OptimalSerialCorrelationImpact.java

  1. package org.drip.sample.almgrenchriss;

  3. import org.drip.execution.capture.TrajectoryShortfallEstimator;
  4. import org.drip.execution.discrete.OptimalSerialCorrelationAdjustment;
  5. import org.drip.execution.dynamics.*;
  6. import org.drip.execution.impact.*;
  7. import org.drip.execution.nonadaptive.DiscreteAlmgrenChriss;
  8. import org.drip.execution.optimum.AlmgrenChrissDiscrete;
  9. import org.drip.execution.parameters.*;
  10. import org.drip.execution.profiletime.UniformParticipationRateLinear;
  11. import org.drip.function.r1tor1.FlatUnivariate;
  12. import org.drip.numerical.common.FormatUtil;
  13. import org.drip.service.env.EnvManager;

  15. /*
  16.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  17.  */

  19. /*!
  20.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  21.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  22.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  23.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  24.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  25.  * 
  26.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  27.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  28.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  29.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  30.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  31.  *      and computational support.
  32.  *  
  33.  *      https://lakshmidrip.github.io/DROP/
  34.  *  
  35.  *  DROP is composed of three modules:
  36.  *  
  37.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  38.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  39.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  40.  * 
  41.  *  DROP Product Core implements libraries for the following:
  42.  *  - Fixed Income Analytics
  43.  *  - Loan Analytics
  44.  *  - Transaction Cost Analytics
  45.  * 
  46.  *  DROP Portfolio Core implements libraries for the following:
  47.  *  - Asset Allocation Analytics
  48.  *  - Asset Liability Management Analytics
  49.  *  - Capital Estimation Analytics
  50.  *  - Exposure Analytics
  51.  *  - Margin Analytics
  52.  *  - XVA Analytics
  53.  * 
  54.  *  DROP Computational Core implements libraries for the following:
  55.  *  - Algorithm Support
  56.  *  - Computation Support
  57.  *  - Function Analysis
  58.  *  - Model Validation
  59.  *  - Numerical Analysis
  60.  *  - Numerical Optimizer
  61.  *  - Spline Builder
  62.  *  - Statistical Learning
  63.  * 
  64.  *  Documentation for DROP is Spread Over:
  65.  * 
  66.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  67.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  68.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  69.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  70.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  71.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  72.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  73.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  74.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  75.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  76.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  77.  * 
  78.  *  Licensed under the Apache License, Version 2.0 (the "License");
  79.  *      you may not use this file except in compliance with the License.
  80.  *   
  81.  *  You may obtain a copy of the License at
  82.  *      http://www.apache.org/licenses/LICENSE-2.0
  83.  *  
  84.  *  Unless required by applicable law or agreed to in writing, software
  85.  *      distributed under the License is distributed on an "AS IS" BASIS,
  86.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  87.  *  
  88.  *  See the License for the specific language governing permissions and
  89.  *      limitations under the License.
  90.  */

  92. /**
  93.  * <i>OptimalSerialCorrelationImpact</i> estimates the Optimal Adjustment to the Optimal Trading Trajectory
  94.  * attributable to Serial Correlation in accordance with the Specification of Almgren and Chriss (2000) for
  95.  * the given Risk Aversion Parameter without the Asset Drift. The References are:
  96.  * 
  97.  * <br><br>
  98.  *  <ul>
  99.  *      <li>
  100.  *          Almgren, R., and N. Chriss (1999): Value under Liquidation <i>Risk</i> <b>12 (12)</b>
  101.  *      </li>
  102.  *      <li>
  103.  *          Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
  104.  *              Risk</i> <b>3 (2)</b> 5-39
  105.  *      </li>
  106.  *      <li>
  107.  *          Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
  108.  *              Markets</i> <b>1</b> 1-50
  109.  *      </li>
  110.  *      <li>
  111.  *          Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional
  112.  *              Trades <i>Journal of Finance</i> <b>50</b> 1147-1174
  113.  *      </li>
  114.  *      <li>
  115.  *          Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange
  116.  *              Analysis of Institutional Equity Trades <i>Journal of Financial Economics</i> <b>46</b>
  117.  *              265-292
  118.  *      </li>
  119.  *  </ul>
  120.  * 
  121.  * <br><br>
  122.  *  <ul>
  123.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  124.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
  125.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">DROP API Construction and Usage</a></li>
  126.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/almgrenchriss/README.md">Almgren Chriss Efficient Frontier Trajectories</a></li>
  127.  *  </ul>
  128.  * <br><br>
  129.  *
  130.  * @author Lakshmi Krishnamurthy
  131.  */

  133. public class OptimalSerialCorrelationImpact {

  135.     public static void main (
  136.         final String[] astrArgs)
  137.         throws Exception
  138.     {
  139.         EnvManager.InitEnv (
  140.             "",
  141.             true
  142.         );

  144.         double dblS0 = 50.;
  145.         double dblX = 1000000.;
  146.         double dblT = 5.;
  147.         int iN = 5;
  148.         double dblAnnualVolatility = 0.30;
  149.         double dblAnnualReturns = 0.10;
  150.         double dblBidAsk = 0.125;
  151.         double dblDailyVolume = 5.e06;
  152.         double dblDailyVolumePermanentImpact = 0.1;
  153.         double dblDailyVolumeTemporaryImpact = 0.01;
  154.         double dblLambdaU = 1.e-06;
  155.         double dblSerialCorrelation = 0.1;

  157.         ArithmeticPriceDynamicsSettings apds = ArithmeticPriceDynamicsSettings.FromAnnualReturnsSettings (
  158.             dblAnnualReturns,
  159.             dblAnnualVolatility,
  160.             0.,
  161.             dblS0
  162.         );

  164.         double dblAlpha = apds.drift();

  166.         double dblSigma = apds.epochVolatility();

  168.         PriceMarketImpactLinear pmil = new PriceMarketImpactLinear (
  169.             new AssetTransactionSettings (
  170.                 dblS0,
  171.                 dblDailyVolume,
  172.                 dblBidAsk
  173.             ),
  174.             dblDailyVolumePermanentImpact,
  175.             dblDailyVolumeTemporaryImpact
  176.         );

  178.         ParticipationRateLinear prlPermanent = (ParticipationRateLinear) pmil.permanentTransactionFunction();

  180.         ParticipationRateLinear prlTemporary = (ParticipationRateLinear) pmil.temporaryTransactionFunction();

  182.         LinearPermanentExpectationParameters lpep = ArithmeticPriceEvolutionParametersBuilder.LinearExpectation (
  183.             new ArithmeticPriceDynamicsSettings (
  184.                 0.,
  185.                 new FlatUnivariate (dblSigma),
  186.                 dblSerialCorrelation
  187.             ),
  188.             new UniformParticipationRateLinear (prlPermanent),
  189.             new UniformParticipationRateLinear (prlTemporary)
  190.         );

  192.         DiscreteAlmgrenChriss dac = DiscreteAlmgrenChriss.Standard (
  193.             dblX,
  194.             dblT,
  195.             iN,
  196.             lpep,
  197.             dblLambdaU
  198.         );

  200.         AlmgrenChrissDiscrete acd = (AlmgrenChrissDiscrete) dac.generate();

  202.         double[] adblExecutionTimeNode = acd.executionTimeNode();

  204.         double[] adblTradeList = acd.tradeList();

  206.         double[] adblHoldings = acd.holdings();

  208.         TrajectoryShortfallEstimator tse = new TrajectoryShortfallEstimator (acd);

  210.         OptimalSerialCorrelationAdjustment[] aOSCA = tse.serialCorrelationAdjustment (lpep);

  212.         System.out.println ("\n\t|---------------------------------------------||");

  214.         System.out.println ("\t| ALMGREN-CHRISS TRAJECTORY GENERATOR INPUTS  ||");

  216.         System.out.println ("\t|---------------------------------------------||");

  218.         System.out.println ("\t| Initial Stock Price           : " + dblS0);

  220.         System.out.println ("\t| Initial Holdings              : " + dblX);

  222.         System.out.println ("\t| Liquidation Time              : " + dblT);

  224.         System.out.println ("\t| Number of Time Periods        : " + iN);

  226.         System.out.println ("\t| Annual Volatility             :" + FormatUtil.FormatDouble (dblAnnualVolatility, 1, 0, 100.) + "%");

  228.         System.out.println ("\t| Annual Growth                 :" + FormatUtil.FormatDouble (dblAnnualReturns, 1, 0, 100.) + "%");

  230.         System.out.println ("\t| Bid-Ask Spread                : " + dblBidAsk);

  232.         System.out.println ("\t| Daily Volume                  : " + dblDailyVolume);

  234.         System.out.println ("\t| Daily Volume Temporary Impact : " + dblDailyVolumeTemporaryImpact);

  236.         System.out.println ("\t| Daily Volume Permanent Impact : " + dblDailyVolumePermanentImpact);

  238.         System.out.println ("\t| Daily Volume 5 million Shares : " + prlPermanent.slope());

  240.         System.out.println ("\t| Static Holdings 11,000 Shares : " + dblLambdaU);

  242.         System.out.println ("\t|");

  244.         System.out.println (
  245.             "\t| Daily Volatility              : " +
  246.             FormatUtil.FormatDouble (dblSigma, 1, 4, 1.)
  247.         );

  249.         System.out.println (
  250.             "\t| Daily Returns                 : " +
  251.             FormatUtil.FormatDouble (dblAlpha, 1, 4, 1.)
  252.         );

  254.         System.out.println ("\t| Temporary Impact Fixed Offset :  " + prlTemporary.offset());

  256.         System.out.println ("\t| Eta                           :  " + prlTemporary.slope());

  258.         System.out.println ("\t| Gamma                         :  " + prlPermanent.slope());

  260.         System.out.println ("\t|---------------------------------------------||");

  262.         System.out.println ("\n\t|-------------------------------------------------||");

  264.         System.out.println ("\t|            AC2000 Optimal Trajectory            ||");

  266.         System.out.println ("\t|            ------ ------- ----------            ||");

  268.         System.out.println ("\t|   L -> R:                                       ||");

  270.         System.out.println ("\t|      Time Node                                  ||");

  272.         System.out.println ("\t|      Holdings                                   ||");

  274.         System.out.println ("\t|      Trade Amount                               ||");

  276.         System.out.println ("\t|      Holdings Serial Correlation Adjustment     ||");

  278.         System.out.println ("\t|      Trade Amount Serial Correlation Adjustment ||");

  280.         System.out.println ("\t|-------------------------------------------------||");

  282.         for (int i = 0; i <= iN; ++i) {
  283.             if (i == 0)
  284.                 System.out.println (
  285.                     "\t|" + FormatUtil.FormatDouble (adblExecutionTimeNode[i], 1, 0, 1.) + " => " +
  286.                     FormatUtil.FormatDouble (adblHoldings[i], 7, 1, 1.) + " | " +
  287.                     FormatUtil.FormatDouble (0., 6, 1, 1.) + " | " +
  288.                     FormatUtil.FormatDouble (aOSCA[i].holdingsShift(), 5, 1, 1.) + " | " +
  289.                     FormatUtil.FormatDouble (aOSCA[i].gain(), 3, 1, 1.) + " ||"
  290.                 );
  291.             else
  292.                 System.out.println (
  293.                     "\t|" + FormatUtil.FormatDouble (adblExecutionTimeNode[i], 1, 0, 1.) + " => " +
  294.                     FormatUtil.FormatDouble (adblHoldings[i], 7, 1, 1.) + " | " +
  295.                     FormatUtil.FormatDouble (adblTradeList[i - 1], 6, 1, 1.) + " | " +
  296.                     FormatUtil.FormatDouble (aOSCA[i].holdingsShift(), 5, 1, 1.) + " | " +
  297.                     FormatUtil.FormatDouble (aOSCA[i].gain(), 3, 1, 1.) + " ||"
  298.                 );
  299.         }

  301.         System.out.println ("\t|-------------------------------------------------||");

  303.         EnvManager.TerminateEnv();
  304.     }
  305. }
Created with JaCoCo 0.7.9.201702052155