HeuristicCardinalityBoundOptimizer02.java
- package org.drip.sample.tadonkivial;
- import org.drip.function.rdtor1descent.LineStepEvolutionControl;
- import org.drip.function.rdtor1solver.InteriorPointBarrierControl;
- import org.drip.measure.statistics.MultivariateMoments;
- import org.drip.numerical.common.FormatUtil;
- import org.drip.portfolioconstruction.allocator.*;
- import org.drip.portfolioconstruction.asset.Portfolio;
- import org.drip.portfolioconstruction.cardinality.UpperBoundHoldingsAllocationControl;
- import org.drip.portfolioconstruction.cardinality.TadonkiVialHoldingsAllocation;
- import org.drip.portfolioconstruction.cardinality.TadonkiVialMeanVarianceOptimizer;
- import org.drip.portfolioconstruction.params.AssetUniverseStatisticalProperties;
- import org.drip.service.env.EnvManager;
- /*
- * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
- */
- /*!
- * Copyright (C) 2020 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>HeuristicCardinalityBoundOptimizer02</i> demonstrates the Setup and Execution of a Cardinality Bounded
- * Portfolio Allocator with Asset Level Bounds using the Tadonki-Vial (2004) Heuristics. The References are:
- *
- * <br><br>
- * <ul>
- * <li>
- * Chang, T., J., N. Meade, J. E. Beasley, and Y. M. Sharaiha (2000): Heuristics for Cardinality
- * Constrained Portfolio Optimization <i>Computers and Operations Research</i> <b>27 (13)</b>
- * 1271-1302
- * </li>
- * <li>
- * Chvatal, V. (1973): Edmonds Polytopes in a Hierarchy of Combinatorial Problems <i>Discrete
- * Mathematics</i> <b>4 (4)</b> 305-337
- * </li>
- * <li>
- * Jobst, N. J., M. D. Horniman, C. A. Lucas, and G. Mitra (2001): Computational Aspects of
- * Alternative Portfolio Selection Models in the Presence of Discrete Asset Choice Constraints
- * <i>Quantitative Finance</i> <b>1 (5)</b> 1-13
- * </li>
- * <li>
- * Letchford, A. N. and A. Lodi (2002): Strengthening Chvatal-Gomory Cuts and Gomory Fractional Cuts
- * <i>Operations Research Letters</i> <b>30 (2)</b> 74-82
- * </li>
- * <li>
- * Tadonki, C., and J. P. Vial (2004): Portfolio Selection with Cardinality and Bound Constraints
- * https://www.cri.ensmp.fr/~tadonki/PaperForWeb/Tadonki_PF.pdf
- * </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/AssetAllocationAnalyticsLibrary.md">Asset Allocation 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/assetallocationexcel/README.md">Asset-Bound Allocator Excel Reconciliation</a></li>
- * </ul>
- * <br><br>
- *
- * @author Lakshmi Krishnamurthy
- */
- public class HeuristicCardinalityBoundOptimizer02
- {
- private static final void PrintPortfolio (
- final String header,
- final HoldingsAllocation holdingsAllocation)
- {
- if (null == holdingsAllocation)
- {
- return;
- }
- Portfolio optimalPortfolio = holdingsAllocation.optimalPortfolio();
- System.out.println ("\t|------------------||");
- System.out.println ("\t| " + header);
- System.out.println ("\t|------------------||");
- System.out.println ("\t| ASSET | DROP ||");
- System.out.println ("\t|------------------||");
- for (int assetIndex = 0;
- assetIndex < optimalPortfolio.assetComponentArray().length;
- ++assetIndex)
- {
- System.out.println (
- "\t| " + optimalPortfolio.assetComponentArray()[assetIndex].id() + " |" +
- FormatUtil.FormatDouble (
- optimalPortfolio.assetComponentArray()[assetIndex].amount(), 2, 4, 100.
- ) + "% ||"
- );
- }
- System.out.println ("\t|------------------||");
- System.out.println ("\t| Cardinality => " + optimalPortfolio.cardinality());
- System.out.println ("\t|------------------||");
- System.out.println();
- }
- public static final void main (
- final String[] argumentArray)
- throws Exception
- {
- EnvManager.InitEnv (
- "",
- true
- );
- int cardinalityUpperBound = 4;
- String[] assetIDArray = new String[]
- {
- "TOK",
- "EWJ",
- "HYG",
- "LQD",
- "EMD",
- "GSG",
- "BWX"
- };
- double[] assetHoldingsLowerBoundArray = new double[]
- {
- 0.05,
- 0.05,
- 0.05,
- 0.10,
- 0.05,
- 0.05,
- 0.03
- };
- double[] assetHoldingsUpperBoundArray = new double[]
- {
- 0.40,
- 0.40,
- 0.30,
- 0.60,
- 0.35,
- 0.15,
- 0.50
- };
- double[] expectedAssetReturnsArray = new double[]
- {
- 0.008430,
- 0.007230,
- 0.006450,
- 0.002560,
- 0.004480,
- 0.006840,
- 0.001670
- };
- double portfolioDesignReturn = 0.005500;
- double[][] assetReturnsCovarianceMatrix = new double[][]
- {
- {0.002733, 0.002083, 0.001593, 0.000488, 0.001172, 0.002312, 0.000710},
- {0.002083, 0.002768, 0.001302, 0.000457, 0.001105, 0.001647, 0.000563},
- {0.001593, 0.001302, 0.001463, 0.000639, 0.001050, 0.001110, 0.000519},
- {0.000488, 0.000457, 0.000639, 0.000608, 0.000663, 0.000042, 0.000370},
- {0.001172, 0.001105, 0.001050, 0.000663, 0.001389, 0.000825, 0.000661},
- {0.002312, 0.001647, 0.001110, 0.000042, 0.000825, 0.005211, 0.000749},
- {0.000710, 0.000563, 0.000519, 0.000370, 0.000661, 0.000749, 0.000703}
- };
- AssetUniverseStatisticalProperties assetUniverseStatisticalProperties =
- AssetUniverseStatisticalProperties.FromMultivariateMetrics (
- MultivariateMoments.Standard (
- assetIDArray,
- expectedAssetReturnsArray,
- assetReturnsCovarianceMatrix
- )
- );
- System.out.println ("\t|-------------------||");
- System.out.println ("\t| ASSET BOUNDS ||");
- System.out.println ("\t|-------------------||");
- for (int assetIndex = 0;
- assetIndex < assetIDArray.length;
- ++assetIndex)
- {
- System.out.println (
- "\t| " + assetIDArray[assetIndex] + " | " +
- FormatUtil.FormatDouble (assetHoldingsLowerBoundArray[assetIndex], 2, 0, 100.) + "% | " +
- FormatUtil.FormatDouble (assetHoldingsUpperBoundArray[assetIndex], 2, 0, 100.) + "% ||"
- );
- }
- System.out.println ("\t|-------------------||");
- UpperBoundHoldingsAllocationControl boundedCardinalityParameters =
- new UpperBoundHoldingsAllocationControl (
- assetIDArray,
- CustomRiskUtilitySettings.VarianceMinimizer(),
- new EqualityConstraintSettings (
- EqualityConstraintSettings.FULLY_INVESTED_CONSTRAINT |
- EqualityConstraintSettings.RETURNS_CONSTRAINT,
- portfolioDesignReturn
- ),
- cardinalityUpperBound
- );
- for (int assetIndex = 0;
- assetIndex < assetIDArray.length;
- ++assetIndex)
- {
- boundedCardinalityParameters.addBound (
- assetIDArray[assetIndex],
- assetHoldingsLowerBoundArray[assetIndex],
- assetHoldingsUpperBoundArray[assetIndex]
- );
- }
- TadonkiVialHoldingsAllocation tadonkiVialHoldingsAllocation = new TadonkiVialMeanVarianceOptimizer (
- InteriorPointBarrierControl.Standard(),
- LineStepEvolutionControl.NocedalWrightStrongWolfe (
- false
- )
- ).allocate (
- boundedCardinalityParameters,
- assetUniverseStatisticalProperties
- );
- PrintPortfolio (
- "FLOOR PASS",
- tadonkiVialHoldingsAllocation.floorPassHoldingsAllocation()
- );
- PrintPortfolio (
- "FIRST GREEDY PRUNE PASS",
- tadonkiVialHoldingsAllocation.firstPrunePassHoldingsAllocation()
- );
- PrintPortfolio (
- "SECOND GREEDY PRUNE PASS",
- tadonkiVialHoldingsAllocation.secondPrunePassHoldingsAllocation()
- );
- EnvManager.TerminateEnv();
- }
- }