OptimalTrajectoryTradeAnalysis.java
package org.drip.sample.athl;
import org.drip.execution.athl.DynamicsParameters;
import org.drip.execution.dynamics.LinearPermanentExpectationParameters;
import org.drip.execution.nonadaptive.ContinuousPowerImpact;
import org.drip.execution.optimum.PowerImpactContinuous;
import org.drip.execution.parameters.AssetFlowSettings;
import org.drip.function.definition.R1ToR1;
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>OptimalTrajectoryTradeAnalysis</i> analyzes the Impact of Input Parameters on the Trade Scheduling
* using the Equity Market Impact Functions determined empirically by Almgren, Thum, Hauptmann, and Li
* (2005), using the Parameterization of Almgren (2003) for IBM. 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 OptimalTrajectoryTradeAnalysis {
private static final void TradeSizeSensitivity (
final double dblADVRatio,
final double dblTradeSize,
final LinearPermanentExpectationParameters lpep)
throws Exception
{
double dblTradeTime = 0.5;
int iNumInterval = 10;
double dblRiskAversion = 1.e-02;
ContinuousPowerImpact cpi = ContinuousPowerImpact.Standard (
dblTradeSize,
dblTradeTime,
lpep,
dblRiskAversion
);
PowerImpactContinuous pic = (PowerImpactContinuous) cpi.generate();
R1ToR1 r1ToR1Holdings = pic.holdings();
double[] adblHoldings = new double[iNumInterval];
double[] adblExecutionTime = new double[iNumInterval];
for (int i = 1; i <= iNumInterval; ++i) {
adblExecutionTime[i - 1] = dblTradeTime * i / iNumInterval;
adblHoldings[i - 1] = r1ToR1Holdings.evaluate (adblExecutionTime[i - 1]);
}
String strDump = "";
for (int i = 0; i < adblHoldings.length; ++i)
strDump = strDump + FormatUtil.FormatDouble (adblHoldings[i] / dblTradeSize, 2, 2, 100.) + "% | ";
System.out.println (
"\t| " +
FormatUtil.FormatDouble (dblADVRatio, 2, 0, 100.) + "% | " + strDump +
FormatUtil.FormatDouble (pic.characteristicTime(), 1, 3, 1.) + " ||"
);
}
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv (
"",
true
);
String strAssetName = "IBM";
double dblAverageDailyVolume = 6561000.;
double dblSharesOutstanding = 1728000000.;
double dblBaseDailyVolatility = 1.57;
double[] adblADVRatio = new double[] {
0.01,
0.02,
0.03,
0.04,
0.06,
0.08,
0.10,
0.15,
0.20,
0.25,
0.30
};
LinearPermanentExpectationParameters lpep = new DynamicsParameters (
new AssetFlowSettings (
strAssetName,
dblAverageDailyVolume,
dblSharesOutstanding,
dblBaseDailyVolatility
)
).almgren2003();
System.out.println();
System.out.println ("\t|------------------------------------------------------------------------------------------------------------------------------||");
System.out.println ("\t| Trade Size Dependence on the Execution Schedule ||");
System.out.println ("\t|------------------------------------------------------------------------------------------------------------------------------||");
System.out.println ("\t| L -> R : ||");
System.out.println ("\t| Trade Size as a Fraction of ADV ||");
System.out.println ("\t| Execution Time Nodes ||");
System.out.println ("\t| Characteristic Time ||");
System.out.println ("\t|------------------------------------------------------------------------------------------------------------------------------||");
for (double dblADVRatio : adblADVRatio)
TradeSizeSensitivity (
dblADVRatio,
dblADVRatio * dblAverageDailyVolume,
lpep
);
System.out.println ("\t|------------------------------------------------------------------------------------------------------------------------------||");
EnvManager.TerminateEnv();
}
}