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<?xml version="1.0" encoding="UTF-8"?><!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"><html xmlns="http://www.w3.org/1999/xhtml" lang="en"><head><meta http-equiv="Content-Type" content="text/html;charset=UTF-8"/><link rel="stylesheet" href="../jacoco-resources/report.css" type="text/css"/><link rel="shortcut icon" href="../jacoco-resources/report.gif" type="image/gif"/><title>LinearImpactNoDrift.java</title><link rel="stylesheet" href="../jacoco-resources/prettify.css" type="text/css"/><script type="text/javascript" src="../jacoco-resources/prettify.js"></script></head><body onload="window['PR_TAB_WIDTH']=4;prettyPrint()"><div class="breadcrumb" id="breadcrumb"><span class="info"><a href="../jacoco-sessions.html" class="el_session">Sessions</a></span><a href="../index.html" class="el_report">DROP</a> > <a href="index.source.html" class="el_package">org.drip.sample.execution</a> > <span class="el_source">LinearImpactNoDrift.java</span></div><h1>LinearImpactNoDrift.java</h1><pre class="source lang-java linenums">
package org.drip.sample.execution;
import org.drip.execution.capture.LinearImpactTrajectoryEstimator;
import org.drip.execution.dynamics.*;
import org.drip.execution.impact.*;
import org.drip.execution.nonadaptive.StaticOptimalSchemeDiscrete;
import org.drip.execution.optimum.EfficientTradingTrajectoryDiscrete;
import org.drip.execution.parameters.*;
import org.drip.execution.profiletime.UniformParticipationRateLinear;
import org.drip.execution.risk.MeanVarianceObjectiveUtility;
import org.drip.execution.strategy.*;
import org.drip.function.r1tor1.FlatUnivariate;
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>LinearImpactNoDrift</i> generates the Trade/Holdings List of Optimal Execution Schedule based on the
* Evolution Walk Parameters specified. The Generation follows a Numerical Optimizer Scheme, as opposed to
* the Almgren-Chriss Closed Form; it also excludes the Impact of Drift. 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>
* Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
* Markets</i> <b>1</b> 1-50
* </li>
* <li>
* Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional
* Trades <i>Journal of Finance</i> <b>50</b> 1147-1174
* </li>
* <li>
* Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange
* Analysis of Institutional Equity Trades <i>Journal of Financial Economics</i> <b>46</b>
* 265-292
* </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
*/
<span class="nc" id="L125">public class LinearImpactNoDrift {</span>
public static void main (
final String[] astrArgs)
throws Exception
{
<span class="fc" id="L131"> EnvManager.InitEnv ("");</span>
<span class="fc" id="L133"> double dblS0 = 50.;</span>
<span class="fc" id="L134"> double dblX = 1000000.;</span>
<span class="fc" id="L135"> double dblT = 5.;</span>
<span class="fc" id="L136"> int iN = 5;</span>
<span class="fc" id="L137"> double dblAnnualVolatility = 0.30;</span>
<span class="fc" id="L138"> double dblAnnualReturns = 0.10;</span>
<span class="fc" id="L139"> double dblBidAsk = 0.125;</span>
<span class="fc" id="L140"> double dblDailyVolume = 5.e06;</span>
<span class="fc" id="L141"> double dblDailyVolumePermanentImpact = 0.1;</span>
<span class="fc" id="L142"> double dblDailyVolumeTemporaryImpact = 0.01;</span>
<span class="fc" id="L143"> double dblLambdaU = 1.e-06;</span>
<span class="fc" id="L145"> ArithmeticPriceDynamicsSettings apds = ArithmeticPriceDynamicsSettings.FromAnnualReturnsSettings (</span>
dblAnnualReturns,
dblAnnualVolatility,
0.,
dblS0
);
<span class="fc" id="L152"> double dblAlpha = apds.drift();</span>
<span class="fc" id="L154"> double dblSigma = apds.epochVolatility();</span>
<span class="fc" id="L156"> PriceMarketImpactLinear pmil = new PriceMarketImpactLinear (</span>
new AssetTransactionSettings (
dblS0,
dblDailyVolume,
dblBidAsk
),
dblDailyVolumePermanentImpact,
dblDailyVolumeTemporaryImpact
);
<span class="fc" id="L166"> ParticipationRateLinear prlPermanent = (ParticipationRateLinear) pmil.permanentTransactionFunction();</span>
<span class="fc" id="L168"> ParticipationRateLinear prlTemporary = (ParticipationRateLinear) pmil.temporaryTransactionFunction();</span>
<span class="fc" id="L170"> DiscreteTradingTrajectoryControl dttc = DiscreteTradingTrajectoryControl.FixedInterval (</span>
new OrderSpecification (
dblX,
dblT
),
iN
);
<span class="fc" id="L178"> LinearPermanentExpectationParameters lpep = ArithmeticPriceEvolutionParametersBuilder.LinearExpectation (</span>
new ArithmeticPriceDynamicsSettings (
0.,
new FlatUnivariate (dblSigma),
0.
),
new UniformParticipationRateLinear (prlPermanent),
new UniformParticipationRateLinear (prlTemporary)
);
<span class="fc" id="L188"> EfficientTradingTrajectoryDiscrete ettd = (EfficientTradingTrajectoryDiscrete) new StaticOptimalSchemeDiscrete (</span>
dttc,
lpep,
new MeanVarianceObjectiveUtility (dblLambdaU)
<span class="fc" id="L192"> ).generate();</span>
<span class="fc" id="L194"> double[] adblExecutionTimeNode = ettd.executionTimeNode();</span>
<span class="fc" id="L196"> double[] adblTradeList = ettd.tradeList();</span>
<span class="fc" id="L198"> double[] adblHoldings = ettd.holdings();</span>
<span class="fc" id="L200"> LinearImpactTrajectoryEstimator lite = new LinearImpactTrajectoryEstimator (ettd);</span>
<span class="fc" id="L202"> R1UnivariateNormal r1un = lite.totalCostDistributionSynopsis (lpep);</span>
<span class="fc" id="L204"> System.out.println ("\n\t|---------------------------------------------||");</span>
<span class="fc" id="L206"> System.out.println ("\t| ALMGREN-CHRISS TRAJECTORY GENERATOR INPUTS ||");</span>
<span class="fc" id="L208"> System.out.println ("\t|---------------------------------------------||");</span>
<span class="fc" id="L210"> System.out.println ("\t| Initial Stock Price : " + dblS0);</span>
<span class="fc" id="L212"> System.out.println ("\t| Initial Holdings : " + dblX);</span>
<span class="fc" id="L214"> System.out.println ("\t| Liquidation Time : " + dblT);</span>
<span class="fc" id="L216"> System.out.println ("\t| Number of Time Periods : " + iN);</span>
<span class="fc" id="L218"> System.out.println ("\t| Annual Volatility :" + FormatUtil.FormatDouble (dblAnnualVolatility, 1, 0, 100.) + "%");</span>
<span class="fc" id="L220"> System.out.println ("\t| Annual Growth :" + FormatUtil.FormatDouble (dblAnnualReturns, 1, 0, 100.) + "%");</span>
<span class="fc" id="L222"> System.out.println ("\t| Bid-Ask Spread : " + dblBidAsk);</span>
<span class="fc" id="L224"> System.out.println ("\t| Daily Volume : " + dblDailyVolume);</span>
<span class="fc" id="L226"> System.out.println ("\t| Daily Volume Temporary Impact : " + dblDailyVolumeTemporaryImpact);</span>
<span class="fc" id="L228"> System.out.println ("\t| Daily Volume Permanent Impact : " + dblDailyVolumePermanentImpact);</span>
<span class="fc" id="L230"> System.out.println ("\t| Daily Volume 5 million Shares : " + prlPermanent.slope());</span>
<span class="fc" id="L232"> System.out.println ("\t| Static Holdings 11,000 Shares : " + dblLambdaU);</span>
<span class="fc" id="L234"> System.out.println ("\t|");</span>
<span class="fc" id="L236"> System.out.println (</span>
"\t| Daily Volatility : " +
<span class="fc" id="L238"> FormatUtil.FormatDouble (dblSigma, 1, 4, 1.)</span>
);
<span class="fc" id="L241"> System.out.println (</span>
"\t| Daily Returns : " +
<span class="fc" id="L243"> FormatUtil.FormatDouble (dblAlpha, 1, 4, 1.)</span>
);
<span class="fc" id="L246"> System.out.println ("\t| Temporary Impact Fixed Offset : " + prlTemporary.offset());</span>
<span class="fc" id="L248"> System.out.println ("\t| Eta : " + prlTemporary.slope());</span>
<span class="fc" id="L250"> System.out.println ("\t| Gamma : " + prlPermanent.slope());</span>
<span class="fc" id="L252"> System.out.println ("\t|---------------------------------------------||");</span>
<span class="fc" id="L254"> System.out.println ("\n\t|-----------------------------||");</span>
<span class="fc" id="L256"> System.out.println ("\t| Optimal Trading Trajectory ||");</span>
<span class="fc" id="L258"> System.out.println ("\t| ------- ------- ---------- ||");</span>
<span class="fc" id="L260"> System.out.println ("\t| L -> R: ||");</span>
<span class="fc" id="L262"> System.out.println ("\t| Time Node ||");</span>
<span class="fc" id="L264"> System.out.println ("\t| Holdings ||");</span>
<span class="fc" id="L266"> System.out.println ("\t| Trade Amount ||");</span>
<span class="fc" id="L268"> System.out.println ("\t|-----------------------------||");</span>
<span class="fc bfc" id="L270" title="All 2 branches covered."> for (int i = 0; i <= iN; ++i) {</span>
<span class="fc bfc" id="L271" title="All 2 branches covered."> if (i == 0)</span>
<span class="fc" id="L272"> System.out.println (</span>
<span class="fc" id="L273"> "\t|" + FormatUtil.FormatDouble (adblExecutionTimeNode[i], 1, 0, 1.) + " => " +</span>
<span class="fc" id="L274"> FormatUtil.FormatDouble (adblHoldings[i], 7, 1, 1.) + " | " +</span>
<span class="fc" id="L275"> FormatUtil.FormatDouble (0., 6, 1, 1.) + " ||"</span>
);
else
<span class="fc" id="L278"> System.out.println (</span>
<span class="fc" id="L279"> "\t|" + FormatUtil.FormatDouble (adblExecutionTimeNode[i], 1, 0, 1.) + " => " +</span>
<span class="fc" id="L280"> FormatUtil.FormatDouble (adblHoldings[i], 7, 1, 1.) + " | " +</span>
<span class="fc" id="L281"> FormatUtil.FormatDouble (adblTradeList[i - 1], 6, 1, 1.) + " ||"</span>
);
}
<span class="fc" id="L285"> System.out.println ("\t|-----------------------------||");</span>
<span class="fc" id="L287"> System.out.println ("\n\t|--------------------------------------------------------------||");</span>
<span class="fc" id="L289"> System.out.println ("\t| TRANSACTION COST RECONCILIATION: OPTIMAL vs. EXPLICIT LINEAR ||");</span>
<span class="fc" id="L291"> System.out.println ("\t|--------------------------------------------------------------||");</span>
<span class="fc" id="L293"> System.out.println (</span>
"\t| Transaction Cost Expectation : " +
<span class="fc" id="L295"> FormatUtil.FormatDouble (r1un.mean(), 6, 1, 1.) + " | " +</span>
<span class="fc" id="L296"> FormatUtil.FormatDouble (ettd.transactionCostExpectation(), 6, 1, 1.) + " ||"</span>
);
<span class="fc" id="L299"> System.out.println (</span>
"\t| Transaction Cost Variance (X 10^-06) : " +
<span class="fc" id="L301"> FormatUtil.FormatDouble (r1un.variance(), 6, 1, 1.e-06) + " | " +</span>
<span class="fc" id="L302"> FormatUtil.FormatDouble (ettd.transactionCostVariance(), 6, 1, 1.e-06) + " ||"</span>
);
<span class="fc" id="L305"> System.out.println ("\t|--------------------------------------------------------------||");</span>
<span class="fc" id="L307"> EnvManager.TerminateEnv();</span>
<span class="fc" id="L308"> }</span>
}
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