AlmgrenConstantTradingEnhanced.java
package org.drip.sample.execution;
import org.drip.execution.capture.TrajectoryShortfallEstimator;
import org.drip.execution.dynamics.*;
import org.drip.execution.impact.ParticipationRateLinear;
import org.drip.execution.nonadaptive.*;
import org.drip.execution.optimum.*;
import org.drip.execution.profiletime.UniformParticipationRateLinear;
import org.drip.execution.risk.MeanVarianceObjectiveUtility;
import org.drip.execution.strategy.*;
import org.drip.function.definition.R1ToR1;
import org.drip.measure.gaussian.R1UnivariateNormal;
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) 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 risk, transaction costs, exposure, margin
* calculations, valuation adjustment, and portfolio construction within and across fixed income,
* credit, commodity, equity, FX, and structured products.
*
* https://lakshmidrip.github.io/DROP/
*
* DROP is composed of three modules:
*
* - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
* - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
* - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
*
* DROP Analytics Core implements libraries for the following:
* - Fixed Income Analytics
* - Asset Backed Analytics
* - XVA Analytics
* - Exposure and Margin Analytics
*
* DROP Portfolio Core implements libraries for the following:
* - Asset Allocation Analytics
* - Transaction Cost Analytics
*
* DROP Numerical Core implements libraries for the following:
* - Statistical Learning
* - Numerical Optimizer
* - Spline Builder
* - Algorithm Support
*
* 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>AlmgrenConstantTradingEnhanced</i> demonstrates the Generation of the Optimal Trading Trajectory under
* the Condition of Constant Trading Enhanced Volatility using a Numerical Optimization Technique. 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>
* Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
* Markets</i> <b>1</b> 1-50
* </li>
* </ul>
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics Library</a></li>
* <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/execution/README.md">Execution</a></li>
* </ul>
* <br><br>
*
* @author Lakshmi Krishnamurthy
*/
public class AlmgrenConstantTradingEnhanced {
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv ("");
double dblEta = 5.e-06;
double dblAlpha = 1.;
double dblSigma = 1.;
double dblLambda = 1.e-05;
double dblX = 100000.;
double dblT = 5.;
int iNumInterval = 500;
DiscreteTradingTrajectoryControl dttc = DiscreteTradingTrajectoryControl.FixedInterval (
new OrderSpecification (
dblX,
dblT
),
iNumInterval
);
ArithmeticPriceEvolutionParameters apep = ArithmeticPriceEvolutionParametersBuilder.TradingEnhancedVolatility (
dblSigma,
new UniformParticipationRateLinear (ParticipationRateLinear.SlopeOnly (dblEta)),
new UniformParticipationRateLinear (
new ParticipationRateLinear (
dblAlpha,
0.
)
)
);
EfficientTradingTrajectoryDiscrete ettd = (EfficientTradingTrajectoryDiscrete) new StaticOptimalSchemeDiscrete (
dttc,
apep,
new MeanVarianceObjectiveUtility (dblLambda)
).generate();
double[] adblExecutionTimeNode = ettd.executionTimeNode();
double[] adblTradeList = ettd.tradeList();
double[] adblHoldings = ettd.holdings();
ContinuousConstantTradingEnhanced ccte = ContinuousConstantTradingEnhanced.Standard (
dblX,
dblT,
apep,
dblLambda
);
EfficientTradingTrajectoryContinuous ettc = (EfficientTradingTrajectoryContinuous) ccte.generate();
R1ToR1 r1ToR1Holdings = ettc.holdings();
double[] adblHoldingsCF = new double[adblExecutionTimeNode.length];
for (int i = 0; i < adblExecutionTimeNode.length; ++i)
adblHoldingsCF[i] = r1ToR1Holdings.evaluate (adblExecutionTimeNode[i]);
TrajectoryShortfallEstimator tse = new TrajectoryShortfallEstimator (ettd);
R1UnivariateNormal r1un = tse.totalCostDistributionSynopsis (apep);
System.out.println ("\n\t|------------------------------------------------||");
System.out.println ("\t| NUMERICAL - CLOSED FORM CONTINUOUS TRAJECTORY ||");
System.out.println ("\t|------------------------------------------------||");
System.out.println ("\t| L -> R: ||");
System.out.println ("\t| - Execution Time Node ||");
System.out.println ("\t| - Holdings (Numerical) ||");
System.out.println ("\t| - Holdings (Continuous Closed Form) ||");
System.out.println ("\t| - Trade List (Numerical) ||");
System.out.println ("\t| - Trade List (Continuous Closed Form) ||");
System.out.println ("\t|------------------------------------------------||");
for (int i = 1; i < adblExecutionTimeNode.length; ++i) {
System.out.println ("\t| " +
FormatUtil.FormatDouble (adblExecutionTimeNode[i], 1, 2, 1.) + " => " +
FormatUtil.FormatDouble (adblHoldings[i] / dblX, 2, 2, 100.) + "% | " +
FormatUtil.FormatDouble (adblHoldingsCF[i] / dblX, 2, 2, 100.) + "% | " +
FormatUtil.FormatDouble (adblTradeList[i - 1] / dblX, 2, 2, 100.) + "% | " +
FormatUtil.FormatDouble ((adblHoldingsCF[i] - adblHoldingsCF[i - 1]) / dblX, 2, 2, 100.) + "% ||"
);
}
System.out.println ("\t|------------------------------------------------||");
System.out.println ("\n\t|--------------------------------------------------------------------------||");
System.out.println ("\t| TRANSACTION COST RECONCILIATION: EXPLICIT vs. NUMERICAL vs. CLOSED FORM ||");
System.out.println ("\t|--------------------------------------------------------------------------||");
System.out.println (
"\t| Transaction Cost Expectation : " +
FormatUtil.FormatDouble (r1un.mean(), 6, 1, 1.) + " | " +
FormatUtil.FormatDouble (ettd.transactionCostExpectation(), 6, 1, 1.) + " | " +
FormatUtil.FormatDouble (ettc.transactionCostExpectation(), 6, 1, 1.) + " ||"
);
System.out.println (
"\t| Transaction Cost Variance (X 10^-06) : " +
FormatUtil.FormatDouble (r1un.variance(), 6, 1, 1.e-06) + " | " +
FormatUtil.FormatDouble (ettd.transactionCostVariance(), 6, 1, 1.e-06) + " | " +
FormatUtil.FormatDouble (ettc.transactionCostVariance(), 6, 1, 1.e-06) + " ||"
);
System.out.println ("\t|--------------------------------------------------------------------------||");
EnvManager.TerminateEnv();
}
}