LimitRiskTermMarginal.java

  1. package org.drip.portfolioconstruction.constraint;

  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.  * 
  13.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  14.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  15.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  16.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  17.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  18.  *      and computational support.
  19.  *  
  20.  *      https://lakshmidrip.github.io/DROP/
  21.  *  
  22.  *  DROP is composed of three modules:
  23.  *  
  24.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  25.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  26.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  27.  * 
  28.  *  DROP Product Core implements libraries for the following:
  29.  *  - Fixed Income Analytics
  30.  *  - Loan Analytics
  31.  *  - Transaction Cost Analytics
  32.  * 
  33.  *  DROP Portfolio Core implements libraries for the following:
  34.  *  - Asset Allocation Analytics
  35.  *  - Asset Liability Management Analytics
  36.  *  - Capital Estimation Analytics
  37.  *  - Exposure Analytics
  38.  *  - Margin Analytics
  39.  *  - XVA Analytics
  40.  * 
  41.  *  DROP Computational Core implements libraries for the following:
  42.  *  - Algorithm Support
  43.  *  - Computation Support
  44.  *  - Function Analysis
  45.  *  - Model Validation
  46.  *  - Numerical Analysis
  47.  *  - Numerical Optimizer
  48.  *  - Spline Builder
  49.  *  - Statistical Learning
  50.  * 
  51.  *  Documentation for DROP is Spread Over:
  52.  * 
  53.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  54.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  55.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  56.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  57.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  58.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  59.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  60.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  61.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  62.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  63.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  64.  * 
  65.  *  Licensed under the Apache License, Version 2.0 (the "License");
  66.  *      you may not use this file except in compliance with the License.
  67.  *   
  68.  *  You may obtain a copy of the License at
  69.  *      http://www.apache.org/licenses/LICENSE-2.0
  70.  *  
  71.  *  Unless required by applicable law or agreed to in writing, software
  72.  *      distributed under the License is distributed on an "AS IS" BASIS,
  73.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  74.  *  
  75.  *  See the License for the specific language governing permissions and
  76.  *      limitations under the License.
  77.  */

  79. /**
  80.  * <i>LimitRiskTermMarginal</i> holds the Details of a Relative Marginal Contribution Based Limit Risk
  81.  * Constraint Term.
  82.  *
  83.  *  <br><br>
  84.  *  <ul>
  85.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  86.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AssetAllocationAnalyticsLibrary.md">Asset Allocation Analytics</a></li>
  87.  *      <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>
  88.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/portfolioconstruction/constraint/README.md"> Portfolio Construction Constraint Term Suite</a></li>
  89.  *  </ul>
  90.  * <br><br>
  91.  *
  92.  * @author Lakshmi Krishnamurthy
  93.  */

  95. public class LimitRiskTermMarginal
  96.     extends org.drip.portfolioconstruction.constraint.LimitRiskTerm
  97. {
  98.     private double[] _initialHoldingsArray = null;

  100.     /**
  101.      * LimitRiskTermMarginal Constructor
  102.      * 
  103.      * @param name Name of the LimitRiskTermMarginal Constraint
  104.      * @param scope Scope of the LimitRiskTermMarginal Constraint
  105.      * @param unit Unit of the LimitRiskTermMarginal Constraint
  106.      * @param minimum Minimum Limit Value of the LimitRiskTermMarginal Constraint
  107.      * @param maximum Maximum Limit Value of the LimitRiskTermMarginal Constraint
  108.      * @param assetCovarianceMatrix Asset Co-variance
  109.      * @param initialHoldingsArray Array of the Initial Holdings
  110.      * 
  111.      * @throws java.lang.Exception Throw if the Inputs are Invalid
  112.      */

  114.     public LimitRiskTermMarginal (
  115.         final java.lang.String name,
  116.         final org.drip.portfolioconstruction.optimizer.Scope scope,
  117.         final org.drip.portfolioconstruction.optimizer.Unit unit,
  118.         final double minimum,
  119.         final double maximum,
  120.         final double[][] assetCovarianceMatrix,
  121.         final double[] initialHoldingsArray)
  122.         throws java.lang.Exception
  123.     {
  124.         super (
  125.             name,
  126.             "CT_LIMIT_MARGINAL_RISK_CONTRIBUTION",
  127.             "Limits the Marginal Contribution to the Total Risk",
  128.             scope,
  129.             unit,
  130.             minimum,
  131.             maximum,
  132.             assetCovarianceMatrix
  133.         );

  135.         if (null == (_initialHoldingsArray = initialHoldingsArray) ||
  136.             _initialHoldingsArray.length != assetCovarianceMatrix[0].length ||
  137.             !org.drip.numerical.common.NumberUtil.IsValid (_initialHoldingsArray))
  138.         {
  139.             throw new java.lang.Exception ("LimitRiskTermMarginal Constructor => Invalid Initial Holdings");
  140.         }
  141.     }

  143.     /**
  144.      * Retrieve the Initial Holdings Array
  145.      * 
  146.      * @return The Initial Holdings Array
  147.      */

  149.     public double[] initialHoldingsArray()
  150.     {
  151.         return _initialHoldingsArray;
  152.     }

  154.     @Override public org.drip.function.definition.RdToR1 rdtoR1()
  155.     {
  156.         return new org.drip.function.definition.RdToR1 (null)
  157.         {
  158.             @Override public int dimension()
  159.             {
  160.                 return assetCovarianceMatrix().length;
  161.             }

  163.             @Override public double evaluate (
  164.                 final double[] finalHoldingsArray)
  165.                 throws java.lang.Exception
  166.             {
  167.                 double[][] assetCovarianceMatrix = assetCovarianceMatrix();

  169.                 int assetCount = assetCovarianceMatrix.length;
  170.                 double marginalVariance = 0;

  172.                 if (null == finalHoldingsArray ||
  173.                     !org.drip.numerical.common.NumberUtil.IsValid (finalHoldingsArray) ||
  174.                     finalHoldingsArray.length != assetCount)
  175.                 {
  176.                     throw new java.lang.Exception
  177.                         ("LimitRiskTermMarginal::rdToR1::evaluate => Invalid Variate Dimension");
  178.                 }

  180.                 for (int assetIndexI = 0; assetIndexI < assetCount; ++assetIndexI)
  181.                 {
  182.                     double dblHoldingsDifferentialI = finalHoldingsArray[assetIndexI] -
  183.                         _initialHoldingsArray[assetIndexI];

  185.                     for (int assetIndexJ = 0; assetIndexJ < assetCount; ++assetIndexJ)
  186.                     {
  187.                         marginalVariance += dblHoldingsDifferentialI *
  188.                             assetCovarianceMatrix[assetIndexI][assetIndexJ] * (
  189.                                 finalHoldingsArray[assetIndexJ] - _initialHoldingsArray[assetIndexJ]
  190.                             );
  191.                     }
  192.                 }

  194.                 return marginalVariance;
  195.             }
  196.         };
  197.     }
  198. }
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