CustomRiskUtilitySettings.java
package org.drip.portfolioconstruction.allocator;
/*
* -*- 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>CustomRiskUtilitySettings</i> contains the settings used to generate the Risk Objective Utility
* Function. It accommodates both the Risk Tolerance and Risk Aversion Variants.
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AssetAllocationAnalyticsLibrary.md">Asset Allocation Analytics</a></li>
* <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>
* <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>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class CustomRiskUtilitySettings
{
private double _riskAversion = java.lang.Double.NaN;
private double _riskTolerance = java.lang.Double.NaN;
/**
* The Variance Minimizer CustomRiskUtilitySettings Instance
*
* @return The Variance Minimizer CustomRiskUtilitySettings Instance
*/
public static final CustomRiskUtilitySettings VarianceMinimizer()
{
try
{
return new CustomRiskUtilitySettings (
1.,
0.
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* The Risk Tolerant Variance Minimizer CustomRiskUtilitySettings Instance
*
* @param riskTolerance The Risk Tolerance Parameter
*
* @return The Risk Tolerant Variance Minimizer CustomRiskUtilitySettings Instance
*/
public static final CustomRiskUtilitySettings RiskTolerant (
final double riskTolerance)
{
try
{
return new CustomRiskUtilitySettings (
1.,
riskTolerance
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* The Risk Aversion Variance Minimizer CustomRiskUtilitySettings Instance
*
* @param riskAversion The Risk Aversion Parameter
*
* @return The Risk Aversion Variance Minimizer CustomRiskUtilitySettings Instance
*/
public static final CustomRiskUtilitySettings RiskAversion (
final double riskAversion)
{
try
{
return new CustomRiskUtilitySettings (
riskAversion,
1.
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* CustomRiskUtilitySettings Constructor
*
* @param riskAversion The Risk Aversion Parameter
* @param riskTolerance The Risk Tolerance Parameter
*
* @throws java.lang.Exception Thrown if the Inputs are Invalid
*/
public CustomRiskUtilitySettings (
final double riskAversion,
final double riskTolerance)
throws java.lang.Exception
{
if (!org.drip.numerical.common.NumberUtil.IsValid (_riskAversion = riskAversion) ||
!org.drip.numerical.common.NumberUtil.IsValid (_riskTolerance = riskTolerance) ||
0. > _riskTolerance)
{
throw new java.lang.Exception ("CustomRiskUtilitySettings Constructor => Invalid Inputs");
}
}
/**
* Retrieve the Risk Aversion Factor
*
* @return The Risk Aversion Factor
*/
public double riskAversion()
{
return _riskAversion;
}
/**
* Retrieve the Risk Tolerance Factor
*
* @return The Risk Tolerance Factor
*/
public double riskTolerance()
{
return _riskTolerance;
}
/**
* Retrieve the Custom Risk Objective Utility Multivariate
*
* @param assetIDArray Array of the Asset IDs
* @param assetUniverseStatisticalProperties The Asset Universe Statistical Properties Instance
*
* @return The Custom Risk Objective Utility Multivariate
*/
public org.drip.function.definition.RdToR1 riskObjectiveUtility (
final java.lang.String[] assetIDArray,
final org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties
assetUniverseStatisticalProperties)
{
if (null == assetIDArray || null == assetUniverseStatisticalProperties)
{
return null;
}
int assetCount = assetIDArray.length;
double[] expectedReturnsArray = new double[assetCount];
double[][] covarianceMatrix = new double[assetCount][assetCount];
org.drip.portfolioconstruction.params.AssetStatisticalProperties[] assetStatisticalPropertiesArray =
new org.drip.portfolioconstruction.params.AssetStatisticalProperties[assetCount];
if (0 == assetCount)
{
return null;
}
for (int assetIndex = 0; assetIndex < assetCount; ++assetIndex)
{
if (null == (assetStatisticalPropertiesArray[assetIndex] =
assetUniverseStatisticalProperties.assetStatisticalProperties (assetIDArray[assetIndex])))
{
return null;
}
expectedReturnsArray[assetIndex] = assetStatisticalPropertiesArray[assetIndex].expectedReturn();
}
for (int assetIndexI = 0; assetIndexI < assetCount; ++assetIndexI)
{
double dblVarianceI = assetStatisticalPropertiesArray[assetIndexI].variance();
for (int assetIndexJ = 0; assetIndexJ < assetCount; ++assetIndexJ)
{
try
{
covarianceMatrix[assetIndexI][assetIndexJ] = java.lang.Math.sqrt (
dblVarianceI * assetStatisticalPropertiesArray[assetIndexJ].variance()
) * (
assetIndexI == assetIndexJ ? 1. : assetUniverseStatisticalProperties.correlation (
assetIDArray[assetIndexI], assetIDArray[assetIndexJ]
)
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
return null;
}
}
}
try
{
return new org.drip.function.rdtor1.RiskObjectiveUtilityMultivariate (
covarianceMatrix,
expectedReturnsArray,
_riskAversion,
_riskTolerance,
assetUniverseStatisticalProperties.riskFreeRate()
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
}