ParticipationRateLinear.java

  1. package org.drip.execution.impact;

  3. /*
  4.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  5.  */

  7. /*!
  8.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  9.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  10.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  11.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  12.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  13.  * 
  14.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  15.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  16.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  17.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  18.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  19.  *      and computational support.
  20.  *  
  21.  *      https://lakshmidrip.github.io/DROP/
  22.  *  
  23.  *  DROP is composed of three modules:
  24.  *  
  25.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  26.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  27.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  28.  * 
  29.  *  DROP Product Core implements libraries for the following:
  30.  *  - Fixed Income Analytics
  31.  *  - Loan Analytics
  32.  *  - Transaction Cost Analytics
  33.  * 
  34.  *  DROP Portfolio Core implements libraries for the following:
  35.  *  - Asset Allocation Analytics
  36.  *  - Asset Liability Management Analytics
  37.  *  - Capital Estimation Analytics
  38.  *  - Exposure Analytics
  39.  *  - Margin Analytics
  40.  *  - XVA Analytics
  41.  * 
  42.  *  DROP Computational Core implements libraries for the following:
  43.  *  - Algorithm Support
  44.  *  - Computation Support
  45.  *  - Function Analysis
  46.  *  - Model Validation
  47.  *  - Numerical Analysis
  48.  *  - Numerical Optimizer
  49.  *  - Spline Builder
  50.  *  - Statistical Learning
  51.  * 
  52.  *  Documentation for DROP is Spread Over:
  53.  * 
  54.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  55.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  56.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  57.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  58.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  59.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  60.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  61.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  62.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  63.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  64.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  65.  * 
  66.  *  Licensed under the Apache License, Version 2.0 (the "License");
  67.  *      you may not use this file except in compliance with the License.
  68.  *   
  69.  *  You may obtain a copy of the License at
  70.  *      http://www.apache.org/licenses/LICENSE-2.0
  71.  *  
  72.  *  Unless required by applicable law or agreed to in writing, software
  73.  *      distributed under the License is distributed on an "AS IS" BASIS,
  74.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  75.  *  
  76.  *  See the License for the specific language governing permissions and
  77.  *      limitations under the License.
  78.  */

  80. /**
  81.  * <i>ParticipationRateLinear</i> implements a Linear Temporary/Permanent Market Impact Function where the
  82.  * Price Change scales linearly with the Trade Rate, along with an Offset. The References are:
  83.  * 
  84.  * <br><br>
  85.  *  <ul>
  86.  *      <li>
  87.  *          Almgren, R., and N. Chriss (1999): Value under Liquidation <i>Risk</i> <b>12 (12)</b>
  88.  *      </li>
  89.  *      <li>
  90.  *          Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
  91.  *              Risk</i> <b>3 (2)</b> 5-39
  92.  *      </li>
  93.  *      <li>
  94.  *          Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
  95.  *              Markets</i> <b>1</b> 1-50
  96.  *      </li>
  97.  *      <li>
  98.  *          Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional
  99.  *              Trades <i>Journal of Finance</i> <b>50</b> 1147-1174
  100.  *      </li>
  101.  *      <li>
  102.  *          Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange
  103.  *              Analysis of Institutional Equity Trades <i>Journal of Financial Economics</i> <b>46</b>
  104.  *              265-292
  105.  *      </li>
  106.  *  </ul>
  107.  *
  108.  *  <br><br>
  109.  *  <ul>
  110.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  111.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
  112.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/execution/README.md">Optimal Impact/Capture Based Trading Trajectories - Deterministic, Stochastic, Static, and Dynamic</a></li>
  113.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/execution/impact/README.md">Market Impact Transaction Function Implementation</a></li>
  114.  *  </ul>
  115.  * 
  116.  * @author Lakshmi Krishnamurthy
  117.  */

  119. public class ParticipationRateLinear extends org.drip.execution.impact.TransactionFunctionLinear {
  120.     private double _dblSlope = java.lang.Double.NaN;
  121.     private double _dblOffset = java.lang.Double.NaN;

  123.     /**
  124.      * Construct a Vanilla Zero-Impact ParticipationRateLinear Instance
  125.      * 
  126.      * @return The Vanilla Zero-Impact ParticipationRateLinear Instance
  127.      */

  129.     public static final ParticipationRateLinear NoImpact()
  130.     {
  131.         try {
  132.             return new ParticipationRateLinear (0., 0.);
  133.         } catch (java.lang.Exception e) {
  134.             e.printStackTrace();
  135.         }

  137.         return null;
  138.     }

  140.     /**
  141.      * Construct a Vanilla Slope-Only ParticipationRateLinear Instance
  142.      * 
  143.      * @param dblSlope The Slope
  144.      *  
  145.      * @return The Vanilla Slope-Only ParticipationRateLinear Instance
  146.      */

  148.     public static final ParticipationRateLinear SlopeOnly (
  149.         final double dblSlope)
  150.     {
  151.         try {
  152.             return new ParticipationRateLinear (0., dblSlope);
  153.         } catch (java.lang.Exception e) {
  154.             e.printStackTrace();
  155.         }

  157.         return null;
  158.     }

  160.     /**
  161.      * ParticipationRateLinear Constructor
  162.      * 
  163.      * @param dblOffset The Offset Market Impact Parameter
  164.      * @param dblSlope The Linear Market Impact Slope Parameter
  165.      * 
  166.      * @throws java.lang.Exception Propagated up from R1ToR1
  167.      */

  169.     public ParticipationRateLinear (
  170.         final double dblOffset,
  171.         final double dblSlope)
  172.         throws java.lang.Exception
  173.     {
  174.         if (!org.drip.numerical.common.NumberUtil.IsValid (_dblOffset = dblOffset) || 0. > _dblOffset ||
  175.             !org.drip.numerical.common.NumberUtil.IsValid (_dblSlope = dblSlope) || 0. > _dblSlope)
  176.             throw new java.lang.Exception ("ParticipationRateLinear Constructor => Invalid Inputs");
  177.     }

  179.     /**
  180.      * Retrieve the Linear Market Impact Slope Parameter
  181.      * 
  182.      * @return The Linear Market Impact Slope Parameter
  183.      */

  185.     public double slope()
  186.     {
  187.         return _dblSlope;
  188.     }

  190.     /**
  191.      * Retrieve the Offset Market Impact Parameter
  192.      * 
  193.      * @return The Offset Market Impact Parameter
  194.      */

  196.     public double offset()
  197.     {
  198.         return _dblOffset;
  199.     }

  201.     @Override public double regularize (
  202.         final double dblTradeInterval)
  203.         throws java.lang.Exception
  204.     {
  205.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblTradeInterval) || 0 >= dblTradeInterval)
  206.             throw new java.lang.Exception ("ParticipationRateLinear::regularize => Invalid Inputs");

  208.         return 1. / dblTradeInterval;
  209.     }

  211.     @Override public double modulate (
  212.         final double dblTradeInterval)
  213.         throws java.lang.Exception
  214.     {
  215.         return 1.;
  216.     }

  218.     @Override public double evaluate  (
  219.         final double dblTradeRate)
  220.         throws java.lang.Exception
  221.     {
  222.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblTradeRate))
  223.             throw new java.lang.Exception ("ParticipationRateLinear::evaluate => Invalid Inputs");

  225.         return (dblTradeRate < 0. ? -1. : 1.) * _dblOffset + _dblSlope * dblTradeRate;
  226.     }

  228.     @Override public double derivative  (
  229.         final double dblTradeRate,
  230.         final int iOrder)
  231.         throws java.lang.Exception
  232.     {
  233.         if (0 >= iOrder)
  234.             throw new java.lang.Exception ("ParticipationRateLinear::derivative => Invalid Inputs");

  236.         return 1 == iOrder ? _dblSlope : 0.;
  237.     }
  238. }
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