OptimalMeasuresConstantExponent.java

  1. package org.drip.sample.principal;

  3. import org.drip.execution.dynamics.*;
  4. import org.drip.execution.impact.*;
  5. import org.drip.execution.nonadaptive.ContinuousPowerImpact;
  6. import org.drip.execution.optimum.PowerImpactContinuous;
  7. import org.drip.execution.parameters.*;
  8. import org.drip.execution.principal.*;
  9. import org.drip.execution.profiletime.*;
  10. import org.drip.function.r1tor1.FlatUnivariate;
  11. import org.drip.numerical.common.FormatUtil;
  12. import org.drip.service.env.EnvManager;

  14. /*
  15.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  16.  */

  18. /*!
  19.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  20.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  21.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  22.  * 
  23.  *  This file is part of DRIP, a free-software/open-source library for buy/side financial/trading model
  24.  *      libraries targeting analysts and developers
  25.  *      https://lakshmidrip.github.io/DRIP/
  26.  *  
  27.  *  DRIP is composed of four main libraries:
  28.  *  
  29.  *  - DRIP Fixed Income - https://lakshmidrip.github.io/DRIP-Fixed-Income/
  30.  *  - DRIP Asset Allocation - https://lakshmidrip.github.io/DRIP-Asset-Allocation/
  31.  *  - DRIP Numerical Optimizer - https://lakshmidrip.github.io/DRIP-Numerical-Optimizer/
  32.  *  - DRIP Statistical Learning - https://lakshmidrip.github.io/DRIP-Statistical-Learning/
  33.  * 
  34.  *  - DRIP Fixed Income: Library for Instrument/Trading Conventions, Treasury Futures/Options,
  35.  *      Funding/Forward/Overnight Curves, Multi-Curve Construction/Valuation, Collateral Valuation and XVA
  36.  *      Metric Generation, Calibration and Hedge Attributions, Statistical Curve Construction, Bond RV
  37.  *      Metrics, Stochastic Evolution and Option Pricing, Interest Rate Dynamics and Option Pricing, LMM
  38.  *      Extensions/Calibrations/Greeks, Algorithmic Differentiation, and Asset Backed Models and Analytics.
  39.  * 
  40.  *  - DRIP Asset Allocation: Library for model libraries for MPT framework, Black Litterman Strategy
  41.  *      Incorporator, Holdings Constraint, and Transaction Costs.
  42.  * 
  43.  *  - DRIP Numerical Optimizer: Library for Numerical Optimization and Spline Functionality.
  44.  * 
  45.  *  - DRIP Statistical Learning: Library for Statistical Evaluation and Machine Learning.
  46.  * 
  47.  *  Licensed under the Apache License, Version 2.0 (the "License");
  48.  *      you may not use this file except in compliance with the License.
  49.  *   
  50.  *  You may obtain a copy of the License at
  51.  *      http://www.apache.org/licenses/LICENSE-2.0
  52.  *  
  53.  *  Unless required by applicable law or agreed to in writing, software
  54.  *      distributed under the License is distributed on an "AS IS" BASIS,
  55.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  56.  *  
  57.  *  See the License for the specific language governing permissions and
  58.  *      limitations under the License.
  59.  */

  61. /**
  62.  * OptimalMeasuresConstantExponent demonstrates the Dependence Exponents on Liquidity, Trade Size, and
  63.  *  Permanent Impact Adjusted Principal Discount for the Optimal Principal Horizon and the Optional
  64.  *  Information Ratio. The References are:
  65.  * 
  66.  *  - Almgren, R., and N. Chriss (1999): Value under Liquidation, Risk 12 (12).
  67.  * 
  68.  *  - Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions, Journal of Risk 3 (2)
  69.  *      5-39.
  70.  * 
  71.  *  - Almgren, R. (2003): Optimal Execution with Nonlinear Impact Functions and Trading-Enhanced Risk,
  72.  *      Applied Mathematical Finance 10 (1) 1-18.
  73.  *
  74.  *  - Almgren, R., and N. Chriss (2003): Bidding Principles, Risk 16 (6) 97-102.
  75.  * 
  76.  *  - Almgren, R., C. Thum, E. Hauptmann, and H. Li (2005): Equity Market Impact, Risk 18 (7) 57-62.
  77.  * 
  78.  * @author Lakshmi Krishnamurthy
  79.  */

  81. public class OptimalMeasuresConstantExponent {

  83.     public static final void main (
  84.         final String[] astrArgs)
  85.         throws Exception
  86.     {
  87.         EnvManager.InitEnv ("");

  89.         double dblS0 = 50.;
  90.         double dblDailyVolume = 1000000.;
  91.         double dblBidAskSpread = 0.;
  92.         double dblPermanentImpactFactor = 0.;
  93.         double dblTemporaryImpactFactor = 0.01;
  94.         double dblDailyVolumeExecutionFactor = 0.1;
  95.         double dblDrift = 0.;
  96.         double dblVolatility = 1.;
  97.         double dblSerialCorrelation = 0.;
  98.         double dblX = 100000.;
  99.         double dblFinishTime = 1.;
  100.         double dblLambda = 5.e-06;

  102.         double[] adblK = new double[] {
  103.             0.5,
  104.             1.0,
  105.             1.5,
  106.             2.0,
  107.             2.5,
  108.             3.0,
  109.             3.5,
  110.             4.0,
  111.             4.5,
  112.             5.0,
  113.             5.5,
  114.             6.0,
  115.             6.5,
  116.             7.0,
  117.             7.5,
  118.             8.0,
  119.             8.5,
  120.             9.0,
  121.             9.5
  122.         };

  124.         System.out.println();

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

  128.         System.out.println ("\t|    Optimal Market Parameters Horizon Dependence     ||");

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

  132.         for (double dblK : adblK) {
  133.             PriceMarketImpactPower pmip = new PriceMarketImpactPower (
  134.                 new AssetTransactionSettings (
  135.                     dblS0,
  136.                     dblDailyVolume,
  137.                     dblBidAskSpread
  138.                 ),
  139.                 dblPermanentImpactFactor,
  140.                 dblTemporaryImpactFactor,
  141.                 dblDailyVolumeExecutionFactor,
  142.                 dblK
  143.             );

  145.             LinearPermanentExpectationParameters lpep = ArithmeticPriceEvolutionParametersBuilder.Almgren2003 (
  146.                 new ArithmeticPriceDynamicsSettings (
  147.                     dblDrift,
  148.                     new FlatUnivariate (dblVolatility),
  149.                     dblSerialCorrelation
  150.                 ),
  151.                 new UniformParticipationRateLinear ((ParticipationRateLinear) pmip.permanentTransactionFunction()),
  152.                 new UniformParticipationRate ((ParticipationRatePower) pmip.temporaryTransactionFunction())
  153.             );

  155.             Almgren2003Estimator a2003e = new Almgren2003Estimator (
  156.                 (PowerImpactContinuous) ContinuousPowerImpact.Standard (
  157.                     dblX,
  158.                     dblFinishTime,
  159.                     lpep,
  160.                     dblLambda
  161.                 ).generate(),
  162.                 lpep
  163.             );

  165.             OptimalMeasureDependence omd = a2003e.optimalMeasures().omdHorizon();

  167.             System.out.println (
  168.                 "\t| " +
  169.                 FormatUtil.FormatDouble (dblK, 1, 3, 1.) + " | " +
  170.                 FormatUtil.FormatDouble (omd.constant(), 1, 3, 1.) + " | " +
  171.                 FormatUtil.FormatDouble (omd.liquidityExponent(), 1, 3, 1.) + " | " +
  172.                 FormatUtil.FormatDouble (omd.blockSizeExponent(), 1, 3, 1.) + " | " +
  173.                 FormatUtil.FormatDouble (omd.volatilityExponent(), 1, 3, 1.) + " | " +
  174.                 FormatUtil.FormatDouble (omd.adjustedPrincipalDiscountExponent(), 1, 3, 1.) + " ||"
  175.             );
  176.         }

  178.         System.out.println ("\t|-----------------------------------------------------||");
  179.     }
  180. }
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