PortfolioConstructionProcessor.java

  1. package org.drip.json.assetallocation;

  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>PortfolioConstructionProcessor</i> Sets Up and Executes a JSON Based In/Out Processing Service for
  82.  * Constrained and Unconstrained Portfolio Construction.
  83.  *
  84.  *  <br><br>
  85.  *  <ul>
  86.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ComputationalCore.md">Computational Core Module</a></li>
  87.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ComputationSupportLibrary.md">Computation Support</a></li>
  88.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/json">RFC-4627 Compliant JSON Encoder/Decoder (Parser)</a></li>
  89.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/json/assetallocation">JSON Based In/Out Service</a></li>
  90.  *  </ul>
  91.  *
  92.  * @author Lakshmi Krishnamurthy
  93.  */

  95. public class PortfolioConstructionProcessor {

  97.     /**
  98.      * JSON Based in/out Budget Constrained Mean Variance Allocation Thunker
  99.      * 
  100.      * @param jsonParameter Budget Constrained Mean Variance Allocation Parameters
  101.      * 
  102.      * @return JSON Budget Constrained Mean Variance Allocation Response
  103.      */

  105.     @SuppressWarnings ("unchecked") public static final org.drip.json.simple.JSONObject
  106.         BudgetConstrainedAllocator (
  107.             final org.drip.json.simple.JSONObject jsonParameter)
  108.     {
  109.         java.lang.String[] astrAssetID = org.drip.json.parser.Converter.StringArrayEntry (jsonParameter,
  110.             "AssetSet");

  112.         org.drip.portfolioconstruction.allocator.BoundedHoldingsAllocationControl pdp = null;
  113.         int iNumAsset = null == astrAssetID ? 0 : astrAssetID.length;
  114.         double[] adblAssetLowerBound = new double[iNumAsset];
  115.         double[] adblAssetUpperBound = new double[iNumAsset];

  117.         if (0 == iNumAsset) return null;

  119.         double[] adblAssetExpectedReturns = org.drip.json.parser.Converter.DoubleArrayEntry (jsonParameter,
  120.             "AssetExpectedReturns");

  122.         double[][] aadblAssetReturnsCovariance = org.drip.json.parser.Converter.DualDoubleArrayEntry
  123.             (jsonParameter, "AssetReturnsCovariance");

  125.         for (int i = 0; i < iNumAsset; ++i) {
  126.             try {
  127.                 adblAssetLowerBound[i] = org.drip.json.parser.Converter.DoubleEntry (jsonParameter,
  128.                     astrAssetID[i] + "::LowerBound");

  130.                 adblAssetUpperBound[i] = org.drip.json.parser.Converter.DoubleEntry (jsonParameter,
  131.                     astrAssetID[i] + "::UpperBound");
  132.             } catch (java.lang.Exception e) {
  133.                 e.printStackTrace();

  135.                 return null;
  136.             }
  137.         }

  139.         org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties ausp =
  140.             org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties.FromMultivariateMetrics
  141.                 (org.drip.measure.statistics.MultivariateMoments.Standard (astrAssetID,
  142.                     adblAssetExpectedReturns, aadblAssetReturnsCovariance));

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

  146.         org.drip.portfolioconstruction.allocator.ConstrainedMeanVarianceOptimizer cmva = new
  147.             org.drip.portfolioconstruction.allocator.ConstrainedMeanVarianceOptimizer (null,
  148.                 org.drip.function.rdtor1descent.LineStepEvolutionControl.NocedalWrightStrongWolfe (false));

  150.         try {
  151.             pdp = new org.drip.portfolioconstruction.allocator.BoundedHoldingsAllocationControl
  152.                 (astrAssetID, new org.drip.portfolioconstruction.allocator.CustomRiskUtilitySettings (1.,
  153.                     0.), new org.drip.portfolioconstruction.allocator.EqualityConstraintSettings
  154.                         (org.drip.portfolioconstruction.allocator.EqualityConstraintSettings.FULLY_INVESTED_CONSTRAINT,
  155.                         java.lang.Double.NaN));
  156.         } catch (java.lang.Exception e) {
  157.             e.printStackTrace();

  159.             return null;
  160.         }

  162.         for (int i = 0; i < astrAssetID.length; ++i) {
  163.             if (!pdp.addBound (astrAssetID[i], adblAssetLowerBound[i], adblAssetUpperBound[i])) return null;
  164.         }

  166.         org.drip.portfolioconstruction.allocator.HoldingsAllocation oo = cmva.allocate (pdp, ausp);

  168.         if (null == oo) return null;

  170.         org.drip.portfolioconstruction.asset.Portfolio pf = oo.optimalPortfolio();

  172.         org.drip.portfolioconstruction.asset.AssetComponent[] aAC = pf.assetComponentArray();

  174.         if (null == aAC || aAC.length != iNumAsset) return null;

  176.         org.drip.json.simple.JSONObject jsonResponse = new org.drip.json.simple.JSONObject();

  178.         jsonResponse.put ("AssetSet", org.drip.json.parser.Converter.Array (astrAssetID));

  180.         jsonResponse.put ("AssetExpectedReturns", org.drip.json.parser.Converter.Array
  181.             (adblAssetExpectedReturns));

  183.         jsonResponse.put ("AssetReturnsCovariance", org.drip.json.parser.Converter.Array
  184.             (aadblAssetReturnsCovariance));

  186.         for (int i = 0; i < adblAssetExpectedReturns.length; ++i) {
  187.             jsonResponse.put (astrAssetID[i] + "::LowerBound", adblAssetLowerBound[i]);

  189.             jsonResponse.put (astrAssetID[i] + "::UpperBound", adblAssetUpperBound[i]);
  190.         }

  192.         for (int i = 0; i < astrAssetID.length; ++i)
  193.             jsonResponse.put (aAC[i].id() + "::WEIGHT", aAC[i].amount());

  195.         jsonResponse.put ("PortfolioNotional", pf.notional());

  197.         try {
  198.             jsonResponse.put ("PortfolioExpectedReturn", pf.expectedReturn (ausp));

  200.             jsonResponse.put ("PortfolioStandardDeviation", java.lang.Math.sqrt (pf.variance (ausp)));

  202.             return jsonResponse;
  203.         } catch (java.lang.Exception e) {
  204.             e.printStackTrace();
  205.         }

  207.         return null;
  208.     }

  210.     /**
  211.      * JSON Based in/out Returns Constrained Mean Variance Allocation Thunker
  212.      * 
  213.      * @param jsonParameter Returns Constrained Mean Variance Allocation Parameters
  214.      * 
  215.      * @return JSON Returns Constrained Mean Variance Allocation Response
  216.      */

  218.     @SuppressWarnings ("unchecked") public static final org.drip.json.simple.JSONObject
  219.         ReturnsConstrainedAllocator (
  220.             final org.drip.json.simple.JSONObject jsonParameter)
  221.     {
  222.         java.lang.String[] astrAssetID = org.drip.json.parser.Converter.StringArrayEntry (jsonParameter,
  223.             "AssetSet");

  225.         org.drip.portfolioconstruction.allocator.BoundedHoldingsAllocationControl pdp = null;
  226.         int iNumAsset = null == astrAssetID ? 0 : astrAssetID.length;
  227.         double dblPortfolioDesignReturn = java.lang.Double.NaN;
  228.         double[] adblAssetLowerBound = new double[iNumAsset];
  229.         double[] adblAssetUpperBound = new double[iNumAsset];

  231.         if (0 == iNumAsset) return null;

  233.         double[] adblAssetReturnsMean = org.drip.json.parser.Converter.DoubleArrayEntry (jsonParameter,
  234.             "AssetReturnsMean");

  236.         double[][] aadblAssetReturnsCovariance = org.drip.json.parser.Converter.DualDoubleArrayEntry
  237.             (jsonParameter, "AssetReturnsCovariance");

  239.         try {
  240.             dblPortfolioDesignReturn = org.drip.json.parser.Converter.DoubleEntry (jsonParameter,
  241.                 "PortfolioDesignReturn");

  243.             for (int i = 0; i < iNumAsset; ++i) {
  244.                 adblAssetLowerBound[i] = org.drip.json.parser.Converter.DoubleEntry (jsonParameter,
  245.                     astrAssetID[i] + "::LowerBound");

  247.                 adblAssetUpperBound[i] = org.drip.json.parser.Converter.DoubleEntry (jsonParameter,
  248.                     astrAssetID[i] + "::UpperBound");
  249.             }
  250.         } catch (java.lang.Exception e) {
  251.             e.printStackTrace();

  253.             return null;
  254.         }

  256.         org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties ausp =
  257.             org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties.FromMultivariateMetrics
  258.                 (org.drip.measure.statistics.MultivariateMoments.Standard (astrAssetID,
  259.                     adblAssetReturnsMean, aadblAssetReturnsCovariance));

  261.         if (null == ausp) return null;

  263.         org.drip.portfolioconstruction.allocator.ConstrainedMeanVarianceOptimizer cmva = new
  264.             org.drip.portfolioconstruction.allocator.ConstrainedMeanVarianceOptimizer (null, null);

  266.         try {
  267.             pdp = new org.drip.portfolioconstruction.allocator.BoundedHoldingsAllocationControl
  268.                 (astrAssetID, new org.drip.portfolioconstruction.allocator.CustomRiskUtilitySettings (1.,
  269.                     0.), new org.drip.portfolioconstruction.allocator.EqualityConstraintSettings
  270.                         (org.drip.portfolioconstruction.allocator.EqualityConstraintSettings.FULLY_INVESTED_CONSTRAINT
  271.                         | org.drip.portfolioconstruction.allocator.EqualityConstraintSettings.RETURNS_CONSTRAINT,
  272.                         dblPortfolioDesignReturn));
  273.         } catch (java.lang.Exception e) {
  274.             e.printStackTrace();

  276.             return null;
  277.         }

  279.         for (int i = 0; i < astrAssetID.length; ++i) {
  280.             if (!pdp.addBound (astrAssetID[i], adblAssetLowerBound[i], adblAssetUpperBound[i])) return null;
  281.         }

  283.         org.drip.portfolioconstruction.allocator.HoldingsAllocation oo = cmva.allocate (pdp, ausp);

  285.         if (null == oo) return null;

  287.         org.drip.portfolioconstruction.asset.Portfolio pf = oo.optimalPortfolio();

  289.         org.drip.portfolioconstruction.asset.AssetComponent[] aAC = pf.assetComponentArray();

  291.         if (null == aAC || aAC.length != iNumAsset) return null;

  293.         org.drip.json.simple.JSONObject jsonResponse = new org.drip.json.simple.JSONObject();

  295.         jsonResponse.put ("AssetSet", org.drip.json.parser.Converter.Array (astrAssetID));

  297.         jsonResponse.put ("AssetReturnsMean", org.drip.json.parser.Converter.Array (adblAssetReturnsMean));

  299.         jsonResponse.put ("AssetReturnsCovariance", org.drip.json.parser.Converter.Array
  300.             (aadblAssetReturnsCovariance));

  302.         for (int i = 0; i < adblAssetReturnsMean.length; ++i) {
  303.             jsonResponse.put (astrAssetID[i] + "::LowerBound", adblAssetLowerBound[i]);

  305.             jsonResponse.put (astrAssetID[i] + "::UpperBound", adblAssetUpperBound[i]);
  306.         }

  308.         for (int i = 0; i < astrAssetID.length; ++i)
  309.             jsonResponse.put (aAC[i].id() + "::WEIGHT", aAC[i].amount());

  311.         jsonResponse.put ("PortfolioNotional", pf.notional());

  313.         try {
  314.             jsonResponse.put ("PortfolioDesignReturn", dblPortfolioDesignReturn);

  316.             jsonResponse.put ("PortfolioExpectedReturn", pf.expectedReturn (ausp));

  318.             jsonResponse.put ("PortfolioStandardDeviation", java.lang.Math.sqrt (pf.variance (ausp)));

  320.             return jsonResponse;
  321.         } catch (java.lang.Exception e) {
  322.             e.printStackTrace();
  323.         }

  325.         return null;
  326.     }
  327. }
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