BoundedHoldingsAllocationControl.java

  1. package org.drip.portfolioconstruction.allocator;

  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>BoundedHoldingsAllocationControl</i> holds the Parameters needed to build the Portfolio with
  82.  * Bounds on the Underlying Assets.
  83.  *
  84.  *  <br><br>
  85.  *  <ul>
  86.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  87.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AssetAllocationAnalyticsLibrary.md">Asset Allocation Analytics</a></li>
  88.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/portfolioconstruction/README.md">Portfolio Construction under Allocation Constraints</a></li>
  89.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/portfolioconstruction/allocator/README.md">MVO Based Portfolio Allocation Construction</a></li>
  90.  *  </ul>
  91.  *
  92.  * @author Lakshmi Krishnamurthy
  93.  */

  95. public class BoundedHoldingsAllocationControl extends
  96.     org.drip.portfolioconstruction.allocator.HoldingsAllocationControl
  97. {
  98.     private org.drip.analytics.support.CaseInsensitiveHashMap<org.drip.portfolioconstruction.asset.AssetBounds>
  99.         _assetBoundsMap = new
  100.             org.drip.analytics.support.CaseInsensitiveHashMap<org.drip.portfolioconstruction.asset.AssetBounds>();

  102.     private double lowerPivotStartingWeight (
  103.         final java.lang.String assetID)
  104.     {
  105.         org.drip.portfolioconstruction.asset.AssetBounds assetBounds = _assetBoundsMap.get (
  106.             assetID
  107.         );

  109.         double lowerWeight = assetBounds.lower();

  111.         if (org.drip.numerical.common.NumberUtil.IsValid (
  112.             lowerWeight
  113.         ))
  114.         {
  115.             return lowerWeight;
  116.         }

  118.         double upperWeight = assetBounds.upper();

  120.         return !org.drip.numerical.common.NumberUtil.IsValid (
  121.             upperWeight
  122.         ) ? 0. : upperWeight - 0.5;
  123.     }

  125.     /**
  126.      * BoundedHoldingsAllocationControl Constructor
  127.      * 
  128.      * @param assetIDArray Array of Assets ID
  129.      * @param customRiskUtilitySettings The Quadratic Custom Risk Utility Settings
  130.      * @param equalityConstraintSettings The Portfolio Equality Constraint Settings
  131.      * 
  132.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  133.      */

  135.     public BoundedHoldingsAllocationControl (
  136.         final java.lang.String[] assetIDArray,
  137.         final org.drip.portfolioconstruction.allocator.CustomRiskUtilitySettings customRiskUtilitySettings,
  138.         final org.drip.portfolioconstruction.allocator.EqualityConstraintSettings equalityConstraintSettings)
  139.         throws java.lang.Exception
  140.     {
  141.         super (
  142.             assetIDArray,
  143.             customRiskUtilitySettings,
  144.             equalityConstraintSettings
  145.         );
  146.     }

  148.     /**
  149.      * Retrieve the Portfolio Asset Bounds Map
  150.      * 
  151.      * @return The Portfolio Asset Bounds Map
  152.      */

  154.     public
  155.         org.drip.analytics.support.CaseInsensitiveHashMap<org.drip.portfolioconstruction.asset.AssetBounds>
  156.             assetBoundsMap()
  157.     {
  158.         return _assetBoundsMap;
  159.     }

  161.     /**
  162.      * Set the Bounds for the specified Asset
  163.      * 
  164.      * @param assetID The Asset ID
  165.      * @param lowerBound The Asset Share Lower Bound
  166.      * @param upperBound The Asset Share Upper Bound
  167.      * 
  168.      * @return TRUE - The Asset Bounds successfully set
  169.      */

  171.     public boolean addBound (
  172.         final java.lang.String assetID,
  173.         final double lowerBound,
  174.         final double upperBound)
  175.     {
  176.         if (null == assetID || assetID.isEmpty())
  177.         {
  178.             return false;
  179.         }

  181.         try
  182.         {
  183.             _assetBoundsMap.put (
  184.                 assetID,
  185.                 new org.drip.portfolioconstruction.asset.AssetBounds (
  186.                     lowerBound,
  187.                     upperBound
  188.                 )
  189.             );

  191.             return true;
  192.         }
  193.         catch (java.lang.Exception e)
  194.         {
  195.             e.printStackTrace();
  196.         }

  198.         return false;
  199.     }

  201.     /**
  202.      * Retrieve the Lower Bound for the Specified Asset ID
  203.      * 
  204.      * @param assetID The Asset ID
  205.      * 
  206.      * @return The Lower Bound for the Specified Asset ID
  207.      * 
  208.      * @throws java.lang.Exception Thrown if the Bound cannot be extracted
  209.      */

  211.     public double lowerBound (
  212.         final java.lang.String assetID)
  213.         throws java.lang.Exception
  214.     {
  215.         if (!_assetBoundsMap.containsKey (assetID))
  216.         {
  217.             throw new java.lang.Exception
  218.                 ("BoundedHoldingsAllocationControl::lowerBound => Invalid Inputs");
  219.         }

  221.         return _assetBoundsMap.get (assetID).lower();
  222.     }

  224.     /**
  225.      * Retrieve the Upper Bound for the Specified Asset ID
  226.      * 
  227.      * @param assetID The Asset ID
  228.      * 
  229.      * @return The Upper Bound for the Specified Asset ID
  230.      * 
  231.      * @throws java.lang.Exception Thrown if the Bound cannot be extracted
  232.      */

  234.     public double upperBound (
  235.         final java.lang.String assetID)
  236.         throws java.lang.Exception
  237.     {
  238.         if (!_assetBoundsMap.containsKey (assetID))
  239.         {
  240.             throw new java.lang.Exception
  241.                 ("BoundedHoldingsAllocationControl::upperBound => Invalid Inputs");
  242.         }

  244.         return _assetBoundsMap.get (assetID).upper();
  245.     }

  247.     /**
  248.      * Retrieve the Array of the Inequality Constraint Functions
  249.      * 
  250.      * @param extraneousVariateCount Number of Extraneous Variates
  251.      * 
  252.      * @return The Array of the Inequality Constraint Functions
  253.      */

  255.     public org.drip.function.rdtor1.AffineBoundMultivariate[] boundingConstraintsArray (
  256.         final int extraneousVariateCount)
  257.     {
  258.         java.util.List<org.drip.function.rdtor1.AffineBoundMultivariate> boundingConstraintsList =
  259.             new java.util.ArrayList<org.drip.function.rdtor1.AffineBoundMultivariate>();

  261.         java.lang.String[] assetIDArray = assetIDArray();

  263.         int assetCount = assetIDArray.length;

  265.         for (int assetIndex = 0; assetIndex < assetCount; ++assetIndex)
  266.         {
  267.             if (!_assetBoundsMap.containsKey (assetIDArray[assetIndex]))
  268.             {
  269.                 continue;
  270.             }

  272.             org.drip.portfolioconstruction.asset.AssetBounds assetBounds = _assetBoundsMap.get (
  273.                 assetIDArray[assetIndex]
  274.             );

  276.             double lowerBound = assetBounds.lower();

  278.             double upperBound = assetBounds.upper();

  280.             try
  281.             {
  282.                 if (org.drip.numerical.common.NumberUtil.IsValid (lowerBound))
  283.                 {
  284.                     boundingConstraintsList.add (
  285.                         new org.drip.function.rdtor1.AffineBoundMultivariate (
  286.                             false,
  287.                             assetIndex,
  288.                             assetCount + extraneousVariateCount,
  289.                             lowerBound
  290.                         )
  291.                     );
  292.                 }

  294.                 if (org.drip.numerical.common.NumberUtil.IsValid (upperBound))
  295.                 {
  296.                     boundingConstraintsList.add (
  297.                         new org.drip.function.rdtor1.AffineBoundMultivariate (
  298.                             true,
  299.                             assetIndex,
  300.                             assetCount + extraneousVariateCount,
  301.                             upperBound
  302.                         )
  303.                     );
  304.                 }
  305.             }
  306.             catch (java.lang.Exception e)
  307.             {
  308.                 e.printStackTrace();

  310.                 return null;
  311.             }
  312.         }

  314.         int constraintCount = boundingConstraintsList.size();

  316.         if (0 == constraintCount)
  317.         {
  318.             return null;
  319.         }

  321.         org.drip.function.rdtor1.AffineBoundMultivariate[] boundingConstraintsArray =
  322.             new org.drip.function.rdtor1.AffineBoundMultivariate[constraintCount];

  324.         for (int constraintIndex = 0; constraintIndex < constraintCount; ++constraintIndex)
  325.         {
  326.             boundingConstraintsArray[constraintIndex] = boundingConstraintsList.get (constraintIndex);
  327.         }

  329.         return boundingConstraintsArray;
  330.     }

  332.     /**
  333.      * Retrieve an Array of Viable Starting Variates From Within the Feasible Region
  334.      * 
  335.      * @return An Array of Viable Starting Variates From Within the Feasible Region
  336.      */

  338.     public double[] feasibleStart()
  339.     {
  340.         boolean returnsConstraintPresent = org.drip.numerical.common.NumberUtil.IsValid (
  341.             equalityConstraintSettings().returnsConstraint()
  342.         );

  344.         java.lang.String[] assetIDArray = assetIDArray();

  346.         int assetCount = assetIDArray.length;
  347.         double[] startingVariateArray = new double[assetCount + (returnsConstraintPresent ? 2 : 1)];

  349.         for (int assetIndex = 0; assetIndex < assetCount; ++assetIndex)
  350.         {
  351.             startingVariateArray[assetIndex] = _assetBoundsMap.get (assetIDArray[assetIndex]).feasibleStart();
  352.         }

  354.         if (returnsConstraintPresent)
  355.         {
  356.             startingVariateArray[assetCount + 1] = 0.;
  357.         }

  359.         startingVariateArray[assetCount] = 0.;
  360.         return startingVariateArray;
  361.     }

  363.     /**
  364.      * Retrieve an Array of Viable Weight Constrained Starting Variates From Within the Feasible Region
  365.      * 
  366.      * @return An Array of Viable Weight Constrained Starting Variates From Within the Feasible Region
  367.      */

  369.     public double[] weightConstrainedFeasibleStart()
  370.     {
  371.         boolean returnsConstraintPresent = org.drip.numerical.common.NumberUtil.IsValid (
  372.             equalityConstraintSettings().returnsConstraint()
  373.         );

  375.         java.lang.String[] assetIDArray = assetIDArray();

  377.         double cumulativeWeight = 0.;
  378.         double allocationQuantumFactor = 0.1;
  379.         int assetCount = assetIDArray.length;
  380.         double[] startingVariateArray = new double[assetCount + (returnsConstraintPresent ? 2 : 1)];

  382.         for (int i = 0; i < assetCount; ++i)
  383.         {
  384.             startingVariateArray[i] = lowerPivotStartingWeight (
  385.                 assetIDArray[i]
  386.             );

  388.             cumulativeWeight += startingVariateArray[i];
  389.         }

  391.         if (1. < cumulativeWeight)
  392.         {
  393.             return null;
  394.         }

  396.         boolean allocationLoop = true;
  397.         double allocationWeightQuantum = allocationQuantumFactor * (1. - cumulativeWeight) / assetCount;

  399.         while (allocationLoop)
  400.         {
  401.             for (int i = 0; i < assetCount; ++i)
  402.             {
  403.                 if (!allocationLoop)
  404.                 {
  405.                     break;
  406.                 }

  408.                 org.drip.portfolioconstruction.asset.AssetBounds assetBounds = _assetBoundsMap.get (
  409.                     assetIDArray[i]
  410.                 );

  412.                 double newStartingWeight = startingVariateArray[i] + allocationWeightQuantum;

  414.                 if (assetBounds.lower() <= newStartingWeight && assetBounds.upper() >= newStartingWeight)
  415.                 {
  416.                     startingVariateArray[i] = newStartingWeight;
  417.                     cumulativeWeight = cumulativeWeight + allocationWeightQuantum;;
  418.                 }

  420.                 if (1. <= cumulativeWeight)
  421.                 {
  422.                     allocationLoop = false;
  423.                 }
  424.             }
  425.         }

  427.         if (returnsConstraintPresent)
  428.         {
  429.             startingVariateArray[assetCount + 1] = 0.;
  430.         }

  432.         startingVariateArray[assetCount] = 0.;
  433.         return startingVariateArray;
  434.     }
  435. }
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