OptimalTrajectoryDRI.java

  1. package org.drip.sample.athl;

  3. import org.drip.execution.athl.DynamicsParameters;
  4. import org.drip.execution.dynamics.LinearPermanentExpectationParameters;
  5. import org.drip.execution.nonadaptive.ContinuousPowerImpact;
  6. import org.drip.execution.optimum.PowerImpactContinuous;
  7. import org.drip.execution.parameters.AssetFlowSettings;
  8. import org.drip.execution.strategy.DiscreteTradingTrajectory;
  9. import org.drip.function.definition.R1ToR1;
  10. import org.drip.numerical.common.FormatUtil;
  11. import org.drip.service.env.EnvManager;

  13. /*
  14.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  15.  */

  17. /*!
  18.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  19.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  20.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  21.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  22.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  23.  * 
  24.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  25.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  26.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  27.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  28.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  29.  *      and computational support.
  30.  *  
  31.  *      https://lakshmidrip.github.io/DROP/
  32.  *  
  33.  *  DROP is composed of three modules:
  34.  *  
  35.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  36.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  37.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  38.  * 
  39.  *  DROP Product Core implements libraries for the following:
  40.  *  - Fixed Income Analytics
  41.  *  - Loan Analytics
  42.  *  - Transaction Cost Analytics
  43.  * 
  44.  *  DROP Portfolio Core implements libraries for the following:
  45.  *  - Asset Allocation Analytics
  46.  *  - Asset Liability Management Analytics
  47.  *  - Capital Estimation Analytics
  48.  *  - Exposure Analytics
  49.  *  - Margin Analytics
  50.  *  - XVA Analytics
  51.  * 
  52.  *  DROP Computational Core implements libraries for the following:
  53.  *  - Algorithm Support
  54.  *  - Computation Support
  55.  *  - Function Analysis
  56.  *  - Model Validation
  57.  *  - Numerical Analysis
  58.  *  - Numerical Optimizer
  59.  *  - Spline Builder
  60.  *  - Statistical Learning
  61.  * 
  62.  *  Documentation for DROP is Spread Over:
  63.  * 
  64.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  65.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  66.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  67.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  68.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  69.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  70.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  71.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  72.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  73.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  74.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  75.  * 
  76.  *  Licensed under the Apache License, Version 2.0 (the "License");
  77.  *      you may not use this file except in compliance with the License.
  78.  *   
  79.  *  You may obtain a copy of the License at
  80.  *      http://www.apache.org/licenses/LICENSE-2.0
  81.  *  
  82.  *  Unless required by applicable law or agreed to in writing, software
  83.  *      distributed under the License is distributed on an "AS IS" BASIS,
  84.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  85.  *  
  86.  *  See the License for the specific language governing permissions and
  87.  *      limitations under the License.
  88.  */

  90. /**
  91.  * <i>OptimalTrajectoryDRI</i> demonstrates the Trade Scheduling using the Equity Market Impact Functions
  92.  * determined empirically by Almgren, Thum, Hauptmann, and Li (2005), using the Parameterization of Almgren
  93.  * (2003) for DRI. The References are:
  94.  *  
  95.  * <br><br>
  96.  *  <ul>
  97.  *      <li>
  98.  *          Almgren, R., and N. Chriss (1999): Value under Liquidation <i>Risk</i> <b>12 (12)</b>
  99.  *      </li>
  100.  *      <li>
  101.  *          Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
  102.  *              Risk</i> <b>3 (2)</b> 5-39
  103.  *      </li>
  104.  *      <li>
  105.  *          Almgren, R. (2003): Optimal Execution with Nonlinear Impact Functions and Trading-Enhanced Risk
  106.  *              <i>Applied Mathematical Finance</i> <b>10 (1)</b> 1-18
  107.  *      </li>
  108.  *      <li>
  109.  *          Almgren, R., and N. Chriss (2003): Bidding Principles <i>Risk</i> 97-102
  110.  *      </li>
  111.  *      <li>
  112.  *          Almgren, R., C. Thum, E. Hauptmann, and H. Li (2005): Equity Market Impact <i>Risk</i> <b>18
  113.  *              (7)</b> 57-62
  114.  *      </li>
  115.  *  </ul>
  116.  *  
  117.  * <br><br>
  118.  *  <ul>
  119.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  120.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
  121.  *      <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>
  122.  *      <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>
  123.  *  </ul>
  124.  * <br><br>
  125.  * 
  126.  * @author Lakshmi Krishnamurthy
  127.  */

  129. public class OptimalTrajectoryDRI {

  131.     public static final void main (
  132.         final String[] astrArgs)
  133.         throws Exception
  134.     {
  135.         EnvManager.InitEnv (
  136.             "",
  137.             true
  138.         );

  140.         String strAssetName = "DRI";
  141.         double dblAverageDailyVolume = 1929000.;
  142.         double dblSharesOutstanding = 168000000.;
  143.         double dblDailyVolatility = 2.26;

  145.         double dblTradeSize = 192900.;
  146.         double dblTradeTime = 1.;
  147.         int iNumInterval = 20;

  149.         double dblRiskAversion = 1.e-02;

  151.         AssetFlowSettings afs = new AssetFlowSettings (
  152.             strAssetName,
  153.             dblAverageDailyVolume,
  154.             dblSharesOutstanding,
  155.             dblDailyVolatility
  156.         );

  158.         LinearPermanentExpectationParameters lpep = new DynamicsParameters (afs).almgren2003();

  160.         ContinuousPowerImpact cpi = ContinuousPowerImpact.Standard (
  161.             dblTradeSize,
  162.             dblTradeTime,
  163.             lpep,
  164.             dblRiskAversion
  165.         );

  167.         PowerImpactContinuous pic = (PowerImpactContinuous) cpi.generate();

  169.         R1ToR1 r1ToR1Holdings = pic.holdings();

  171.         double[] adblHoldings = new double[iNumInterval];
  172.         double[] adblExecutionTime = new double[iNumInterval];

  174.         for (int i = 1; i <= iNumInterval; ++i) {
  175.             adblExecutionTime[i - 1] = dblTradeTime * i / iNumInterval;

  177.             adblHoldings[i - 1] = r1ToR1Holdings.evaluate (adblExecutionTime[i - 1]);
  178.         }

  180.         DiscreteTradingTrajectory dtt = DiscreteTradingTrajectory.Standard (
  181.             adblExecutionTime,
  182.             adblHoldings
  183.         );

  185.         double[] adblTradeList = dtt.tradeList();

  187.         System.out.println();

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

  191.         System.out.println ("\t| DRI ATHL 2005 Optimal Trajectory  ||");

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

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

  197.         System.out.println ("\t|             - Execution Time Node ||");

  199.         System.out.println ("\t|             - Holdings Remaining  ||");

  201.         System.out.println ("\t|             - Trade List Amount   ||");

  203.         System.out.println ("\t|             - Holdings (%)        ||");

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

  207.         for (int i = 1; i < adblExecutionTime.length; ++i)
  208.             System.out.println (
  209.                 "\t| " +
  210.                 FormatUtil.FormatDouble (adblExecutionTime[i], 1, 2, 1.) + " | " +
  211.                 FormatUtil.FormatDouble (adblHoldings[i], 6, 0, 1.) + " | " + 
  212.                 FormatUtil.FormatDouble (adblTradeList[i - 1], 5, 0, 1.) + " | " + 
  213.                 FormatUtil.FormatDouble (adblHoldings[i] / dblTradeSize, 2, 1, 100.) + "% ||"
  214.             );

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

  218.         System.out.println();

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

  222.         System.out.println ("\t|      DRI ATHL 2005 Optimal Trajectory Transaction Cost Measures     ||");

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

  226.         System.out.println (
  227.             "\t| Transaction Cost Expectation ( X 10^-06)                  : " +
  228.             FormatUtil.FormatDouble (pic.transactionCostExpectation(), 3, 2, 1.e-06) + " ||"
  229.         );

  231.         System.out.println (
  232.             "\t| Transaction Cost Variance ( X 10^-09)                     : " +
  233.             FormatUtil.FormatDouble (pic.transactionCostVariance(), 3, 2, 1.e-09) + " ||"
  234.         );

  236.         System.out.println (
  237.             "\t| Characteristic Time                                       : " +
  238.             FormatUtil.FormatDouble (pic.characteristicTime(), 3, 2, 1.) + " ||"
  239.         );

  241.         System.out.println (
  242.             "\t| Efficient Frontier Hyperboloid Boundary Value ( X 10^-12) : " +
  243.             FormatUtil.FormatDouble (pic.hyperboloidBoundaryValue(), 3, 2, 1.e-12) + " ||"
  244.         );

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

  248.         EnvManager.TerminateEnv();
  249.     }
  250. }
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