WeakCurvatureEvolutionMetrics.java

  1. package org.drip.sample.descentverifier;

  3. import org.drip.function.rdtor1descent.LineStepEvolutionControl;
  4. import org.drip.function.rdtor1solver.*;
  5. import org.drip.measure.statistics.MultivariateMoments;
  6. import org.drip.numerical.common.FormatUtil;
  7. import org.drip.portfolioconstruction.allocator.*;
  8. import org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties;
  9. import org.drip.service.env.EnvManager;

  11. /*
  12.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  13.  */

  15. /*!
  16.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  17.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  18.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  19.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  20.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  21.  * 
  22.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  23.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  24.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  25.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  26.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  27.  *      and computational support.
  28.  *  
  29.  *      https://lakshmidrip.github.io/DROP/
  30.  *  
  31.  *  DROP is composed of three modules:
  32.  *  
  33.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  34.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  35.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  36.  * 
  37.  *  DROP Product Core implements libraries for the following:
  38.  *  - Fixed Income Analytics
  39.  *  - Loan Analytics
  40.  *  - Transaction Cost Analytics
  41.  * 
  42.  *  DROP Portfolio Core implements libraries for the following:
  43.  *  - Asset Allocation Analytics
  44.  *  - Asset Liability Management Analytics
  45.  *  - Capital Estimation Analytics
  46.  *  - Exposure Analytics
  47.  *  - Margin Analytics
  48.  *  - XVA Analytics
  49.  * 
  50.  *  DROP Computational Core implements libraries for the following:
  51.  *  - Algorithm Support
  52.  *  - Computation Support
  53.  *  - Function Analysis
  54.  *  - Model Validation
  55.  *  - Numerical Analysis
  56.  *  - Numerical Optimizer
  57.  *  - Spline Builder
  58.  *  - Statistical Learning
  59.  * 
  60.  *  Documentation for DROP is Spread Over:
  61.  * 
  62.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  63.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  64.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  65.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  66.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  67.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  68.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  69.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  70.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  71.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  72.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  73.  * 
  74.  *  Licensed under the Apache License, Version 2.0 (the "License");
  75.  *      you may not use this file except in compliance with the License.
  76.  *   
  77.  *  You may obtain a copy of the License at
  78.  *      http://www.apache.org/licenses/LICENSE-2.0
  79.  *  
  80.  *  Unless required by applicable law or agreed to in writing, software
  81.  *      distributed under the License is distributed on an "AS IS" BASIS,
  82.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  83.  *  
  84.  *  See the License for the specific language governing permissions and
  85.  *      limitations under the License.
  86.  */

  88. /**
  89.  * <i>WeakCurvatureEvolutionMetrics</i> demonstrates the Impact of applying the Weak Curvature Criterion on
  90.  * the Evolution of the R<sup>d</sup> Fixed Point of a Constrained Minimization Search.
  91.  * 
  92.  * <br><br>
  93.  *  <ul>
  94.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ComputationalCore.md">Computational Core Module</a></li>
  95.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/NumericalAnalysisLibrary.md">Numerical Analysis Library</a></li>
  96.  *      <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>
  97.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/descentverifier/README.md">Armijo/Wolfe Strong/Weak Curvature</a></li>
  98.  *  </ul>
  99.  * <br><br>
  100.  *
  101.  * @author Lakshmi Krishnamurthy
  102.  */

  104. public class WeakCurvatureEvolutionMetrics
  105. {

  107.     public static final void main (
  108.         final String[] argumentArray)
  109.         throws Exception
  110.     {
  111.         EnvManager.InitEnv (
  112.             ""
  113.         );

  115.         FixedRdFinder.s_verifierIncrementBlog = true;

  117.         String[] assetNameArray = new String[]
  118.         {
  119.             "TOK",
  120.             "EWJ",
  121.             "HYG",
  122.             "LQD",
  123.             "EMD",
  124.             "GSG",
  125.             "BWX"
  126.         };
  127.         double[] assetLowerBoundArray = new double[]
  128.         {
  129.             0.05,
  130.             0.04,
  131.             0.06,
  132.             0.03,
  133.             0.03,
  134.             0.03,
  135.             0.13
  136.         };
  137.         double[] assetUpperBoundArray = new double[]
  138.         {
  139.             0.43,
  140.             0.27,
  141.             0.44,
  142.             0.32,
  143.             0.66,
  144.             0.32,
  145.             0.88
  146.         };
  147.         double[] assetExpectedReturnsArray = new double[]
  148.         {
  149.             0.1300,
  150.             0.0700,
  151.             0.0400,
  152.             0.0300,
  153.             0.0800,
  154.             0.1000,
  155.             0.0100
  156.         };
  157.         double portfolioDesignReturn = 0.06000;
  158.         double[][] assetReturnsCovarianceMatrix = new double[][]
  159.         {
  160.             {0.002733 * 12, 0.002083 * 12, 0.001593 * 12, 0.000488 * 12, 0.001172 * 12, 0.002312 * 12, 0.000710 * 12},
  161.             {0.002083 * 12, 0.002768 * 12, 0.001302 * 12, 0.000457 * 12, 0.001105 * 12, 0.001647 * 12, 0.000563 * 12},
  162.             {0.001593 * 12, 0.001302 * 12, 0.001463 * 12, 0.000639 * 12, 0.001050 * 12, 0.001110 * 12, 0.000519 * 12},
  163.             {0.000488 * 12, 0.000457 * 12, 0.000639 * 12, 0.000608 * 12, 0.000663 * 12, 0.000042 * 12, 0.000370 * 12},
  164.             {0.001172 * 12, 0.001105 * 12, 0.001050 * 12, 0.000663 * 12, 0.001389 * 12, 0.000825 * 12, 0.000661 * 12},
  165.             {0.002312 * 12, 0.001647 * 12, 0.001110 * 12, 0.000042 * 12, 0.000825 * 12, 0.005211 * 12, 0.000749 * 12},
  166.             {0.000710 * 12, 0.000563 * 12, 0.000519 * 12, 0.000370 * 12, 0.000661 * 12, 0.000749 * 12, 0.000703 * 12}
  167.         };

  169.         AssetUniverseStatisticalProperties assetUniverseStatisticalProperties =
  170.             AssetUniverseStatisticalProperties.FromMultivariateMetrics (
  171.                 MultivariateMoments.Standard (
  172.                     assetNameArray,
  173.                     assetExpectedReturnsArray,
  174.                     assetReturnsCovarianceMatrix
  175.                 )
  176.             );

  178.         double[][] covarianceMatrix = assetUniverseStatisticalProperties.covariance (
  179.             assetNameArray
  180.         );

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

  184.         System.out.println ("\t|                                  CROSS ASSET COVARIANCE MATRIX                                 ||");

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

  188.         String header = "\t|     |";

  190.         for (int assetNameIndex = 0;
  191.             assetNameIndex < assetNameArray.length;
  192.             ++assetNameIndex)
  193.         {
  194.             header += "    " + assetNameArray[assetNameIndex] + "     |";
  195.         }

  197.         System.out.println (header + "|");

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

  201.         for (int assetNameIndexI = 0;
  202.             assetNameIndexI < assetNameArray.length;
  203.             ++assetNameIndexI)
  204.         {
  205.             String dump = "\t| " + assetNameArray[assetNameIndexI] + " ";

  207.             for (int assetNameIndexJ = 0;
  208.                 assetNameIndexJ < assetNameArray.length;
  209.                 ++assetNameIndexJ)
  210.             {
  211.                 dump += "|" + FormatUtil.FormatDouble (
  212.                     covarianceMatrix[assetNameIndexI][assetNameIndexJ], 1, 8, 1.
  213.                 ) + " ";
  214.             }

  216.             System.out.println (dump + "||");
  217.         }

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

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

  223.         System.out.println ("\t|   ASSET BOUNDS    ||");

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

  227.         for (int assetNameIndex = 0;
  228.             assetNameIndex < assetNameArray.length;
  229.             ++assetNameIndex)
  230.         {
  231.             System.out.println (
  232.                 "\t| " + assetNameArray[assetNameIndex] + " | " +
  233.                 FormatUtil.FormatDouble (assetLowerBoundArray[assetNameIndex], 2, 0, 100.) + "% | " +
  234.                 FormatUtil.FormatDouble (assetUpperBoundArray[assetNameIndex], 2, 0, 100.) + "% ||"
  235.             );
  236.         }

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

  240.         InteriorPointBarrierControl interiorPointBarrierControl = InteriorPointBarrierControl.Standard();

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

  244.         System.out.println ("\t|  INTERIOR POINT METHOD BARRIER PARAMETERS  ||");

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

  248.         System.out.println (
  249.             "\t|    Barrier Decay Velocity        : " + 1. / interiorPointBarrierControl.decayVelocity()
  250.         );

  252.         System.out.println (
  253.             "\t|    Barrier Decay Steps           : " + interiorPointBarrierControl.decayStepCount()
  254.         );

  256.         System.out.println (
  257.             "\t|    Initial Barrier Strength      : " + interiorPointBarrierControl.initialStrength());

  259.         System.out.println ("\t|    Barrier Convergence Tolerance : " + interiorPointBarrierControl.relativeTolerance());

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

  263.         BoundedHoldingsAllocationControl boundedPortfolioConstructionParameters =
  264.             new BoundedHoldingsAllocationControl (
  265.                 assetNameArray,
  266.                 CustomRiskUtilitySettings.VarianceMinimizer(),
  267.                 new EqualityConstraintSettings (
  268.                     EqualityConstraintSettings.FULLY_INVESTED_CONSTRAINT |
  269.                         EqualityConstraintSettings.RETURNS_CONSTRAINT,
  270.                     portfolioDesignReturn
  271.                 )
  272.             );

  274.         for (int assetNameIndex = 0;
  275.             assetNameIndex < assetNameArray.length;
  276.             ++assetNameIndex)
  277.         {
  278.             boundedPortfolioConstructionParameters.addBound (
  279.                 assetNameArray[assetNameIndex],
  280.                 assetLowerBoundArray[assetNameIndex],
  281.                 assetUpperBoundArray[assetNameIndex]
  282.             );
  283.         }

  285.         new ConstrainedMeanVarianceOptimizer (
  286.             interiorPointBarrierControl,
  287.             LineStepEvolutionControl.NocedalWrightWeakCurvature()
  288.         ).allocate (
  289.             boundedPortfolioConstructionParameters,
  290.             assetUniverseStatisticalProperties
  291.         );

  293.         EnvManager.TerminateEnv();
  294.     }
  295. }
Created with JaCoCo 0.7.9.201702052155