TransactionFunction.java
- package org.drip.execution.impact;
- /*
- * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
- */
- /*!
- * Copyright (C) 2020 Lakshmi Krishnamurthy
- * Copyright (C) 2019 Lakshmi Krishnamurthy
- * Copyright (C) 2018 Lakshmi Krishnamurthy
- * Copyright (C) 2017 Lakshmi Krishnamurthy
- * Copyright (C) 2016 Lakshmi Krishnamurthy
- *
- * This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
- * asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
- * analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
- * equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
- * numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
- * and computational support.
- *
- * https://lakshmidrip.github.io/DROP/
- *
- * DROP is composed of three modules:
- *
- * - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
- * - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
- * - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
- *
- * DROP Product Core implements libraries for the following:
- * - Fixed Income Analytics
- * - Loan Analytics
- * - Transaction Cost Analytics
- *
- * DROP Portfolio Core implements libraries for the following:
- * - Asset Allocation Analytics
- * - Asset Liability Management Analytics
- * - Capital Estimation Analytics
- * - Exposure Analytics
- * - Margin Analytics
- * - XVA Analytics
- *
- * DROP Computational Core implements libraries for the following:
- * - Algorithm Support
- * - Computation Support
- * - Function Analysis
- * - Model Validation
- * - Numerical Analysis
- * - Numerical Optimizer
- * - Spline Builder
- * - Statistical Learning
- *
- * Documentation for DROP is Spread Over:
- *
- * - Main => https://lakshmidrip.github.io/DROP/
- * - Wiki => https://github.com/lakshmiDRIP/DROP/wiki
- * - GitHub => https://github.com/lakshmiDRIP/DROP
- * - Repo Layout Taxonomy => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
- * - Javadoc => https://lakshmidrip.github.io/DROP/Javadoc/index.html
- * - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
- * - Release Versions => https://lakshmidrip.github.io/DROP/version.html
- * - Community Credits => https://lakshmidrip.github.io/DROP/credits.html
- * - Issues Catalog => https://github.com/lakshmiDRIP/DROP/issues
- * - JUnit => https://lakshmidrip.github.io/DROP/junit/index.html
- * - Jacoco => https://lakshmidrip.github.io/DROP/jacoco/index.html
- *
- * Licensed under the Apache License, Version 2.0 (the "License");
- * you may not use this file except in compliance with the License.
- *
- * You may obtain a copy of the License at
- * http://www.apache.org/licenses/LICENSE-2.0
- *
- * Unless required by applicable law or agreed to in writing, software
- * distributed under the License is distributed on an "AS IS" BASIS,
- * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
- *
- * See the License for the specific language governing permissions and
- * limitations under the License.
- */
- /**
- * <i>TransactionFunction</i> exports the Temporary/Permanent Market Impact Displacement/Volatility
- * Functional Dependence on the Trade Rate. The References are:
- *
- * <br>
- * <ul>
- * <li>
- * Almgren, R., and N. Chriss (1999): Value under Liquidation <i>Risk</i> <b>12 (12)</b>
- * </li>
- * <li>
- * Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
- * Risk</i> <b>3 (2)</b> 5-39
- * </li>
- * <li>
- * Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
- * Markets</i> <b>1</b> 1-50
- * </li>
- * <li>
- * Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional
- * Trades <i>Journal of Finance</i> <b>50</b> 1147-1174
- * </li>
- * <li>
- * Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange
- * Analysis of Institutional Equity Trades <i>Journal of Financial Economics</i> <b>46</b>
- * 265-292
- * </li>
- * </ul>
- *
- * <br><br>
- * <ul>
- * <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
- * <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
- * <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>
- * <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>
- * </ul>
- *
- * @author Lakshmi Krishnamurthy
- */
- public abstract class TransactionFunction extends org.drip.function.definition.R1ToR1 {
- protected TransactionFunction()
- {
- super (null);
- }
- /**
- * Regularize the Input Function using the specified Trade Inputs
- *
- * @param dblTradeInterval The Trade Interval
- *
- * @return The Regularize Input
- *
- * @throws java.lang.Exception Thrown if the Inputs are Invalid
- */
- public abstract double regularize (
- final double dblTradeInterval)
- throws java.lang.Exception;
- /**
- * Modulate/Scale the Impact Output
- *
- * @param dblTradeInterval The Trade Interval
- *
- * @return The Modulated Output
- *
- * @throws java.lang.Exception Thrown if the Inputs are Invalid
- */
- public abstract double modulate (
- final double dblTradeInterval)
- throws java.lang.Exception;
- /**
- * Evaluate the Impact Function at the specified Trade Parameters
- *
- * @param dblTradeAmount The Trade Amount
- * @param dblTradeInterval The Trade Interval
- *
- * @return The Value of the Impact Function
- *
- * @throws java.lang.Exception Thrown if the Inputs are Invalid
- */
- public double evaluate (
- final double dblTradeAmount,
- final double dblTradeInterval)
- throws java.lang.Exception
- {
- return modulate (dblTradeInterval) * evaluate (dblTradeAmount * regularize (dblTradeInterval));
- }
- /**
- * Compute the Sensitivity to the Left Holdings
- *
- * @param dblTradeAmount The Trade Amount
- * @param dblTradeInterval The Trade Interval
- * @param iOrder Order of the Derivative
- *
- * @return The Sensitivity to the Left Holdings of the Impact Function
- *
- * @throws java.lang.Exception Thrown if the Inputs are Invalid
- */
- public double leftHoldingsDerivative (
- final double dblTradeAmount,
- final double dblTradeInterval,
- final int iOrder)
- throws java.lang.Exception
- {
- if (!org.drip.numerical.common.NumberUtil.IsValid (dblTradeAmount) || 0 >= iOrder)
- throw new java.lang.Exception ("TransactionFunction::leftHoldingsDerivative => Invalid Inputs");
- double dblRegularizedInput = regularize (dblTradeInterval);
- return modulate (dblTradeInterval) * java.lang.Math.pow (-1. * dblRegularizedInput, iOrder) *
- derivative (dblTradeAmount * dblRegularizedInput, iOrder);
- }
- /**
- * Compute the Sensitivity to the Right Holdings
- *
- * @param dblTradeAmount The Trade Amount
- * @param dblTradeInterval The Trade Interval
- * @param iOrder Order of the Derivative
- *
- * @return The Sensitivity to the Right Holdings of the Impact Function
- *
- * @throws java.lang.Exception Thrown if the Inputs are Invalid
- */
- public double rightHoldingsDerivative (
- final double dblTradeAmount,
- final double dblTradeInterval,
- final int iOrder)
- throws java.lang.Exception
- {
- if (!org.drip.numerical.common.NumberUtil.IsValid (dblTradeAmount) || 0 >= iOrder)
- throw new java.lang.Exception ("TransactionFunction::rightHoldingsDerivative => Invalid Inputs");
- double dblRegularizedInput = regularize (dblTradeInterval);
- return modulate (dblTradeInterval) * java.lang.Math.pow (dblRegularizedInput, iOrder) * derivative
- (dblTradeAmount * dblRegularizedInput, iOrder);
- }
- /**
- * Compute the Second Order Sensitivity to the Left/Right Holdings
- *
- * @param dblTradeAmount The Trade Amount
- * @param dblTradeInterval The Trade Interval
- *
- * @return The Second Order Sensitivity to the Left/Right Holdings of the Impact Function
- *
- * @throws java.lang.Exception Thrown if the Inputs are Invalid
- */
- public double crossHoldingsDerivative (
- final double dblTradeAmount,
- final double dblTradeInterval)
- throws java.lang.Exception
- {
- if (!org.drip.numerical.common.NumberUtil.IsValid (dblTradeAmount))
- throw new java.lang.Exception ("TransactionFunction::crossHoldingsDerivative => Invalid Inputs");
- double dblRegularizedInput = regularize (dblTradeInterval);
- return -1. * modulate (dblTradeInterval) * dblRegularizedInput * dblRegularizedInput * derivative
- (dblTradeAmount * dblRegularizedInput, 2);
- }
- }