CoordinatedParticipationRateLinear.java
package org.drip.execution.tradingtime;
/*
* -*- 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>CoordinatedParticipationRateLinear</i> implements the Coordinated Variation Version of the Linear
* Participation Rate Transaction Function as described in the "Trading Time" Model. The References are:
*
* <br><br>
* <ul>
* <li>
* Almgren, R. F., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
* Risk</i> <b>3 (2)</b> 5-39
* </li>
* <li>
* Almgren, R. F. (2009): Optimal Trading in a Dynamic Market
* https://www.math.nyu.edu/financial_mathematics/content/02_financial/2009-2.pdf
* </li>
* <li>
* Almgren, R. F. (2012): Optimal Trading with Stochastic Liquidity and Volatility <i>SIAM Journal
* of Financial Mathematics</i> <b>3 (1)</b> 163-181
* </li>
* <li>
* Geman, H., D. B. Madan, and M. Yor (2001): Time Changes for Levy Processes <i>Mathematical
* Finance</i> <b>11 (1)</b> 79-96
* </li>
* <li>
* Jones, C. M., G. Kaul, and M. L. Lipson (1994): Transactions, Volume, and Volatility <i>Review of
* Financial Studies</i> <b>7 (4)</b> 631-651
* </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/tradingtime/README.md">Coordinated Variation Trading Time Models</a></li>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class CoordinatedParticipationRateLinear implements
org.drip.execution.profiletime.BackgroundParticipationRateLinear {
private org.drip.function.definition.R1ToR1 _r1ToR1Volatility = null;
private org.drip.execution.tradingtime.CoordinatedVariation _cv = null;
/**
* CoordinatedParticipationRateLinear Constructor
*
* @param cv The Coordinated Volatility/Liquidity Variation
* @param r1ToR1Volatility The R^1 To R^1 Volatility Function
*
* @throws java.lang.Exception Thrown if the Inputs are Invalid
*/
public CoordinatedParticipationRateLinear (
final org.drip.execution.tradingtime.CoordinatedVariation cv,
final org.drip.function.definition.R1ToR1 r1ToR1Volatility)
throws java.lang.Exception
{
if (null == (_cv = cv) || null == (_r1ToR1Volatility = r1ToR1Volatility))
throw new java.lang.Exception
("CoordinatedParticipationRateLinear Constructor => Invalid Inputs");
}
/**
* Retrieve the Coordinated Variation Constraint
*
* @return The Coordinated Variation Constraint
*/
public org.drip.execution.tradingtime.CoordinatedVariation variationConstraint()
{
return _cv;
}
@Override public org.drip.execution.impact.ParticipationRateLinear liquidityFunction (
final double dblTime)
{
try {
double dblVolatility = _r1ToR1Volatility.evaluate (dblTime);
return org.drip.execution.impact.ParticipationRateLinear.SlopeOnly (_cv.invariant() /
(dblVolatility * dblVolatility));
} catch (java.lang.Exception e) {
e.printStackTrace();
}
return null;
}
@Override public org.drip.execution.impact.TransactionFunction impactFunction (
final double dblTime)
{
return liquidityFunction (dblTime);
}
@Override public org.drip.execution.impact.ParticipationRateLinear epochLiquidityFunction()
{
return liquidityFunction (0.);
}
@Override public org.drip.execution.impact.TransactionFunction epochImpactFunction()
{
return epochLiquidityFunction();
}
/**
* Compute the Volatility Function from the Liquidity Function
*
* @return The R^1 To R^1 Volatility Function
*/
public org.drip.function.definition.R1ToR1 volatilityFunction()
{
return new org.drip.function.definition.R1ToR1 (null) {
@Override public double evaluate (
final double dblTime)
throws java.lang.Exception
{
org.drip.execution.impact.TransactionFunctionLinear tfl = liquidityFunction (dblTime);
if (null == tfl)
throw new java.lang.Exception
("CoordinatedParticipationRateLinear::volatilityFunction::evaluate => Invalid Inputs");
return java.lang.Math.sqrt (_cv.invariant() / tfl.slope());
}
};
}
}