"""""" #
"""
Copyright (c) 2020-2026, Dany Cajas
All rights reserved.
This work is licensed under BSD 3-Clause "New" or "Revised" License.
License available at https://github.com/dcajasn/Riskfolio-Lib/blob/master/LICENSE.txt
"""
import numpy as np
import pandas as pd
import cvxpy as cp
import riskfolio.src.OwaWeights as owa
import riskfolio.src.ParamsEstimation as pe
from scipy.optimize import minimize
from scipy.optimize import Bounds
from scipy.linalg import null_space
from numpy.linalg import pinv
from sklearn.decomposition import PCA
from sklearn.preprocessing import StandardScaler
import warnings
__all__ = [
"MAD",
"SemiDeviation",
"Kurtosis",
"SemiKurtosis",
"EvenMoment",
"EvenSemiMoment",
"VaR_Hist",
"CVaR_Hist",
"WR",
"LPM",
"Entropic_RM",
"EVaR_Hist",
"RLVaR_Hist",
"MDD_Abs",
"ADD_Abs",
"DaR_Abs",
"CDaR_Abs",
"EDaR_Abs",
"RLDaR_Abs",
"UCI_Abs",
"MDD_Rel",
"ADD_Rel",
"DaR_Rel",
"CDaR_Rel",
"EDaR_Rel",
"RLDaR_Rel",
"UCI_Rel",
"GMD",
"TG",
"RG",
"VRG",
"CVRG",
"TGRG",
"EVRG",
"RVRG",
"L_Moment",
"L_Moment_CRM",
"NEA",
"Sharpe_Risk",
"Sharpe",
"Risk_Contribution",
"Risk_Margin",
"Factors_Risk_Contribution",
"BrinsonAttribution",
]
[docs]
def MAD(X):
r"""
Calculate the Mean Absolute Deviation (MAD) of a returns series.
.. math::
\text{MAD}(X) = \frac{1}{T}\sum_{t=1}^{T}
| X_{t} - \mathbb{E}(X_{t}) |
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Returns
-------
value : float
MAD of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T, N = a.shape
mu = np.mean(a, axis=0).reshape(1, -1)
mu = np.repeat(mu, T, axis=0)
value = a - mu
value = np.mean(np.absolute(value), axis=0)
value = np.array(value).item()
return value
[docs]
def SemiDeviation(X):
r"""
Calculate the Semi Deviation of a returns series.
.. math::
\text{SemiDev}(X) = \left [ \frac{1}{T-1}\sum_{t=1}^{T}
\min (X_{t} - \mathbb{E}(X_{t}), 0)^2 \right ]^{1/2}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Semi Deviation of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T, N = a.shape
mu = np.mean(a, axis=0).reshape(1, -1)
mu = np.repeat(mu, T, axis=0)
value = mu - a
value = np.sum(np.power(value[np.where(value >= 0)], 2)) / (T - 1)
value = np.power(value, 0.5).item()
return value
[docs]
def Kurtosis(X):
r"""
Calculate the Square Root Kurtosis of a returns series.
.. math::
\text{Kurt}(X) = \left [ \frac{1}{T}\sum_{t=1}^{T}
(X_{t} - \mathbb{E}(X_{t}))^{4} \right ]^{1/2}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Square Root Kurtosis of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T, N = a.shape
mu = np.mean(a, axis=0).reshape(1, -1)
mu = np.repeat(mu, T, axis=0)
value = mu - a
value = np.sum(np.power(value, 4)) / T
value = np.power(value, 0.5).item()
return value
[docs]
def SemiKurtosis(X):
r"""
Calculate the Semi Square Root Kurtosis of a returns series.
.. math::
\text{SemiKurt}(X) = \left [ \frac{1}{T}\sum_{t=1}^{T}
\min (X_{t} - \mathbb{E}(X_{t}), 0)^{4} \right ]^{1/2}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Semi Square Root Kurtosis of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T, N = a.shape
mu = np.mean(a, axis=0).reshape(1, -1)
mu = np.repeat(mu, T, axis=0)
value = mu - a
value = np.sum(np.power(value[np.where(value >= 0)], 4)) / T
value = np.power(value, 0.5).item()
return value
[docs]
def EvenMoment(X, p: int = 2):
r"""
Calculate the p-th Root of Even Moment of order 2 * p of a returns series.
.. math::
\text{EM}_{p}(X) = \left [ \frac{1}{T}\sum_{t=1}^{T}
(X_{t} - \mathbb{E}(X_{t}))^{2p} \right ]^{1/p}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
p : int
Order of the Even Moment. It must be higher equal than 2.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
p-th Root Even Moment of order 2 * p of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
if isinstance(p, int) == False or p < 2:
raise ValueError("p must be an integer higher equal than 2")
T, N = a.shape
mu = np.mean(a, axis=0).reshape(1, -1)
mu = np.repeat(mu, T, axis=0)
value = mu - a
value = np.linalg.norm(value.flatten(), ord=int(2 * p))
value = np.power(value, 2).item() / T ** (1 / p)
return value
[docs]
def EvenSemiMoment(X, p: int = 2):
r"""
Calculate the p-th Root of Semi Even Moment of order 2 * p of a returns series.
.. math::
\text{ESM}_{p}(X) = \left [ \frac{1}{T}\sum_{t=1}^{T}
\min (X_{t} - \mathbb{E}(X_{t}), 0)^{2p} \right ]^{1/p}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
p : int
Order of the Semi Even Moment. It must be higher equal than 2.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
p-th Root Semi Even Moment of order 2 * p of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
if isinstance(p, int) == False or p < 2:
raise ValueError("p must be an integer higher equal than 2")
T, N = a.shape
mu = np.mean(a, axis=0).reshape(1, -1)
mu = np.repeat(mu, T, axis=0)
value = mu - a
value = np.linalg.norm(value[np.where(value >= 0)].flatten(), ord=int(2 * p))
value = np.power(value, 2).item() / T ** (1 / p)
return value
[docs]
def VaR_Hist(X, alpha=0.05):
r"""
Calculate the Value at Risk (VaR) of a returns series.
.. math::
\text{VaR}_{\alpha}(X) = -\inf_{t \in (0,T)} \left \{ X_{t} \in
\mathbb{R}: F_{X}(X_{t})>\alpha \right \}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of VaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
VaR of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
sorted_a = np.sort(a, axis=0)
index = int(np.ceil(alpha * len(sorted_a)) - 1)
value = -sorted_a[index]
value = np.array(value).item()
return value
[docs]
def CVaR_Hist(X, alpha=0.05):
r"""
Calculate the Conditional Value at Risk (CVaR) of a returns series.
.. math::
\text{CVaR}_{\alpha}(X) = \text{VaR}_{\alpha}(X) +
\frac{1}{\alpha T} \sum_{t=1}^{T} \max(-X_{t} -
\text{VaR}_{\alpha}(X), 0)
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of CVaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
CVaR of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
sorted_a = np.sort(a, axis=0)
index = int(np.ceil(alpha * len(sorted_a)) - 1)
sum_var = 0
for i in range(0, index + 1):
sum_var = sum_var + sorted_a[i] - sorted_a[index]
value = -sorted_a[index] - sum_var / (alpha * len(sorted_a))
value = np.array(value).item()
return value
[docs]
def WR(X):
r"""
Calculate the Worst Realization (WR) or Worst Scenario of a returns series.
.. math::
\text{WR}(X) = \max(-X)
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
WR of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
sorted_a = np.sort(a, axis=0)
value = -sorted_a[0]
value = np.array(value).item()
return value
[docs]
def LPM(X, MAR=0, p=1):
r"""
Calculate the First or Second Lower Partial Moment of a returns series.
.. math::
\text{LPM}(X, \text{MAR}, 1) &= \frac{1}{T}\sum_{t=1}^{T}
\max(\text{MAR} - X_{t}, 0) \\
\text{LPM}(X, \text{MAR}, 2) &= \left [ \frac{1}{T-1}\sum_{t=1}^{T}
\max(\text{MAR} - X_{t}, 0)^{2} \right ]^{\frac{1}{2}} \\
Where:
:math:`\text{MAR}` is the minimum acceptable return.
:math:`p` is the order of the :math:`\text{LPM}`.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
MAR : float, optional
Minimum acceptable return. The default is 0.
p : float, optional can be {1,2}
order of the :math:`\text{LPM}`. The default is 1.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
p-th Lower Partial Moment of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
if p not in [1, 2]:
raise ValueError("p can only be 1 or 2")
value = MAR - a
if p == 2:
n = value.shape[0] - 1
else:
n = value.shape[0]
value = np.sum(np.power(value[np.where(value >= 0)], p)) / n
value = np.power(value, 1 / p).item()
return value
[docs]
def Entropic_RM(X, z=1, alpha=0.05):
r"""
Calculate the Entropic Risk Measure (ERM) of a returns series.
.. math::
\text{ERM}_{\alpha}(X) = z\ln \left (\frac{M_X(z^{-1})}{\alpha} \right )
Where:
:math:`M_X(z)` is the moment generating function of X.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
z : float, optional
Risk aversion parameter, must be greater than zero. The default is 1.
alpha : float, optional
Significance level of EVaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
ERM of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
value = np.mean(np.exp(-1 / z * a), axis=0)
value = z * (np.log(value) + np.log(1 / alpha))
value = np.array(value).item()
return value
def _Entropic_RM(z, X, alpha=0.05):
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
a = a.flatten()
value = np.mean(np.exp(-1 / z * a), axis=0)
value = z * (np.log(value) + np.log(1 / alpha))
value = np.array(value).item()
return value
[docs]
def EVaR_Hist(X, alpha=0.05, solver="CLARABEL"):
r"""
Calculate the Entropic Value at Risk (EVaR) of a returns series.
.. math::
\text{EVaR}_{\alpha}(X) = \inf_{z>0} \left \{ z
\ln \left (\frac{M_X(z^{-1})}{\alpha} \right ) \right \}
Where:
:math:`M_X(t)` is the moment generating function of X.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of EVaR. The default is 0.05.
solver: str, optional
Solver available for CVXPY that supports exponential cone programming.
Used to calculate EVaR, EVRG and EDaR. The default value is 'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
(value, z) : tuple
EVaR of a returns series and value of z that minimize EVaR.
"""
solvers = ["CLARABEL", "MOSEK", "COPT", "SCS", "ECOS"]
if solver not in solvers:
raise ValueError("Only solvers that support exponential cone are allowed")
else:
solvers.remove(solver)
solvers.insert(0, solver)
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T, N = a.shape
# Primal Formulation
t = cp.Variable((1, 1))
z = cp.Variable((1, 1), nonneg=True)
ui = cp.Variable((T, 1))
ones = np.ones((T, 1))
constraints = [
cp.sum(ui) <= z,
cp.ExpCone(-a - t, ones @ z, ui),
]
risk = t + z * np.log(1 / (alpha * T))
objective = cp.Minimize(risk * 1000)
prob = cp.Problem(objective, constraints)
try:
for solver_i in solvers:
prob.solve(solver=solver_i)
if risk.value is not None:
break
except:
pass
if risk.value is None:
value = None
else:
value = risk.value.item()
t = z.value.item()
if value is None:
warnings.filterwarnings("ignore")
# Primal Formulation with Scipy
bnd = Bounds([1e-24], [np.inf])
result = minimize(
_Entropic_RM, [1], args=(X, alpha), method="SLSQP", bounds=bnd, tol=1e-12
)
t = result.x
t = t.item()
value = _Entropic_RM(t, X, alpha)
return (value, t)
[docs]
def RLVaR_Hist(X, alpha=0.05, kappa=0.3, solver="CLARABEL"):
r"""
Calculate the Relativistic Value at Risk (RLVaR) of a returns series.
I recommend only use this function with MOSEK solver.
.. math::
\text{RLVaR}^{\kappa}_{\alpha}(X) & = \left \{
\begin{array}{ll}
\underset{z, t, \psi, \theta, \varepsilon, \omega}{\text{inf}} & t + z \ln_{\kappa} \left ( \frac{1}{\alpha T} \right ) + \sum^T_{i=1} \left ( \psi_{i} + \theta_{i} \right ) \\
\text{s.t.} & -X - t + \varepsilon + \omega \leq 0\\
& z \geq 0 \\
& \left ( z \left ( \frac{1+\kappa}{2\kappa} \right ), \psi_{i} \left ( \frac{1+\kappa}{\kappa} \right ), \varepsilon_{i} \right) \in \mathcal{P}_3^{1/(1+\kappa),\, \kappa/(1+\kappa)} \\
& \left ( \omega_{i}\left ( \frac{1}{1-\kappa} \right ), \theta_{i}\left ( \frac{1}{\kappa} \right), -z \left ( \frac{1}{2\kappa} \right ) \right ) \in \mathcal{P}_3^{1-\kappa,\, \kappa} \\
\end{array} \right .
Where:
:math:`\mathcal{P}_3^{\alpha,\, 1-\alpha}` is the power cone 3D.
:math:`\kappa` is the deformation parameter.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of EVaR. The default is 0.05.
kappa : float, optional
Deformation parameter of RLVaR, must be between 0 and 1. The default is 0.3.
solver: str, optional
Solver available for CVXPY that supports power cone programming. Used
to calculate RLVaR and RLDaR. The default value is 'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : tuple
RLVaR of a returns series.
"""
solvers = ["CLARABEL", "MOSEK", "SCS"]
if solver not in solvers:
raise ValueError("Only solvers that support 3D-power cone are allowed")
else:
solvers.remove(solver)
solvers.insert(0, solver)
a = np.array(X * 100, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T, N = a.shape
# Dual Formulation
Z = cp.Variable((T, 1))
nu = cp.Variable((T, 1))
tau = cp.Variable((T, 1))
ones = np.ones((T, 1))
c = ((1 / (alpha * T)) ** kappa - (1 / (alpha * T)) ** (-kappa)) / (2 * kappa)
constraints = [
cp.sum(Z) == 1,
cp.sum(nu - tau) / (2 * kappa) <= c,
cp.PowCone3D(nu, ones, Z, 1 / (1 + kappa)),
cp.PowCone3D(Z, ones, tau, 1 - kappa),
]
risk = Z.T @ (-a)
objective = cp.Maximize(risk)
prob = cp.Problem(objective, constraints)
try:
for solver_i in solvers:
prob.solve(solver=solver_i)
if risk.value is not None:
break
except:
pass
if risk.value is None:
value = None
else:
value = risk.value.item()
if value is None:
# Primal Formulation
t = cp.Variable((1, 1))
z = cp.Variable((1, 1))
omega = cp.Variable((T, 1))
psi = cp.Variable((T, 1))
theta = cp.Variable((T, 1))
nu = cp.Variable((T, 1))
ones = np.ones((T, 1))
constraints = [
cp.PowCone3D(
z * (1 + kappa) / (2 * kappa) * ones,
psi * (1 + kappa) / kappa,
nu,
1 / (1 + kappa),
),
cp.PowCone3D(
omega / (1 - kappa), theta / kappa, -z / (2 * kappa) * ones, (1 - kappa)
),
-a - t + nu + omega <= 0,
z >= 0,
]
c = ((1 / (alpha * T)) ** kappa - (1 / (alpha * T)) ** (-kappa)) / (2 * kappa)
risk = t + c * z + cp.sum(psi + theta)
objective = cp.Minimize(risk * 1000)
prob = cp.Problem(objective, constraints)
try:
for solver_i in solvers:
prob.solve(solver=solver_i)
if risk.value is not None:
break
except:
pass
if risk.value is None:
value = 0
else:
value = risk.value.item()
return value / 100
[docs]
def MDD_Abs(X):
r"""
Calculate the Maximum Drawdown (MDD) of a returns series
using uncompounded cumulative returns.
.. math::
\text{MDD}(X) = \max_{j \in (0,T)} \left [\max_{t \in (0,j)}
\left ( \sum_{i=0}^{t}X_{i} \right ) - \sum_{i=0}^{j}X_{i} \right ]
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
MDD of an uncompounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
value = 0
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD = peak - i
if DD > value:
value = DD
value = np.array(value).item()
return value
[docs]
def ADD_Abs(X):
r"""
Calculate the Average Drawdown (ADD) of a returns series
using uncompounded cumulative returns.
.. math::
\text{ADD}(X) = \frac{1}{T}\sum_{j=0}^{T}\left [ \max_{t \in (0,j)}
\left ( \sum_{i=0}^{t}X_{i} \right ) - \sum_{i=0}^{j}X_{i} \right ]
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
ADD of an uncompounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
value = 0
peak = -99999
n = 0
for i in NAV:
if i > peak:
peak = i
DD = peak - i
if DD > 0:
value += DD
n += 1
if n == 0:
value = 0
else:
value = value / (n - 1)
value = np.array(value).item()
return value
[docs]
def DaR_Abs(X, alpha=0.05):
r"""
Calculate the Drawdown at Risk (DaR) of a returns series
using uncompounded cumulative returns.
.. math::
\text{DaR}_{\alpha}(X) & = \max_{j \in (0,T)} \left \{ \text{DD}(X,j)
\in \mathbb{R}: F_{\text{DD}} \left ( \text{DD}(X,j) \right )< 1-\alpha
\right \} \\
\text{DD}(X,j) & = \max_{t \in (0,j)} \left ( \sum_{i=0}^{t}X_{i}
\right )- \sum_{i=0}^{j}X_{i}
Parameters
----------
X : np.array
Returns series, must have Tx1 size..
alpha : float, optional
Significance level of DaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
DaR of an uncompounded cumulative returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i))
del DD[0]
sorted_DD = np.sort(np.array(DD), axis=0)
index = int(np.ceil(alpha * len(sorted_DD)) - 1)
value = -sorted_DD[index]
value = np.array(value).item()
return value
[docs]
def CDaR_Abs(X, alpha=0.05):
r"""
Calculate the Conditional Drawdown at Risk (CDaR) of a returns series
using uncompounded cumulative returns.
.. math::
\text{CDaR}_{\alpha}(X) = \text{DaR}_{\alpha}(X) + \frac{1}{\alpha T}
\sum_{j=0}^{T} \max \left [ \max_{t \in (0,j)}
\left ( \sum_{i=0}^{t}X_{i} \right ) - \sum_{i=0}^{j}X_{i}
- \text{DaR}_{\alpha}(X), 0 \right ]
Where:
:math:`\text{DaR}_{\alpha}` is the Drawdown at Risk of an uncompounded
cumulated return series :math:`X`.
Parameters
----------
X : np.array
Returns series, must have Tx1 size..
alpha : float, optional
Significance level of CDaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
CDaR of an uncompounded cumulative returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i))
del DD[0]
sorted_DD = np.sort(np.array(DD), axis=0)
index = int(np.ceil(alpha * len(sorted_DD)) - 1)
sum_var = 0
for i in range(0, index + 1):
sum_var = sum_var + sorted_DD[i] - sorted_DD[index]
value = -sorted_DD[index] - sum_var / (alpha * len(sorted_DD))
value = np.array(value).item()
return value
[docs]
def EDaR_Abs(X, alpha=0.05, solver="CLARABEL"):
r"""
Calculate the Entropic Drawdown at Risk (EDaR) of a returns series
using uncompounded cumulative returns.
.. math::
\text{EDaR}_{\alpha}(X) & = \inf_{z>0} \left \{ z
\ln \left (\frac{M_{\text{DD}(X)}(z^{-1})}{\alpha} \right ) \right \} \\
\text{DD}(X,j) & = \max_{t \in (0,j)} \left ( \sum_{i=0}^{t}X_{i}
\right )- \sum_{i=0}^{j}X_{i} \\
Parameters
----------
X : np.array
Returns series, must have Tx1 size..
alpha : float, optional
Significance level of EDaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
(value, z) : tuple
EDaR of an uncompounded cumulative returns series
and value of z that minimize EDaR.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i))
del DD[0]
value, t = EVaR_Hist(np.array(DD), alpha=alpha, solver=solver)
return (value, t)
[docs]
def RLDaR_Abs(X, alpha=0.05, kappa=0.3, solver="CLARABEL"):
r"""
Calculate the Relativistic Drawdown at Risk (RLDaR) of a returns series
using uncompounded cumulative returns. I recommend only use this function with MOSEK solver.
.. math::
\text{RLDaR}^{\kappa}_{\alpha}(X) & = \text{RLVaR}^{\kappa}_{\alpha}(\text{DD}(X)) \\
\text{DD}(X,j) & = \max_{t \in (0,j)} \left ( \sum_{i=0}^{t}X_{i}
\right )- \sum_{i=0}^{j}X_{i} \\
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of EVaR. The default is 0.05.
kappa : float, optional
Deformation parameter of RLDaR, must be between 0 and 1. The default is 0.3.
solver: str, optional
Solver available for CVXPY that supports power cone programming. Used
to calculate RLVaR, RVRG and RLDaR. The default value is 'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : tuple
RLDaR of an uncompounded cumulative returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i))
del DD[0]
value = RLVaR_Hist(np.array(DD), alpha=alpha, kappa=kappa, solver=solver)
return value
[docs]
def UCI_Abs(X):
r"""
Calculate the Ulcer Index (UCI) of a returns series
using uncompounded cumulative returns.
.. math::
\text{UCI}(X) =\sqrt{\frac{1}{T}\sum_{j=0}^{T} \left [ \max_{t \in
(0,j)} \left ( \sum_{i=0}^{t}X_{i} \right ) - \sum_{i=0}^{j}X_{i}
\right ] ^2}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of an uncompounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = np.insert(np.array(a), 0, 1, axis=0)
NAV = np.cumsum(np.array(prices), axis=0)
value = 0
peak = -99999
n = 0
for i in NAV:
if i > peak:
peak = i
DD = peak - i
if DD > 0:
value += DD**2
n += 1
if n == 0:
value = 0
else:
value = np.sqrt(value / (n - 1))
value = np.array(value).item()
return value
[docs]
def MDD_Rel(X):
r"""
Calculate the Maximum Drawdown (MDD) of a returns series
using cumpounded cumulative returns.
.. math::
\text{MDD}(X) = \max_{j \in (0,T)}\left[\max_{t \in (0,j)}
\left ( \prod_{i=0}^{t}(1+X_{i}) \right ) - \prod_{i=0}^{j}(1+X_{i})
\right]
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
MDD of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
value = 0
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD = (peak - i) / peak
if DD > value:
value = DD
value = np.array(value).item()
return value
[docs]
def ADD_Rel(X):
r"""
Calculate the Average Drawdown (ADD) of a returns series
using cumpounded cumulative returns.
.. math::
\text{ADD}(X) = \frac{1}{T}\sum_{j=0}^{T} \left [ \max_{t \in (0,j)}
\left ( \prod_{i=0}^{t}(1+X_{i}) \right )- \prod_{i=0}^{j}(1+X_{i})
\right ]
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
ADD of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
value = 0
peak = -99999
n = 0
for i in NAV:
if i > peak:
peak = i
DD = (peak - i) / peak
if DD > 0:
value += DD
n += 1
if n == 0:
value = 0
else:
value = value / (n - 1)
value = np.array(value).item()
return value
[docs]
def DaR_Rel(X, alpha=0.05):
r"""
Calculate the Drawdown at Risk (DaR) of a returns series
using cumpounded cumulative returns.
.. math::
\text{DaR}_{\alpha}(X) & = \max_{j \in (0,T)} \left \{ \text{DD}(X,j)
\in \mathbb{R}: F_{\text{DD}} \left ( \text{DD}(X,j) \right )< 1 - \alpha
\right \} \\
\text{DD}(X,j) & = \max_{t \in (0,j)} \left ( \prod_{i=0}^{t}(1+X_{i})
\right )- \prod_{i=0}^{j}(1+X_{i})
Parameters
----------
X : np.array
Returns series, must have Tx1 size..
alpha : float, optional
Significance level of DaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
DaR of a cumpounded cumulative returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("X must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i) / peak)
del DD[0]
sorted_DD = np.sort(np.array(DD), axis=0)
index = int(np.ceil(alpha * len(sorted_DD)) - 1)
value = -sorted_DD[index]
value = np.array(value).item()
return value
[docs]
def CDaR_Rel(X, alpha=0.05):
r"""
Calculate the Conditional Drawdown at Risk (CDaR) of a returns series
using cumpounded cumulative returns.
.. math::
\text{CDaR}_{\alpha}(X) = \text{DaR}_{\alpha}(X) + \frac{1}{\alpha T}
\sum_{i=0}^{T} \max \left [ \max_{t \in (0,T)}
\left ( \prod_{i=0}^{t}(1+X_{i}) \right )- \prod_{i=0}^{j}(1+X_{i})
- \text{DaR}_{\alpha}(X), 0 \right ]
Where:
:math:`\text{DaR}_{\alpha}` is the Drawdown at Risk of a cumpound
cumulated return series :math:`X`.
Parameters
----------
X : np.array
Returns series, must have Tx1 size..
alpha : float, optional
Significance level of CDaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
CDaR of a cumpounded cumulative returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("X must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i) / peak)
del DD[0]
sorted_DD = np.sort(np.array(DD), axis=0)
index = int(np.ceil(alpha * len(sorted_DD)) - 1)
sum_var = 0
for i in range(0, index + 1):
sum_var = sum_var + sorted_DD[i] - sorted_DD[index]
value = -sorted_DD[index] - sum_var / (alpha * len(sorted_DD))
value = np.array(value).item()
return value
[docs]
def EDaR_Rel(X, alpha=0.05, solver="CLARABEL"):
r"""
Calculate the Entropic Drawdown at Risk (EDaR) of a returns series
using cumpounded cumulative returns.
.. math::
\text{EDaR}_{\alpha}(X) & = \inf_{z>0} \left \{ z
\ln \left (\frac{M_{\text{DD}(X)}(z^{-1})}{\alpha} \right ) \right \} \\
\text{DD}(X,j) & = \max_{t \in (0,j)} \left ( \prod_{i=0}^{t}(1+X_{i})
\right )- \prod_{i=0}^{j}(1+X_{i})
Parameters
----------
X : np.array
Returns series, must have Tx1 size..
alpha : float, optional
Significance level of EDaR. The default is 0.05.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
(value, z) : tuple
EDaR of a cumpounded cumulative returns series
and value of z that minimize EDaR.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("X must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i) / peak)
del DD[0]
value, t = EVaR_Hist(np.array(DD), alpha=alpha, solver=solver)
return (value, t)
[docs]
def RLDaR_Rel(X, alpha=0.05, kappa=0.3, solver="CLARABEL"):
r"""
Calculate the Relativistic Drawdown at Risk (RLDaR) of a returns series
using compounded cumulative returns. I recommend only use this function with MOSEK solver.
.. math::
\text{RLDaR}^{\kappa}_{\alpha}(X) & = \text{RLVaR}^{\kappa}_{\alpha}(\text{DD}(X)) \\
\text{DD}(X,j) & = \max_{t \in (0,j)} \left ( \prod_{i=0}^{t}(1+X_{i})
\right )- \prod_{i=0}^{j}(1+X_{i}) \\
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of RLDaR. The default is 0.05.
kappa : float, optional
Deformation parameter of RLDaR, must be between 0 and 1. The default is 0.3.
solver: str, optional
Solver available for CVXPY that supports power cone programming. Used
to calculate RLVaR, RVRG and RLDaR. The default value is 'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : tuple
RLDaR of a compounded cumulative returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("X must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
DD = []
peak = -99999
for i in NAV:
if i > peak:
peak = i
DD.append(-(peak - i) / peak)
del DD[0]
value = RLVaR_Hist(np.array(DD), alpha=alpha, kappa=kappa, solver=solver)
return value
[docs]
def UCI_Rel(X):
r"""
Calculate the Ulcer Index (UCI) of a returns series
using cumpounded cumulative returns.
.. math::
\text{UCI}(X) =\sqrt{\frac{1}{T}\sum_{j=0}^{T} \left [ \max_{t \in
(0,j)} \left ( \prod_{i=0}^{t}(1+X_{i}) \right )- \prod_{i=0}^{j}
(1+X_{i}) \right ] ^2}
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
prices = 1 + np.insert(np.array(a), 0, 0, axis=0)
NAV = np.cumprod(prices, axis=0)
value = 0
peak = -99999
n = 0
for i in NAV:
if i > peak:
peak = i
DD = (peak - i) / peak
if DD > 0:
value += DD**2
n += 1
if n == 0:
value = 0
else:
value = np.sqrt(value / (n - 1))
value = np.array(value).item()
return value
[docs]
def GMD(X):
r"""
Calculate the Gini Mean Difference (GMD) of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Gini Mean Difference of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_gmd(T)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def TG(X, alpha=0.05, a_sim=100):
r"""
Calculate the Tail Gini of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of Tail Gini. The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini. The default is 100.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_tg(T, alpha, a_sim)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def RG(X):
r"""
Calculate the range of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_rg(T)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def VRG(X, alpha=0.05, beta=None):
r"""
Calculate the VaR range of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of VaR of losses. The default is 0.05.
beta : float, optional
Significance level of VaR of gains. If None it duplicates alpha value.
The default is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
if beta is None:
beta = alpha
value_L = VaR_Hist(a, alpha=alpha)
value_G = VaR_Hist(-a, alpha=beta)
value = value_L + value_G
return value
[docs]
def CVRG(X, alpha=0.05, beta=None):
r"""
Calculate the CVaR range of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of CVaR of losses. The default is 0.05.
beta : float, optional
Significance level of CVaR of gains. If None it duplicates alpha value.
The default is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_cvrg(T, alpha=alpha, beta=beta)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def TGRG(X, alpha=0.05, a_sim=100, beta=None, b_sim=None):
r"""
Calculate the Tail Gini range of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of Tail Gini of losses. The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini of losses. The default is 100.
beta : float, optional
Significance level of Tail Gini of gains. If None it duplicates alpha value.
The default is None.
b_sim : float, optional
Number of CVaRs used to approximate Tail Gini of gains. If None it duplicates a_sim value.
The default is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_tgrg(T, alpha=alpha, a_sim=a_sim, beta=beta, b_sim=b_sim)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def EVRG(X, alpha=0.05, beta=None, solver="CLARABEL"):
r"""
Calculate the CVaR range of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of EVaR of losses. The default is 0.05.
beta : float, optional
Significance level of EVaR of gains. If None it duplicates alpha value.
The default is None.
solver: str, optional
Solver available for CVXPY that supports exponential cone programming.
Used to calculate EVaR, EVRG and EDaR. The default value is 'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
if beta is None:
beta = alpha
value_L = EVaR_Hist(a, alpha=alpha, solver=solver)[0]
value_G = EVaR_Hist(-a, alpha=beta, solver=solver)[0]
value = value_L + value_G
return value
[docs]
def RVRG(X, alpha=0.05, beta=None, kappa=0.3, kappa_g=None, solver="CLARABEL"):
r"""
Calculate the CVaR range of a returns series.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
alpha : float, optional
Significance level of RLVaR of losses. The default is 0.05.
beta : float, optional
Significance level of RLVaR of gains. If None it duplicates alpha value.
The default is None.
kappa : float, optional
Deformation parameter of RLVaR for losses, must be between 0 and 1.
The default is 0.3.
kappa_g : float, optional
Deformation parameter of RLVaR for gains, must be between 0 and 1.
The default is None.
solver: str, optional
Solver available for CVXPY that supports power cone programming.
Used to calculate EVaR, EVRG and EDaR. The default value is 'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Ulcer Index of a cumpounded cumulative returns.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
if beta is None:
beta = alpha
if kappa_g is None:
kappa_g = kappa
value_L = RLVaR_Hist(a, alpha=alpha, kappa=kappa, solver=solver)
value_G = RLVaR_Hist(-a, alpha=beta, kappa=kappa_g, solver=solver)
value = value_L + value_G
return value
[docs]
def L_Moment(X, k=2):
r"""
Calculate the kth l-moment of a returns series.
.. math:
\lambda_k = {\tbinom{T}{k}}^{-1} \mathop{\sum \sum \ldots \sum}_{1
\leq i_{1} < i_{2} \cdots < i_{k} \leq n} \frac{1}{k}
\sum^{k-1}_{j=0} (-1)^{j} \binom{k-1}{j} y_{[i_{k-j}]} \\
Where $y_{[i]}$ is the ith-ordered statistic.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
k : int
Order of the l-moment. Must be an integer higher or equal than 1.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Kth l-moment of a returns series.
"""
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_l_moment(T, k=k)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def L_Moment_CRM(X, k=4, method="MSD", g=0.5, max_phi=0.5, solver="CLARABEL"):
r"""
Calculate a custom convex risk measure that is a weighted average of
first k-th l-moments.
Parameters
----------
X : np.array
Returns series, must have Tx1 size.
k : int
Order of the l-moment. Must be an integer higher or equal than 2.
method : str, optional
Method to calculate the weights used to combine the l-moments with
order higher than 2. The default value is 'MSD'. Possible values are:
- 'CRRA': Normalized Constant Relative Risk Aversion coefficients.
- 'ME': Maximum Entropy.
- 'MSS': Minimum Sum Squares.
- 'MSD': Minimum Square Distance.
g : float, optional
Risk aversion coefficient of CRRA utility function. The default is 0.5.
max_phi : float, optional
Maximum weight constraint of L-moments.
The default is 0.5.
solver: str, optional
Solver available for CVXPY. Used to calculate 'ME', 'MSS' and 'MSD' weights.
The default value is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Custom convex risk measure that is a weighted average of first k-th l-moments of a returns series.
"""
if k < 2 or (not isinstance(k, int)):
raise ValueError("k must be an integer higher equal than 2")
if method not in ["CRRA", "ME", "MSS", "MSD"]:
raise ValueError("Available methods are 'CRRA', 'ME', 'MSS' and 'MSD'")
if g >= 1 or g <= 0:
raise ValueError("The risk aversion coefficient mus be between 0 and 1")
if max_phi >= 1 or max_phi <= 0:
raise ValueError(
"The constraint on maximum weight of L-moments must be between 0 and 1"
)
a = np.array(X, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("returns must have Tx1 size")
T = a.shape[0]
w_ = owa.owa_l_moment_crm(
T, k=k, method=method, g=g, max_phi=max_phi, solver=solver
)
value = (w_.T @ np.sort(a, axis=0)).item()
return value
[docs]
def NEA(w):
r"""
Calculate the number of effective assets (NEA) that is the inverse of the
Herfindahl Hirschman index (HHI).
Parameters
----------
w : DataFrame or Series of shape (n_assets, 1)
Portfolio weights, where n_assets is the number of assets.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
The NEA of the portfolio.
"""
a = np.array(w, ndmin=2)
if a.shape[0] == 1 and a.shape[1] > 1:
a = a.T
if a.shape[0] > 1 and a.shape[1] > 1:
raise ValueError("w must have n_assets x 1 size")
value = 1 / np.sum(a**2)
return value
###############################################################################
# Risk Adjusted Return Ratios
###############################################################################
[docs]
def Sharpe_Risk(
returns,
w=None,
cov=None,
rm="MV",
rf=0,
alpha=0.05,
a_sim=100,
beta=None,
b_sim=None,
kappa=0.3,
kappa_g=None,
p_em=2,
p_esm=2,
solver="CLARABEL",
):
r"""
Calculate the risk measure available on the Sharpe function.
Parameters
----------
w : DataFrame or np.array of shape (n_assets, 1)
Weights matrix, where n_assets is the number of assets.
cov : DataFrame of shape (n_assets, n_assets)
Covariance matrix, where n_assets is the number of assets.
returns : DataFrame or nd-array of shape (n_samples, n_features)
Features matrix, where n_samples is the number of samples and
n_features is the number of features.
rm : str, optional
Risk measure used in the denominator of the ratio. The default is
'MV'. Possible values are:
- 'MV': Standard Deviation.
- 'KT': Square Root Kurtosis.
- 'EM': Even Moment of order 2 * p_em.
- 'MAD': Mean Absolute Deviation.
- 'GMD': Gini Mean Difference.
- 'MSV': Semi Standard Deviation.
- 'SKT': Square Root Semi Kurtosis.
- 'ESM': Even Semi Moment of order 2 * p_em.
- 'FLPM': First Lower Partial Moment (Omega Ratio).
- 'SLPM': Second Lower Partial Moment (Sortino Ratio).
- 'VaR': Value at Risk.
- 'CVaR': Conditional Value at Risk.
- 'TG': Tail Gini.
- 'EVaR': Entropic Value at Risk.
- 'RLVaR': Relativistic Value at Risk. I recommend only use this function with MOSEK solver.
- 'WR': Worst Realization (Minimax).
- 'RG': Range of returns.
- 'VRG' VaR range of returns.
- 'CVRG': CVaR range of returns.
- 'TGRG': Tail Gini range of returns.
- 'EVRG': EVaR range of returns.
- 'RVRG': RLVaR range of returns. I recommend only use this function with MOSEK solver.
- 'MDD': Maximum Drawdown of uncompounded cumulative returns (Calmar Ratio).
- 'ADD': Average Drawdown of uncompounded cumulative returns.
- 'DaR': Drawdown at Risk of uncompounded cumulative returns.
- 'CDaR': Conditional Drawdown at Risk of uncompounded cumulative returns.
- 'EDaR': Entropic Drawdown at Risk of uncompounded cumulative returns.
- 'RLDaR': Relativistic Drawdown at Risk of uncompounded cumulative returns. I recommend only use this risk measure with MOSEK solver.
- 'UCI': Ulcer Index of uncompounded cumulative returns.
- 'MDD_Rel': Maximum Drawdown of compounded cumulative returns (Calmar Ratio).
- 'ADD_Rel': Average Drawdown of compounded cumulative returns.
- 'DaR_Rel': Drawdown at Risk of compounded cumulative returns.
- 'CDaR_Rel': Conditional Drawdown at Risk of compounded cumulative returns.
- 'EDaR_Rel': Entropic Drawdown at Risk of compounded cumulative returns.
- 'RLDaR_Rel': Relativistic Drawdown at Risk of compounded cumulative returns. I recommend only use this risk measure with MOSEK solver.
- 'UCI_Rel': Ulcer Index of compounded cumulative returns.
rf : float, optional
Risk free rate. The default is 0.
alpha : float, optional
Significance level of VaR, CVaR, EVaR, RLVaR, DaR, CDaR, EDaR, RLDaR
and Tail Gini of losses. The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini of losses. The default is 100.
beta : float, optional
Significance level of CVaR and Tail Gini of gains. If None it
duplicates alpha value. The default is None.
b_sim : float, optional
Number of CVaRs used to approximate Tail Gini of gains. If None it
duplicates a_sim value. The default is None.
kappa : float, optional
Deformation parameter of RLVaR and RLDaR for losses, must be between 0 and 1.
The default is 0.3.
kappa_g : float, optional
Deformation parameter of RLVaR and RLDaR for gains, must be between 0 and 1.
The default is None.
p_em : int, optional
Order of the Even Moment of order 2 * p_em. It must be an integer higher equal than 2. The default value is 2.
p_esm : int, optional
Order of the Even Semi Moment of order 2 * p_esm. It must be an integer higher equal than 2. The default value is 2.
solver: str, optional
Solver available for CVXPY that supports exponential and power cone
programming. Used to calculate RLVaR and RLDaR. The default value is
'CLARABEL'.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Risk measure of the portfolio.
"""
if isinstance(returns, pd.Series):
returns_ = returns.to_frame()
elif isinstance(returns, pd.DataFrame):
returns_ = returns.to_numpy()
else:
returns_ = np.array(returns, ndmin=2)
if returns_.shape[1] == 1:
w_ = np.array([[1]])
else:
if w is None:
raise ValueError("weights must have n_assets x 1 size")
else:
w_ = np.array(w, ndmin=2)
if w_.shape[0] == 1 and w_.shape[1] > 1:
w_ = w_.T
if w_.shape[0] > 1 and w_.shape[1] > 1:
raise ValueError("weights must have n_assets x 1 size")
if cov is None:
cov_ = np.array(np.cov(returns_, rowvar=False), ndmin=2)
else:
cov_ = np.array(cov, ndmin=2)
a = returns_ @ w_
if rm == "MV":
risk = w_.T @ cov_ @ w_
risk = np.sqrt(risk.item())
elif rm == "MAD":
risk = MAD(a)
elif rm == "GMD":
risk = GMD(a)
elif rm == "MSV":
risk = SemiDeviation(a)
elif rm == "FLPM":
risk = LPM(a, MAR=rf, p=1)
elif rm == "SLPM":
risk = LPM(a, MAR=rf, p=2)
elif rm == "VaR":
risk = VaR_Hist(a, alpha=alpha)
elif rm == "CVaR":
risk = CVaR_Hist(a, alpha=alpha)
elif rm == "TG":
risk = TG(a, alpha=alpha, a_sim=a_sim)
elif rm == "EVaR":
risk = EVaR_Hist(a, alpha=alpha, solver=solver)[0]
elif rm == "RLVaR":
risk = RLVaR_Hist(a, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "WR":
risk = WR(a)
elif rm == "RG":
risk = RG(a)
elif rm == "VRG":
risk = VRG(a, alpha=alpha, beta=beta)
elif rm == "CVRG":
risk = CVRG(a, alpha=alpha, beta=beta)
elif rm == "TGRG":
risk = TGRG(a, alpha=alpha, a_sim=a_sim, beta=beta, b_sim=b_sim)
elif rm == "EVRG":
risk = EVRG(a, alpha=alpha, beta=beta, solver=solver)
elif rm == "RVRG":
risk = RVRG(
a, alpha=alpha, beta=beta, kappa=kappa, kappa_g=kappa_g, solver=solver
)
elif rm == "MDD":
risk = MDD_Abs(a)
elif rm == "ADD":
risk = ADD_Abs(a)
elif rm == "DaR":
risk = DaR_Abs(a, alpha=alpha)
elif rm == "CDaR":
risk = CDaR_Abs(a, alpha=alpha)
elif rm == "EDaR":
risk = EDaR_Abs(a, alpha=alpha)[0]
elif rm == "RLDaR":
risk = RLDaR_Abs(a, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "UCI":
risk = UCI_Abs(a)
elif rm == "MDD_Rel":
risk = MDD_Rel(a)
elif rm == "ADD_Rel":
risk = ADD_Rel(a)
elif rm == "DaR_Rel":
risk = DaR_Rel(a, alpha=alpha)
elif rm == "CDaR_Rel":
risk = CDaR_Rel(a, alpha=alpha)
elif rm == "EDaR_Rel":
risk = EDaR_Rel(a, alpha=alpha)[0]
elif rm == "RLDaR_Rel":
risk = RLDaR_Rel(a, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "UCI_Rel":
risk = UCI_Rel(a)
elif rm == "KT":
risk = Kurtosis(a)
elif rm == "SKT":
risk = SemiKurtosis(a)
elif rm == "EM":
risk = EvenMoment(a, p=p_em)
elif rm == "ESM":
risk = EvenSemiMoment(a, p=p_esm)
value = risk
return value
[docs]
def Sharpe(
returns,
w=None,
mu=None,
cov=None,
rm="MV",
rf=0,
alpha=0.05,
a_sim=100,
beta=None,
b_sim=None,
kappa=0.3,
kappa_g=None,
p_em=2,
p_esm=2,
solver="CLARABEL",
):
r"""
Calculate the Risk Adjusted Return Ratio from a portfolio returns series.
.. math::
\text{Sharpe}(X) = \frac{\mathbb{E}(X) - r_{f}}{\phi(X)}
Where:
:math:`X` is the vector of portfolio returns.
:math:`r_{f}` is the risk free rate, when the risk measure is
:math:`\text{LPM}` uses instead of :math:`r_{f}` the :math:`\text{MAR}`.
:math:`\phi(X)` is a convex risk measure. The risk measures availabe are:
Parameters
----------
returns : DataFrame or nd-array of shape (n_samples, n_features)
Features matrix, where n_samples is the number of samples and
n_features is the number of features.
w : DataFrame or np.array of shape (n_assets, 1)
Weights matrix, where n_assets is the number of assets.
mu : DataFrame or nd-array of shape (1, n_assets)
Vector of expected returns, where n_assets is the number of assets.
cov : DataFrame of shape (n_assets, n_assets)
Covariance matrix, where n_assets is the number of assets.
rm : str, optional
Risk measure used in the denominator of the ratio. The default is
'MV'. Possible values are:
- 'MV': Standard Deviation.
- 'KT': Square Root Kurtosis.
- 'EM': Even Moment of order 2 * p_em.
- 'MAD': Mean Absolute Deviation.
- 'GMD': Gini Mean Difference.
- 'MSV': Semi Standard Deviation.
- 'SKT': Square Root Semi Kurtosis.
- 'ESM': Even Semi Moment of order 2 * p_em.
- 'FLPM': First Lower Partial Moment (Omega Ratio).
- 'SLPM': Second Lower Partial Moment (Sortino Ratio).
- 'VaR': Value at Risk.
- 'CVaR': Conditional Value at Risk.
- 'TG': Tail Gini.
- 'EVaR': Entropic Value at Risk.
- 'RLVaR': Relativistic Value at Risk. I recommend only use this function with MOSEK solver.
- 'WR': Worst Realization (Minimax).
- 'RG': Range of returns.
- 'VRG' VaR range of returns.
- 'CVRG': CVaR range of returns.
- 'TGRG': Tail Gini range of returns.
- 'EVRG': EVaR range of returns.
- 'RVRG': RLVaR range of returns. I recommend only use this function with MOSEK solver.
- 'MDD': Maximum Drawdown of uncompounded cumulative returns (Calmar Ratio).
- 'ADD': Average Drawdown of uncompounded cumulative returns.
- 'DaR': Drawdown at Risk of uncompounded cumulative returns.
- 'CDaR': Conditional Drawdown at Risk of uncompounded cumulative returns.
- 'EDaR': Entropic Drawdown at Risk of uncompounded cumulative returns.
- 'RLDaR': Relativistic Drawdown at Risk of uncompounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI': Ulcer Index of uncompounded cumulative returns.
- 'MDD_Rel': Maximum Drawdown of compounded cumulative returns (Calmar Ratio).
- 'ADD_Rel': Average Drawdown of compounded cumulative returns.
- 'DaR_Rel': Drawdown at Risk of compounded cumulative returns.
- 'CDaR_Rel': Conditional Drawdown at Risk of compounded cumulative returns.
- 'EDaR_Rel': Entropic Drawdown at Risk of compounded cumulative returns.
- 'RLDaR_Rel': Relativistic Drawdown at Risk of compounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI_Rel': Ulcer Index of compounded cumulative returns.
rf : float, optional
Risk free rate. The default is 0.
alpha : float, optional
Significance level of VaR, CVaR, EVaR, RLVaR, DaR, CDaR, EDaR, RLDaR and Tail Gini of losses.
The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini of losses. The default is 100.
beta : float, optional
Significance level of CVaR and Tail Gini of gains. If None it duplicates alpha value.
The default is None.
b_sim : float, optional
Number of CVaRs used to approximate Tail Gini of gains. If None it duplicates a_sim value.
The default is None.
kappa : float, optional
Deformation parameter of RLVaR and RLDaR for losses, must be between 0 and 1.
The default is 0.3.
kappa_g : float, optional
Deformation parameter of RLVaR and RLDaR for gains, must be between 0 and 1.
The default is None.
p_em : int, optional
Order of the Even Moment of order 2 * p_em. It must be an integer higher equal than 2. The default value is 2.
p_esm : int, optional
Order of the Even Semi Moment of order 2 * p_esm. It must be an integer higher equal than 2. The default value is 2.
solver: str, optional
Solver available for CVXPY that supports power cone programming. Used to calculate RLVaR and RLDaR.
The default value is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Risk adjusted return ratio of :math:`X`.
"""
if isinstance(returns, pd.Series):
returns_ = returns.to_frame()
elif isinstance(returns, pd.DataFrame):
returns_ = returns.to_numpy()
else:
returns_ = np.array(returns, ndmin=2)
if returns_.shape[1] == 1:
w_ = np.array([[1]])
else:
if w is None:
raise ValueError("weights must have n_assets x 1 size")
else:
w_ = np.array(w, ndmin=2)
if w_.shape[0] == 1 and w_.shape[1] > 1:
w_ = w_.T
if w_.shape[0] > 1 and w_.shape[1] > 1:
raise ValueError("weights must have n_assets x 1 size")
if cov is None:
cov_ = np.array(np.cov(returns_, rowvar=False), ndmin=2)
else:
cov_ = np.array(cov, ndmin=2)
if mu is None:
mu_ = np.array(np.mean(returns_, axis=0), ndmin=2)
else:
mu_ = np.array(mu, ndmin=2)
ret = mu_ @ w_
ret = ret.item()
risk = Sharpe_Risk(
returns=returns_,
w=w_,
cov=cov_,
rm=rm,
rf=rf,
alpha=alpha,
a_sim=a_sim,
beta=beta,
b_sim=b_sim,
kappa=kappa,
kappa_g=kappa_g,
p_em=p_em,
p_esm=p_esm,
solver=solver,
)
value = (ret - rf) / risk
return value
###############################################################################
# Risk Contribution Vectors
###############################################################################
[docs]
def Risk_Contribution(
w,
returns,
cov=None,
rm="MV",
rf=0,
alpha=0.05,
a_sim=100,
beta=None,
b_sim=None,
kappa=0.3,
kappa_g=None,
p_em=2,
p_esm=2,
solver="CLARABEL",
):
r"""
Calculate the risk contribution for each asset based on the selected risk measure.
Parameters
----------
w : DataFrame or Series of shape (n_assets, 1)
Portfolio weights, where n_assets is the number of assets.
returns : DataFrame or nd-array of shape (n_samples, n_features)
Features matrix, where n_samples is the number of samples and
n_features is the number of features.
cov : DataFrame of shape (n_assets, n_assets)
Covariance matrix, where n_assets is the number of assets.
rm : str, optional
Risk measure used in the denominator of the ratio. The default is
'MV'. Possible values are:
- 'MV': Standard Deviation.
- 'KT': Square Root Kurtosis.
- 'EM': Even Moment of order 2 * p_em.
- 'MAD': Mean Absolute Deviation.
- 'GMD': Gini Mean Difference.
- 'MSV': Semi Standard Deviation.
- 'SKT': Square Root Semi Kurtosis.
- 'ESM': Even Semi Moment of order 2 * p_esm.
- 'FLPM': First Lower Partial Moment (Omega Ratio).
- 'SLPM': Second Lower Partial Moment (Sortino Ratio).
- 'VaR': Value at Risk.
- 'CVaR': Conditional Value at Risk.
- 'TG': Tail Gini.
- 'EVaR': Entropic Value at Risk.
- 'RLVaR': Relativistic Value at Risk. I recommend only use this function with MOSEK solver.
- 'WR': Worst Realization (Minimax).
- 'RG': Range of returns.
- 'VRG' VaR range of returns.
- 'CVRG': CVaR range of returns.
- 'TGRG': Tail Gini range of returns.
- 'EVRG': EVaR range of returns.
- 'RVRG': RLVaR range of returns. I recommend only use this function with MOSEK solver.
- 'MDD': Maximum Drawdown of uncompounded cumulative returns (Calmar Ratio).
- 'ADD': Average Drawdown of uncompounded cumulative returns.
- 'DaR': Drawdown at Risk of uncompounded cumulative returns.
- 'CDaR': Conditional Drawdown at Risk of uncompounded cumulative returns.
- 'EDaR': Entropic Drawdown at Risk of uncompounded cumulative returns.
- 'RLDaR': Relativistic Drawdown at Risk of uncompounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI': Ulcer Index of uncompounded cumulative returns.
- 'MDD_Rel': Maximum Drawdown of compounded cumulative returns (Calmar Ratio).
- 'ADD_Rel': Average Drawdown of compounded cumulative returns.
- 'CDaR_Rel': Conditional Drawdown at Risk of compounded cumulative returns.
- 'EDaR_Rel': Entropic Drawdown at Risk of compounded cumulative returns.
- 'RLDaR_Rel': Relativistic Drawdown at Risk of compounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI_Rel': Ulcer Index of compounded cumulative returns.
rf : float, optional
Risk free rate. The default is 0.
alpha : float, optional
Significance level of VaR, CVaR, EVaR, RLVaR, DaR, CDaR, EDaR, RLDaR and Tail Gini of losses.
The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini of losses. The default is 100.
beta : float, optional
Significance level of CVaR and Tail Gini of gains. If None it duplicates alpha value.
The default is None.
b_sim : float, optional
Number of CVaRs used to approximate Tail Gini of gains. If None it duplicates a_sim value.
The default is None.
kappa : float, optional
Deformation parameter of RLVaR and RLDaR for losses, must be between 0 and 1.
The default is 0.3.
kappa_g : float, optional
Deformation parameter of RLVaR and RLDaR for gains, must be between 0 and 1.
The default is None.
p_em : int, optional
Order of the Even Moment of order 2 * p_em. It must be an integer higher equal than 2. The default value is 2.
p_esm : int, optional
Order of the Even Semi Moment of order 2 * p_esm. It must be an integer higher equal than 2. The default value is 2.
solver: str, optional
Solver available for CVXPY that supports power cone programming. Used to calculate RLVaR and RLDaR.
The default value is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Risk measure of the portfolio.
"""
w_ = np.array(w, ndmin=2)
if w_.shape[0] == 1 and w_.shape[1] > 1:
w_ = w_.T
if w_.shape[0] > 1 and w_.shape[1] > 1:
raise ValueError("weights must have n_assets x 1 size")
if isinstance(returns, pd.Series):
returns_ = returns.to_frame()
returns_ = returns.to_numpy()
elif isinstance(returns, pd.DataFrame):
returns_ = returns.to_numpy()
else:
returns_ = np.array(returns, ndmin=2)
if cov is None:
cov_ = np.array(np.cov(returns_, rowvar=False), ndmin=2)
else:
cov_ = np.array(cov, ndmin=2)
RC = []
if rm in ["EVaR", "EDaR", "RLVaR", "RLDaR", "EVRG", "RVRG"]:
d_i = 0.0001
else:
d_i = 0.0000001
for i in range(0, w_.shape[0]):
delta = np.zeros((w_.shape[0], 1))
delta[i, 0] = d_i
w_1 = w_ + delta
w_2 = w_ - delta
a_1 = returns_ @ w_1
a_2 = returns_ @ w_2
if rm == "MV":
risk_1 = w_1.T @ cov_ @ w_1
risk_1 = np.sqrt(risk_1.item())
risk_2 = w_2.T @ cov_ @ w_2
risk_2 = np.sqrt(risk_2.item())
elif rm == "MAD":
risk_1 = MAD(a_1)
risk_2 = MAD(a_2)
elif rm == "GMD":
risk_1 = GMD(a_1)
risk_2 = GMD(a_2)
elif rm == "MSV":
risk_1 = SemiDeviation(a_1)
risk_2 = SemiDeviation(a_2)
elif rm == "FLPM":
risk_1 = LPM(a_1, MAR=rf, p=1)
risk_2 = LPM(a_2, MAR=rf, p=1)
elif rm == "SLPM":
risk_1 = LPM(a_1, MAR=rf, p=2)
risk_2 = LPM(a_2, MAR=rf, p=2)
elif rm == "VaR":
risk_1 = VaR_Hist(a_1, alpha=alpha)
risk_2 = VaR_Hist(a_2, alpha=alpha)
elif rm == "CVaR":
risk_1 = CVaR_Hist(a_1, alpha=alpha)
risk_2 = CVaR_Hist(a_2, alpha=alpha)
elif rm == "TG":
risk_1 = TG(a_1, alpha=alpha, a_sim=a_sim)
risk_2 = TG(a_2, alpha=alpha, a_sim=a_sim)
elif rm == "EVaR":
risk_1 = EVaR_Hist(a_1, alpha=alpha, solver=solver)[0]
risk_2 = EVaR_Hist(a_2, alpha=alpha, solver=solver)[0]
elif rm == "RLVaR":
risk_1 = RLVaR_Hist(a_1, alpha=alpha, kappa=kappa, solver=solver)
risk_2 = RLVaR_Hist(a_2, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "WR":
risk_1 = WR(a_1)
risk_2 = WR(a_2)
elif rm == "VRG":
risk_1 = VRG(a_1, alpha=alpha, beta=beta)
risk_2 = VRG(a_2, alpha=alpha, beta=beta)
elif rm == "CVRG":
risk_1 = CVRG(a_1, alpha=alpha, beta=beta)
risk_2 = CVRG(a_2, alpha=alpha, beta=beta)
elif rm == "TGRG":
risk_1 = TGRG(a_1, alpha=alpha, a_sim=a_sim, beta=beta, b_sim=b_sim)
risk_2 = TGRG(a_2, alpha=alpha, a_sim=a_sim, beta=beta, b_sim=b_sim)
elif rm == "EVRG":
risk_1 = EVRG(a_1, alpha=alpha, beta=beta, solver=solver)
risk_2 = EVRG(a_2, alpha=alpha, beta=beta, solver=solver)
elif rm == "RVRG":
risk_1 = RVRG(
a_1, alpha=alpha, beta=beta, kappa=kappa, kappa_g=kappa_g, solver=solver
)
risk_2 = RVRG(
a_2, alpha=alpha, beta=beta, kappa=kappa, kappa_g=kappa_g, solver=solver
)
elif rm == "RG":
risk_1 = RG(a_1)
risk_2 = RG(a_2)
elif rm == "MDD":
risk_1 = MDD_Abs(a_1)
risk_2 = MDD_Abs(a_2)
elif rm == "ADD":
risk_1 = ADD_Abs(a_1)
risk_2 = ADD_Abs(a_2)
elif rm == "DaR":
risk_1 = DaR_Abs(a_1, alpha=alpha)
risk_2 = DaR_Abs(a_2, alpha=alpha)
elif rm == "CDaR":
risk_1 = CDaR_Abs(a_1, alpha=alpha)
risk_2 = CDaR_Abs(a_2, alpha=alpha)
elif rm == "EDaR":
risk_1 = EDaR_Abs(a_1, alpha=alpha)[0]
risk_2 = EDaR_Abs(a_2, alpha=alpha)[0]
elif rm == "RLDaR":
risk_1 = RLDaR_Abs(a_1, alpha=alpha, kappa=kappa, solver=solver)
risk_2 = RLDaR_Abs(a_2, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "UCI":
risk_1 = UCI_Abs(a_1)
risk_2 = UCI_Abs(a_2)
elif rm == "MDD_Rel":
risk_1 = MDD_Rel(a_1)
risk_2 = MDD_Rel(a_2)
elif rm == "ADD_Rel":
risk_1 = ADD_Rel(a_1)
risk_2 = ADD_Rel(a_2)
elif rm == "DaR_Rel":
risk_1 = DaR_Rel(a_1, alpha=alpha)
risk_2 = DaR_Rel(a_2, alpha=alpha)
elif rm == "CDaR_Rel":
risk_1 = CDaR_Rel(a_1, alpha=alpha)
risk_2 = CDaR_Rel(a_2, alpha=alpha)
elif rm == "EDaR_Rel":
risk_1 = EDaR_Rel(a_1, alpha=alpha)[0]
risk_2 = EDaR_Rel(a_2, alpha=alpha)[0]
elif rm == "RLDaR_Rel":
risk_1 = RLDaR_Rel(a_1, alpha=alpha, kappa=kappa, solver=solver)
risk_2 = RLDaR_Rel(a_2, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "UCI_Rel":
risk_1 = UCI_Rel(a_1)
risk_2 = UCI_Rel(a_2)
elif rm == "KT":
risk_1 = Kurtosis(a_1) * 0.5
risk_2 = Kurtosis(a_2) * 0.5
elif rm == "SKT":
risk_1 = SemiKurtosis(a_1) * 0.5
risk_2 = SemiKurtosis(a_2) * 0.5
elif rm == "EM":
risk_1 = EvenMoment(a_1, p=p_em) * 0.5
risk_2 = EvenMoment(a_2, p=p_em) * 0.5
elif rm == "ESM":
risk_1 = EvenSemiMoment(a_1, p=p_esm) * 0.5
risk_2 = EvenSemiMoment(a_2, p=p_esm) * 0.5
RC_i = (risk_1 - risk_2) / (2 * d_i) * w_[i, 0]
RC.append(RC_i)
RC = np.array(RC, ndmin=1)
return RC
[docs]
def Risk_Margin(
w,
returns,
cov=None,
rm="MV",
rf=0,
alpha=0.05,
a_sim=100,
beta=None,
b_sim=None,
kappa=0.3,
kappa_g=None,
p_em=2,
p_esm=2,
solver="CLARABEL",
):
r"""
Calculate the risk margin for each asset based on the risk measure
selected.
Parameters
----------
w : DataFrame or Series of shape (n_assets, 1)
Portfolio weights, where n_assets is the number of assets.
returns : DataFrame or nd-array of shape (n_samples, n_features)
Features matrix, where n_samples is the number of samples and
n_features is the number of features.
cov : DataFrame of shape (n_assets, n_assets)
Covariance matrix, where n_assets is the number of assets.
rm : str, optional
Risk measure used in the denominator of the ratio. The default is
'MV'. Possible values are:
- 'MV': Standard Deviation.
- 'KT': Square Root Kurtosis.
- 'EM': Even Moment of order 2 * p_em.
- 'MAD': Mean Absolute Deviation.
- 'GMD': Gini Mean Difference.
- 'MSV': Semi Standard Deviation.
- 'SKT': Square Root Semi Kurtosis.
- 'ESM': Even Semi Moment of order 2 * p_esm.
- 'FLPM': First Lower Partial Moment (Omega Ratio).
- 'SLPM': Second Lower Partial Moment (Sortino Ratio).
- 'VaR': Value at Risk.
- 'CVaR': Conditional Value at Risk.
- 'TG': Tail Gini.
- 'EVaR': Entropic Value at Risk.
- 'RLVaR': Relativistic Value at Risk. I recommend only use this function with MOSEK solver.
- 'WR': Worst Realization (Minimax).
- 'RG': Range of returns.
- 'VRG' VaR range of returns.
- 'CVRG': CVaR range of returns.
- 'TGRG': Tail Gini range of returns.
- 'EVRG': EVaR range of returns.
- 'RVRG': RLVaR range of returns.
- 'MDD': Maximum Drawdown of uncompounded cumulative returns (Calmar Ratio).
- 'ADD': Average Drawdown of uncompounded cumulative returns.
- 'DaR': Drawdown at Risk of uncompounded cumulative returns.
- 'CDaR': Conditional Drawdown at Risk of uncompounded cumulative returns.
- 'EDaR': Entropic Drawdown at Risk of uncompounded cumulative returns.
- 'RLDaR': Relativistic Drawdown at Risk of uncompounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI': Ulcer Index of uncompounded cumulative returns.
- 'MDD_Rel': Maximum Drawdown of compounded cumulative returns (Calmar Ratio).
- 'ADD_Rel': Average Drawdown of compounded cumulative returns.
- 'CDaR_Rel': Conditional Drawdown at Risk of compounded cumulative returns.
- 'EDaR_Rel': Entropic Drawdown at Risk of compounded cumulative returns.
- 'RLDaR_Rel': Relativistic Drawdown at Risk of compounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI_Rel': Ulcer Index of compounded cumulative returns.
rf : float, optional
Risk free rate. The default is 0.
alpha : float, optional
Significance level of VaR, CVaR, EVaR, RLVaR, DaR, CDaR, EDaR, RLDaR
and Tail Gini of losses. The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini of losses. The default is 100.
beta : float, optional
Significance level of VaR, CVaR, Tail Gini, EVaR and RLVaR of gains. If
None it duplicates alpha value. The default is None.
b_sim : float, optional
Number of CVaRs used to approximate Tail Gini of gains. If None it
duplicates a_sim value.
The default is None.
kappa : float, optional
Deformation parameter of RLVaR and RLDaR for losses, must be between 0 and 1.
The default is 0.3.
kappa_g : float, optional
Deformation parameter of RLVaR and RLDaR for gains, must be between 0 and 1.
The default is None.
p_em : int, optional
Order of the Even Moment of order 2 * p_em. It must be an integer higher equal than 2. The default value is 2.
p_esm : int, optional
Order of the Even Semi Moment of order 2 * p_esm. It must be an integer higher equal than 2. The default value is 2.
solver: str, optional
Solver available for CVXPY that supports exponential and power cone
programming. Used to calculate EVaR, EVRG, EDaR, RLVaR, RVRG and RLDaR.
The default value is None.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Risk margin of the portfolio.
"""
w_ = np.array(w, ndmin=2)
if w_.shape[0] == 1 and w_.shape[1] > 1:
w_ = w_.T
if w_.shape[0] > 1 and w_.shape[1] > 1:
raise ValueError("weights must have n_assets x 1 size")
if isinstance(returns, pd.Series):
returns_ = returns.to_frame()
elif isinstance(returns, pd.DataFrame):
returns_ = returns.to_numpy()
else:
returns_ = np.array(returns, ndmin=2)
if cov is None:
cov_ = np.array(np.cov(returns_, rowvar=False), ndmin=2)
else:
cov_ = np.array(cov, ndmin=2)
RM = []
if rm in ["RLVaR", "RLDaR"]:
d_i = 0.0001
else:
d_i = 0.0000001
for i in range(0, w_.shape[0]):
delta = np.zeros((w_.shape[0], 1))
delta[i, 0] = d_i
w_1 = w_ + delta
w_2 = w_ - delta
a_1 = returns_ @ w_1
a_2 = returns_ @ w_2
if rm == "MV":
risk_1 = w_1.T @ cov_ @ w_1
risk_1 = np.sqrt(risk_1.item())
risk_2 = w_2.T @ cov_ @ w_2
risk_2 = np.sqrt(risk_2.item())
elif rm == "MAD":
risk_1 = MAD(a_1)
risk_2 = MAD(a_2)
elif rm == "GMD":
risk_1 = GMD(a_1)
risk_2 = GMD(a_2)
elif rm == "MSV":
risk_1 = SemiDeviation(a_1)
risk_2 = SemiDeviation(a_2)
elif rm == "FLPM":
risk_1 = LPM(a_1, MAR=rf, p=1)
risk_2 = LPM(a_2, MAR=rf, p=1)
elif rm == "SLPM":
risk_1 = LPM(a_1, MAR=rf, p=2)
risk_2 = LPM(a_2, MAR=rf, p=2)
elif rm == "VaR":
risk_1 = VaR_Hist(a_1, alpha=alpha)
risk_2 = VaR_Hist(a_2, alpha=alpha)
elif rm == "CVaR":
risk_1 = CVaR_Hist(a_1, alpha=alpha)
risk_2 = CVaR_Hist(a_2, alpha=alpha)
elif rm == "TG":
risk_1 = TG(a_1, alpha=alpha, a_sim=a_sim)
risk_2 = TG(a_2, alpha=alpha, a_sim=a_sim)
elif rm == "EVaR":
risk_1 = EVaR_Hist(a_1, alpha=alpha, solver=solver)[0]
risk_2 = EVaR_Hist(a_2, alpha=alpha, solver=solver)[0]
elif rm == "RLVaR":
risk_1 = RLVaR_Hist(a_1, alpha=alpha, kappa=kappa, solver=solver)
risk_2 = RLVaR_Hist(a_2, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "WR":
risk_1 = WR(a_1)
risk_2 = WR(a_2)
elif rm == "VRG":
risk_1 = VRG(a_1, alpha=alpha, beta=beta)
risk_2 = VRG(a_2, alpha=alpha, beta=beta)
elif rm == "CVRG":
risk_1 = CVRG(a_1, alpha=alpha, beta=beta)
risk_2 = CVRG(a_2, alpha=alpha, beta=beta)
elif rm == "TGRG":
risk_1 = TGRG(a_1, alpha=alpha, a_sim=a_sim, beta=beta, b_sim=b_sim)
risk_2 = TGRG(a_2, alpha=alpha, a_sim=a_sim, beta=beta, b_sim=b_sim)
elif rm == "EVRG":
risk_1 = EVRG(a_1, alpha=alpha, beta=beta, solver=solver)
risk_2 = EVRG(a_2, alpha=alpha, beta=beta, solver=solver)
elif rm == "RVRG":
risk_1 = RVRG(
a_1, alpha=alpha, beta=beta, kappa=kappa, kappa_g=kappa_g, solver=solver
)
risk_2 = RVRG(
a_2, alpha=alpha, beta=beta, kappa=kappa, kappa_g=kappa_g, solver=solver
)
elif rm == "RG":
risk_1 = RG(a_1)
risk_2 = RG(a_2)
elif rm == "MDD":
risk_1 = MDD_Abs(a_1)
risk_2 = MDD_Abs(a_2)
elif rm == "ADD":
risk_1 = ADD_Abs(a_1)
risk_2 = ADD_Abs(a_2)
elif rm == "DaR":
risk_1 = DaR_Abs(a_1, alpha=alpha)
risk_2 = DaR_Abs(a_2, alpha=alpha)
elif rm == "CDaR":
risk_1 = CDaR_Abs(a_1, alpha=alpha)
risk_2 = CDaR_Abs(a_2, alpha=alpha)
elif rm == "EDaR":
risk_1 = EDaR_Abs(a_1, alpha=alpha, solver=solver)[0]
risk_2 = EDaR_Abs(a_2, alpha=alpha, solver=solver)[0]
elif rm == "RLDaR":
risk_1 = RLDaR_Abs(a_1, alpha=alpha, kappa=kappa, solver=solver)
risk_2 = RLDaR_Abs(a_2, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "UCI":
risk_1 = UCI_Abs(a_1)
risk_2 = UCI_Abs(a_2)
elif rm == "MDD_Rel":
risk_1 = MDD_Rel(a_1)
risk_2 = MDD_Rel(a_2)
elif rm == "ADD_Rel":
risk_1 = ADD_Rel(a_1)
risk_2 = ADD_Rel(a_2)
elif rm == "DaR_Rel":
risk_1 = DaR_Rel(a_1, alpha=alpha)
risk_2 = DaR_Rel(a_2, alpha=alpha)
elif rm == "CDaR_Rel":
risk_1 = CDaR_Rel(a_1, alpha=alpha)
risk_2 = CDaR_Rel(a_2, alpha=alpha)
elif rm == "EDaR_Rel":
risk_1 = EDaR_Rel(a_1, alpha=alpha, solver=solver)[0]
risk_2 = EDaR_Rel(a_2, alpha=alpha, solver=solver)[0]
elif rm == "RLDaR_Rel":
risk_1 = RLDaR_Rel(a_1, alpha=alpha, kappa=kappa, solver=solver)
risk_2 = RLDaR_Rel(a_2, alpha=alpha, kappa=kappa, solver=solver)
elif rm == "UCI_Rel":
risk_1 = UCI_Rel(a_1)
risk_2 = UCI_Rel(a_2)
elif rm == "KT":
risk_1 = Kurtosis(a_1) * 0.5
risk_2 = Kurtosis(a_2) * 0.5
elif rm == "SKT":
risk_1 = SemiKurtosis(a_1) * 0.5
risk_2 = SemiKurtosis(a_2) * 0.5
elif rm == "EM":
risk_1 = EvenMoment(a_1, p=p_em) * 0.5
risk_2 = EvenMoment(a_2, p=p_em) * 0.5
elif rm == "ESM":
risk_1 = EvenSemiMoment(a_1, p=p_esm) * 0.5
risk_2 = EvenSemiMoment(a_2, p=p_esm) * 0.5
RM_i = (risk_1 - risk_2) / (2 * d_i)
RM.append(RM_i)
RM = np.array(RM, ndmin=1)
return RM
[docs]
def Factors_Risk_Contribution(
w,
returns,
factors,
cov=None,
B=None,
const=False,
rm="MV",
rf=0,
alpha=0.05,
a_sim=100,
beta=None,
b_sim=None,
kappa=0.3,
kappa_g=None,
p_em=2,
p_esm=2,
solver="CLARABEL",
feature_selection="stepwise",
stepwise="Forward",
criterion="pvalue",
threshold=0.05,
n_components=0.95,
):
r"""
Calculate the risk contribution for each factor based on the selected risk measure.
Parameters
----------
w : DataFrame or Series of shape (n_assets, 1)
Portfolio weights, where n_assets is the number of assets.
returns : DataFrame or nd-array of shape (n_samples, n_features)
Features matrix, where n_samples is the number of samples and
n_features is the number of features.
factors : DataFrame or nd-array of shape (n_samples, n_factors)
Factors matrix, where n_samples is the number of samples and
n_factors is the number of factors.
cov : DataFrame of shape (n_assets, n_assets)
Covariance matrix, where n_assets is the number of assets.
B : DataFrame of shape (n_assets, n_factors), optional
Loadings matrix, where n_assets is the number assets and n_factors is
the number of risk factors. If is not specified, is estimated using
stepwise regression. The default is None.
const : bool, optional
Indicate if the loadings matrix has a constant.
The default is False.
rm : str, optional
Risk measure used in the denominator of the ratio. The default is
'MV'. Possible values are:
- 'MV': Standard Deviation.
- 'KT': Square Root Kurtosis.
- 'EM': Even Moment of order 2 * p_em.
- 'MAD': Mean Absolute Deviation.
- 'GMD': Gini Mean Difference.
- 'MSV': Semi Standard Deviation.
- 'SKT': Square Root Semi Kurtosis.
- 'ESM': Even Semi Moment of order 2 * p_esm.
- 'FLPM': First Lower Partial Moment (Omega Ratio).
- 'SLPM': Second Lower Partial Moment (Sortino Ratio).
- 'VaR': Value at Risk.
- 'CVaR': Conditional Value at Risk.
- 'TG': Tail Gini.
- 'EVaR': Entropic Value at Risk.
- 'RLVaR': Relativistic Value at Risk. I recommend only use this function with MOSEK solver.
- 'WR': Worst Realization (Minimax).
- 'RG': Range of returns.
- 'VRG' VaR range of returns.
- 'CVRG': CVaR range of returns.
- 'TGRG': Tail Gini range of returns.
- 'EVRG': EVaR range of returns.
- 'RVRG': RLVaR range of returns. I recommend only use this function with MOSEK solver.
- 'MDD': Maximum Drawdown of uncompounded cumulative returns (Calmar Ratio).
- 'ADD': Average Drawdown of uncompounded cumulative returns.
- 'DaR': Drawdown at Risk of uncompounded cumulative returns.
- 'CDaR': Conditional Drawdown at Risk of uncompounded cumulative returns.
- 'EDaR': Entropic Drawdown at Risk of uncompounded cumulative returns.
- 'RLDaR': Relativistic Drawdown at Risk of uncompounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI': Ulcer Index of uncompounded cumulative returns.
- 'MDD_Rel': Maximum Drawdown of compounded cumulative returns (Calmar Ratio).
- 'ADD_Rel': Average Drawdown of compounded cumulative returns.
- 'CDaR_Rel': Conditional Drawdown at Risk of compounded cumulative returns.
- 'EDaR_Rel': Entropic Drawdown at Risk of compounded cumulative returns.
- 'RLDaR_Rel': Relativistic Drawdown at Risk of compounded cumulative returns. I recommend only use this function with MOSEK solver.
- 'UCI_Rel': Ulcer Index of compounded cumulative returns.
rf : float, optional
Risk free rate. The default is 0.
alpha : float, optional
Significance level of VaR, CVaR, EVaR, RLVaR, DaR, CDaR, EDaR, RLDaR and Tail Gini of losses.
The default is 0.05.
a_sim : float, optional
Number of CVaRs used to approximate Tail Gini of losses. The default is 100.
beta : float, optional
Significance level of CVaR and Tail Gini of gains. If None it duplicates alpha value.
The default is None.
b_sim : float, optional
Number of CVaRs used to approximate Tail Gini of gains. If None it duplicates a_sim value.
The default is None.
kappa : float, optional
Deformation parameter of RLVaR and RLDaR for losses, must be between 0 and 1.
The default is 0.3.
kappa_g : float, optional
Deformation parameter of RLVaR and RLDaR for gains, must be between 0 and 1.
The default is None.
p_em : int, optional
Order of the Even Moment of order 2 * p_em. It must be an integer higher equal than 2. The default value is 2.
p_esm : int, optional
Order of the Even Semi Moment of order 2 * p_esm. It must be an integer higher equal than 2. The default value is 2.
solver: str, optional
Solver available for CVXPY that supports power cone programming. Used to calculate RLVaR and RLDaR.
The default value is None.
feature_selection: str 'stepwise' or 'PCR', optional
Indicate the method used to estimate the loadings matrix.
The default is 'stepwise'.
stepwise: str 'Forward' or 'Backward', optional
Indicate the method used for stepwise regression.
The default is 'Forward'.
criterion : str, optional
The default is 'pvalue'. Possible values of the criterion used to select
the best features are:
- 'pvalue': select the features based on p-values.
- 'AIC': select the features based on lowest Akaike Information Criterion.
- 'SIC': select the features based on lowest Schwarz Information Criterion.
- 'R2': select the features based on highest R Squared.
- 'R2_A': select the features based on highest Adjusted R Squared.
threshold : scalar, optional
Is the maximum p-value for each variable that will be
accepted in the model. The default is 0.05.
n_components : int, float, None or str, optional
if 1 < n_components (int), it represents the number of components that
will be keep. if 0 < n_components < 1 (float), it represents the
percentage of variance that the is explained by the components kept.
See `PCA <https://scikit-learn.org/stable/modules/generated/sklearn.decomposition.PCA.html>`_
for more details. The default is 0.95.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
value : float
Risk measure of the portfolio.
"""
w_ = np.array(w, ndmin=2)
if w_.shape[0] == 1 and w_.shape[1] > 1:
w_ = w_.T
if w_.shape[0] > 1 and w_.shape[1] > 1:
raise ValueError("weights must have n_assets x 1 size")
if returns.index.tolist() != factors.index.tolist():
raise ValueError("returns and factors must have same dates.")
RM = Risk_Margin(
w=w_,
returns=returns,
cov=cov,
rm=rm,
rf=rf,
alpha=alpha,
a_sim=a_sim,
beta=beta,
b_sim=b_sim,
kappa=kappa,
kappa_g=kappa_g,
p_em=p_em,
p_esm=p_esm,
solver=solver,
).reshape(-1, 1)
if B is None:
B = pe.loadings_matrix(
X=factors,
Y=returns,
feature_selection=feature_selection,
stepwise=stepwise,
criterion=criterion,
threshold=threshold,
n_components=n_components,
)
const = True
elif not isinstance(B, pd.DataFrame):
raise ValueError("B must be a DataFrame")
if const == True or factors.shape[1] + 1 == B.shape[1]:
B = B.iloc[:, 1:].to_numpy()
if feature_selection == "PCR":
scaler = StandardScaler()
scaler.fit(factors)
factors_std = scaler.transform(factors)
if n_components > 0 and n_components < 1:
pca = PCA(n_components=n_components)
elif n_components >= 1:
pca = PCA(n_components=int(n_components))
pca.fit(factors_std)
V_p = pca.components_.T
std = np.array(np.std(factors, axis=0, ddof=1), ndmin=2)
B = (pinv(V_p) @ (B.T * std.T)).T
B1 = pinv(B.T)
B2 = pinv(null_space(B.T).T)
B3 = pinv(B2.T)
RC_F = (B.T @ w_) * (B1.T @ RM)
RC_OF = np.array(((B2.T @ w_) * (B3.T @ RM)).sum(), ndmin=2)
RC_F = np.vstack([RC_F, RC_OF]).ravel()
return RC_F
[docs]
def BrinsonAttribution(
prices,
w,
wb,
start,
end,
asset_classes,
classes_col,
method="nearest",
):
r"""
Creates a DataFrame with the Brinson Performance Attribution per class and
aggregate based on :cite:`f-Brinson1985`.
Parameters
----------
prices : DataFrame of shape (n_samples, n_assets)
Assets prices DataFrame, where n_samples is the number of
observations and n_assets is the number of assets.
w : DataFrame or Series of shape (n_assets, 1)
A portfolio specified by the user.
wb : DataFrame or Series of shape (n_assets, 1)
A benchmark specified by the user.
start : str
Start date in format 'YYYY-MM-DD' specified by the user.
end : str
End date in format 'YYYY-MM-DD' specified by the user.
asset_classes : DataFrame of shape (n_assets, n_cols)
Asset's classes DataFrame, where n_assets is the number of assets and
n_cols is the number of columns of the DataFrame where the first column
is the asset list and the next columns are the different asset's
classes sets. It is only used when kind value is 'classes'. The default
value is None.
classes_col : str or int
If value is str, it is the column name of the set of classes from
asset_classes dataframe. If value is int, it is the column number of
the set of classes from asset_classes dataframe. The default
value is None.
method : str
Method used to calculate the nearest start or end dates in case one of
them is not in prices DataFrame. The default value is 'nearest'.
See `get_indexer <https://pandas.pydata.org/docs/reference/api/pandas.Index.get_indexer.html#pandas.Index.get_indexer>`__ for more details.
Raises
------
ValueError
When the value cannot be calculated.
Returns
-------
BrinAttr : DataFrame
A DataFrame with the Brinson Performance Attribution per class and aggregate.
(start_, end_) : tuple
Start and end dates calculated using get_indexer method in string format.
Example
-------
::
BrinAttr, (start, end) = BrinsonAttribution(
prices=data,
w=w,
wb=wb,
start='2019-01-07',
end='2019-12-06',
asset_classes=asset_classes,
classes_col='Industry',
)
.. image:: ../images/BrinAttr.png
"""
if not isinstance(prices, pd.DataFrame):
raise ValueError("prices must be a DataFrame")
if not isinstance(w, pd.DataFrame):
if isinstance(w, pd.Series):
wp_ = w.to_frame()
else:
raise ValueError("w must be a one column DataFrame or Series")
else:
if w.shape[0] == 1:
wp_ = w.T.copy()
elif w.shape[1] == 1:
wp_ = w.copy()
else:
raise ValueError("w must be a one column DataFrame or Series")
if not isinstance(wb, pd.DataFrame):
if isinstance(wb, pd.Series):
wb_ = wb.to_frame()
else:
raise ValueError("w must be a one column DataFrame or Series")
else:
if wb.shape[0] == 1:
wb_ = wb.T.copy()
elif wb.shape[1] == 1:
wb_ = wb.copy()
else:
raise ValueError("w must be a one column DataFrame or Series")
if not isinstance(asset_classes, pd.DataFrame):
raise ValueError("asset_classes must be a DataFrame")
else:
if asset_classes.shape[1] < 2:
raise ValueError("asset_classes must have at least two columns")
classes = asset_classes.columns.tolist()
if isinstance(classes_col, str) and classes_col in classes:
col = classes_col
elif isinstance(classes_col, int) and classes[classes_col] in classes:
col = classes[classes_col]
else:
raise ValueError(
"classes_col must be a valid column or column position of asset_classes"
)
prices_ = prices.copy()
prices_.index = prices_.index.tz_localize(None)
start_ = prices_.index.get_indexer([pd.Timestamp(start)], method=method)
end_ = prices_.index.get_indexer([pd.Timestamp(end)], method=method)
p1 = prices_.iloc[start_].to_numpy().reshape(-1, 1)
p2 = prices_.iloc[end_].to_numpy().reshape(-1, 1)
p3 = p2 / p1 - 1
wp_ = wp_.to_numpy().reshape(-1, 1)
wb_ = wb_.to_numpy().reshape(-1, 1)
Rp = (p3.T @ wp_).item()
Rb = (p3.T @ wb_).item()
classes = asset_classes[col].tolist()
unique_classes = list(set(classes))
unique_classes.sort()
labels = [
"Asset Allocation",
"Security Selection",
"Interaction",
"Total Excess Return",
]
BrinAttr = pd.DataFrame([], index=labels)
for i in unique_classes:
sets_i = []
for j in classes:
sets_i.append(i == j)
sets_i = np.array(sets_i, dtype=int).reshape(-1, 1)
wb_i = (sets_i.T @ wb_).item()
wp_i = (sets_i.T @ wp_).item()
Rb_i = (np.multiply(p3, sets_i).T @ wb_).item() / wb_i
Rp_i = (np.multiply(p3, sets_i).T @ wp_).item() / wp_i
AAE_i = (wp_i - wb_i) * (Rb_i - Rb)
SSE_i = wb_i * (Rp_i - Rb_i)
IE_i = (wp_i - wb_i) * (Rp_i - Rb_i)
TER_i = AAE_i + SSE_i + IE_i
BrinAttr_i = pd.DataFrame(
[AAE_i, SSE_i, IE_i, TER_i], index=labels, columns=[i]
)
BrinAttr = pd.concat([BrinAttr, BrinAttr_i], axis=1)
total = BrinAttr.sum(axis=1).to_frame()
total.columns = ["Total"]
BrinAttr = pd.concat([BrinAttr, total], axis=1)
start_ = prices_.index.tolist()[start_.item()].strftime("%Y-%m-%d")
end_ = prices_.index.tolist()[end_.item()].strftime("%Y-%m-%d")
return BrinAttr, (start_, end_)