EquityMarketImpactDRI.java
package org.drip.sample.athl;
import org.drip.execution.athl.*;
import org.drip.execution.parameters.AssetFlowSettings;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
/*
* -*- 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>EquityMarketImpactDRI</i> demonstrates the Reconciliation of the Equity Market Impact with that
* determined empirically by Almgren, Thum, Hauptmann, and Li (2005), using the Parameterization of Almgren
* (2003) for DRI. The References are:
*
* <br><br>
* <ul>
* <li>
* Almgren, R., and N. Chriss (1999): Value under Liquidation <i>Risk</i> <b>12 (12)</b>
* </li>
* <li>
* Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
* Risk</i> <b>3 (2)</b> 5-39
* </li>
* <li>
* Almgren, R. (2003): Optimal Execution with Nonlinear Impact Functions and Trading-Enhanced Risk
* <i>Applied Mathematical Finance</i> <b>10 (1)</b> 1-18
* </li>
* <li>
* Almgren, R., and N. Chriss (2003): Bidding Principles <i>Risk</i> 97-102
* </li>
* <li>
* Almgren, R., C. Thum, E. Hauptmann, and H. Li (2005): Equity Market Impact <i>Risk</i> <b>18
* (7)</b> 57-62
* </li>
* </ul>
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
* <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>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/athl/README.md">Almgren, Thum, Hauptmann, and Li (2005) Calibration</a></li>
* </ul>
* <br><br>
*
* @author Lakshmi Krishnamurthy
*/
public class EquityMarketImpactDRI {
private static final void TemporaryImpactReconciler (
final TemporaryImpact ti,
final double dblTradeSize,
final double dblTime,
final double dblNormalizedTemporaryImpactReconciler,
final double dblDenormalizedTemporaryImpactReconciler,
final double dblDenormalizedPermanentImpact,
final double dblRealizedImpactReconciler)
throws Exception
{
double dblNormalizedTemporaryImpact = ti.evaluate (
dblTradeSize / (ti.assetFlowParameters().averageDailyVolume() * dblTime)
);
double dblDenormalizedTemporaryImpact = ti.evaluate (
dblTradeSize,
dblTime
);
System.out.println (
"\t| " +
FormatUtil.FormatDouble (dblTime, 1, 1, 1.) + " | " +
FormatUtil.FormatDouble (dblNormalizedTemporaryImpact, 1, 3, 1.) + " | " +
FormatUtil.FormatDouble (dblNormalizedTemporaryImpactReconciler, 1, 3, 1.) + " || " +
FormatUtil.FormatDouble (dblDenormalizedTemporaryImpact, 2, 0, 100.) + " | " +
FormatUtil.FormatDouble (dblDenormalizedTemporaryImpactReconciler, 2, 0, 1.) + " ||" +
FormatUtil.FormatDouble (dblDenormalizedPermanentImpact + dblDenormalizedTemporaryImpact, 2, 0, 100.) + " | " +
FormatUtil.FormatDouble (dblRealizedImpactReconciler, 2, 0, 1.) + " ||"
);
}
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv (
"",
true
);
String strAssetName = "DRI";
double dblAverageDailyVolume = 1929000.;
double dblSharesOutstanding = 168000000.;
double dblDailyVolatility = 2.26;
double dblTradeSize = 192900.;
double dblTradeTime = 1.;
double dblInverseTurnoverReconciler = 87.092;
double dblNormalizedTradeSizeReconciler = 0.1;
double dblNormalizedPermanentImpactReconciler = 0.096;
double dblDenormalizedPermanentImpactReconciler = 21.679;
double[] adblTime = new double[] {
0.1,
0.2,
0.5
};
double[] adblNormalizedTemporaryImpactReconciler = new double[] {
0.142,
0.094,
0.054
};
double[] adblDenormalizedTemporaryImpactReconciler = new double[] {
32,
21,
12
};
double[] adblRealizedImpactReconciler = new double[] {
43,
32,
23
};
AssetFlowSettings afs = new AssetFlowSettings (
strAssetName,
dblAverageDailyVolume,
dblSharesOutstanding,
dblDailyVolatility
);
TemporaryImpact ti = new TemporaryImpact (afs);
PermanentImpactNoArbitrage pina = new PermanentImpactNoArbitrage (afs);
double dblDenormalizedPermanentImpact = pina.evaluate (
dblTradeSize,
dblTradeTime
);
double dblNormalizedPermanentImpact = pina.evaluate (
dblTradeSize / (afs.averageDailyVolume() * dblTradeTime)
);
System.out.println();
System.out.println ("\t|-------------------------------------------||");
System.out.println ("\t| Asset => " + strAssetName);
System.out.println ("\t| Average Daily Volume => " + FormatUtil.FormatDouble (dblAverageDailyVolume, 1, 0, 1.));
System.out.println ("\t| Shares Outstanding => " + FormatUtil.FormatDouble (dblSharesOutstanding, 1, 0, 1.));
System.out.println ("\t| Daily Volatility => " + FormatUtil.FormatDouble (dblDailyVolatility, 1, 2, 1.) + "%");
System.out.println ("\t| Trade Size => " + FormatUtil.FormatDouble (dblTradeSize, 1, 0, 1.));
System.out.println ("\t|-------------------------------------------||\n");
System.out.println ("\t|------------------------------------------------------||");
System.out.println ("\t| ALMGREN, THUM, HAUPTMANN, and LI (2005) PERM. RECON ||");
System.out.println ("\t|------------------------------------------------------||");
System.out.println (
"\t| Inverse Turn-over => " +
FormatUtil.FormatDouble (afs.inverseTurnover(), 2, 3, 1.) + " | " +
FormatUtil.FormatDouble (dblInverseTurnoverReconciler, 2, 3, 1.) + " ||"
);
System.out.println (
"\t| Normalized Trade Size => " +
FormatUtil.FormatDouble (afs.normalizeTradeSize (dblTradeSize, dblTradeTime), 2, 3, 1.) + " | " +
FormatUtil.FormatDouble (dblNormalizedTradeSizeReconciler, 2, 3, 1.) + " ||"
);
System.out.println (
"\t| Normalized Permanent Impact => " +
FormatUtil.FormatDouble (2. * dblNormalizedPermanentImpact, 2, 3, 1.) + " | " +
FormatUtil.FormatDouble (dblNormalizedPermanentImpactReconciler, 2, 3, 1.) + " ||"
);
System.out.println (
"\t| De-normalized Permanent Impact => " +
FormatUtil.FormatDouble (2. * dblDenormalizedPermanentImpact, 2, 3, 100.) + " | " +
FormatUtil.FormatDouble (dblDenormalizedPermanentImpactReconciler, 2, 3, 1.) + " ||"
);
System.out.println ("\t|------------------------------------------------------||\n");
System.out.println ("\t|-------------------------------------------------||");
System.out.println ("\t| TEMPORARY IMPACT PARAMETERS RECONCILIATION ||");
System.out.println ("\t|-------------------------------------------------||");
System.out.println ("\t| L -> R: ||");
System.out.println ("\t| - Time ||");
System.out.println ("\t| - Normalized K (Computed) ||");
System.out.println ("\t| - Normalized K (Reconciler) ||");
System.out.println ("\t| - De-normalized K (Computed) ||");
System.out.println ("\t| - De-normalized K (Reconciler) ||");
System.out.println ("\t| - De-normalized J (Computed) ||");
System.out.println ("\t| - De-normalized J (Reconciler) ||");
System.out.println ("\t|-------------------------------------------------||");
for (int i = 0; i < adblTime.length; ++i)
TemporaryImpactReconciler (
ti,
dblTradeSize,
adblTime[i],
adblNormalizedTemporaryImpactReconciler[i],
adblDenormalizedTemporaryImpactReconciler[i],
dblDenormalizedPermanentImpact,
adblRealizedImpactReconciler[i]
);
System.out.println ("\t|-------------------------------------------------||\n");
EnvManager.TerminateEnv();
}
}