EfficientTradingTrajectoryDiscrete.java

  1. package org.drip.execution.optimum;

  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>EfficientTradingTrajectoryDiscrete</i> contains the Discrete Trading Trajectory generated by a given
  82.  * Optimal Trajectory Generation Scheme. Schemes may be Numerical or Closed Form. 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. F., 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.  *          Almgren, R. (2003): Optimal Execution with Nonlinear Impact Functions and Trading-Enhanced Risk
  95.  *              <i>Applied Mathematical Finance</i> <b>10 (1)</b> 1-18
  96.  *      </li>
  97.  *      <li>
  98.  *          Almgren, R., and N. Chriss (2003): Bidding Principles <i>Risk</i> 97-102
  99.  *      </li>
  100.  *      <li>
  101.  *          Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
  102.  *              Markets</i> <b>1</b> 1-50
  103.  *      </li>
  104.  *  </ul>
  105.  *
  106.  *  <br><br>
  107.  *  <ul>
  108.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  109.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
  110.  *      <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>
  111.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/execution/optimum/README.md">Almgren-Chriss Efficient Trading Trajectories</a></li>
  112.  *  </ul>
  113.  * 
  114.  * @author Lakshmi Krishnamurthy
  115.  */

  117. public class EfficientTradingTrajectoryDiscrete extends org.drip.execution.strategy.DiscreteTradingTrajectory
  118.     implements org.drip.execution.optimum.EfficientTradingTrajectory {
  119.     private double _dblMarketPower = java.lang.Double.NaN;
  120.     private double _dblTransactionCostVariance = java.lang.Double.NaN;
  121.     private double _dblTransactionCostExpectation = java.lang.Double.NaN;

  123.     /**
  124.      * Construct a Standard EfficientTradingTrajectoryDiscrete Instance
  125.      * 
  126.      * @param adblExecutionTimeNode Array containing the Trajectory Time Nodes
  127.      * @param adblHoldings Array containing the Holdings
  128.      * @param apep The Arithmetic Price Walk Evolution Parameters
  129.  * 
  130.      * @return The EfficientTradingTrajectoryDiscrete Instance
  131.      */

  133.     public static EfficientTradingTrajectoryDiscrete Standard (
  134.         final double[] adblExecutionTimeNode,
  135.         final double[] adblHoldings,
  136.         final org.drip.execution.dynamics.ArithmeticPriceEvolutionParameters apep)
  137.     {
  138.         if (null == apep) return null;

  140.         org.drip.execution.strategy.DiscreteTradingTrajectory dtt =
  141.             org.drip.execution.strategy.DiscreteTradingTrajectory.Standard (adblExecutionTimeNode,
  142.                 adblHoldings);

  144.         if (null == dtt) return null;

  146.         double dblExecutionTime = dtt.executionTime();

  148.         try {
  149.             org.drip.measure.gaussian.R1UnivariateNormal r1un = (new
  150.                 org.drip.execution.capture.TrajectoryShortfallEstimator (dtt)).totalCostDistributionSynopsis
  151.                     (apep);

  153.             return null == r1un ? null : new EfficientTradingTrajectoryDiscrete (adblExecutionTimeNode,
  154.                 adblHoldings, dtt.tradeList(), r1un.mean(), r1un.variance(),
  155.                     apep.temporaryExpectation().epochImpactFunction().evaluate (dtt.tradeSize(),
  156.                         dblExecutionTime) / (apep.arithmeticPriceDynamicsSettings().epochVolatility() *
  157.                             java.lang.Math.sqrt (dblExecutionTime)));
  158.         } catch (java.lang.Exception e) {
  159.             e.printStackTrace();
  160.         }

  162.         return null;
  163.     }

  165.     /**
  166.      * EfficientTradingTrajectoryDiscrete Constructor
  167.      * 
  168.      * @param adblExecutionTimeNode Array containing the Trajectory Time Nodes
  169.      * @param adblHoldings Array containing the Holdings
  170.      * @param adblTradeList Array containing the Trade List
  171.      * @param dblTransactionCostExpectation The Expected Transaction Cost
  172.      * @param dblTransactionCostVariance The Variance of the Transaction Cost
  173.      * @param dblMarketPower The Dimension-less Relative Market Impact
  174.      * 
  175.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  176.      */

  178.     public EfficientTradingTrajectoryDiscrete (
  179.         final double[] adblExecutionTimeNode,
  180.         final double[] adblHoldings,
  181.         final double[] adblTradeList,
  182.         final double dblTransactionCostExpectation,
  183.         final double dblTransactionCostVariance,
  184.         final double dblMarketPower)
  185.         throws java.lang.Exception
  186.     {
  187.         super (adblExecutionTimeNode, adblHoldings, adblTradeList);

  189.         if (!org.drip.numerical.common.NumberUtil.IsValid (_dblTransactionCostExpectation =
  190.             dblTransactionCostExpectation) || !org.drip.numerical.common.NumberUtil.IsValid
  191.                 (_dblTransactionCostVariance = dblTransactionCostVariance) ||
  192.                     !org.drip.numerical.common.NumberUtil.IsValid (_dblMarketPower = dblMarketPower))
  193.             throw new java.lang.Exception
  194.                 ("EfficientTradingTrajectoryDiscrete Constructor => Invalid Inputs");
  195.     }

  197.     @Override public double marketPower()
  198.     {
  199.         return _dblMarketPower;
  200.     }

  202.     @Override public double transactionCostExpectation()
  203.     {
  204.         return _dblTransactionCostExpectation;
  205.     }

  207.     @Override public double transactionCostVariance()
  208.     {
  209.         return _dblTransactionCostVariance;
  210.     }
  211. }
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