com.opengamma.analytics.financial.timeseries.util.TimeSeriesWeightedVolatilityOperator.java Source code

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Here is the source code for com.opengamma.analytics.financial.timeseries.util.TimeSeriesWeightedVolatilityOperator.java

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/**
 * Copyright (C) 2013 - present by OpenGamma Inc. and the OpenGamma group of companies
 * 
 * Please see distribution for license.
 */
package com.opengamma.analytics.financial.timeseries.util;

import org.apache.commons.lang.Validate;

import com.opengamma.OpenGammaRuntimeException;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.timeseries.date.DateDoubleTimeSeries;
import com.opengamma.timeseries.date.localdate.ImmutableLocalDateDoubleTimeSeries;

/**
 * Calculates a weighted volatility series from a series of absolute returns.
 */
public class TimeSeriesWeightedVolatilityOperator
        extends Function1D<DateDoubleTimeSeries<?>, DateDoubleTimeSeries<?>> {

    private static final TimeSeriesPercentageChangeOperator PERCENTAGE_CHANGE = new TimeSeriesPercentageChangeOperator();

    private final double _lambda;

    public TimeSeriesWeightedVolatilityOperator(double lambda) {
        if (lambda <= 0 || lambda > 1) {
            throw new OpenGammaRuntimeException("lambda must be in the range (0, 1]");
        }
        _lambda = lambda;
    }

    @Override
    public DateDoubleTimeSeries<?> evaluate(DateDoubleTimeSeries<?> ts) {
        Validate.notNull(ts, "time series");
        Validate.isTrue(ts.size() > 1, "time series length must be > 1");
        DateDoubleTimeSeries<?> percentageChangeSeries = PERCENTAGE_CHANGE.evaluate(ts);
        int n = percentageChangeSeries.size();
        double[] weightedVariances = new double[n];
        double[] weightedVolatilities = new double[n];
        double oldestPercentageChange = percentageChangeSeries.getEarliestValueFast();
        weightedVariances[0] = oldestPercentageChange * oldestPercentageChange;
        weightedVolatilities[0] = Math.abs(oldestPercentageChange);
        for (int i = 1; i < n; i++) {
            double percentageChange = percentageChangeSeries.getValueAtIndexFast(i);
            weightedVariances[i] = ((1 - _lambda) * percentageChange * percentageChange)
                    + (_lambda * weightedVariances[i - 1]);
            weightedVolatilities[i] = Math.sqrt(weightedVariances[i]);
        }

        return ImmutableLocalDateDoubleTimeSeries.of(percentageChangeSeries.timesArrayFast(), weightedVolatilities);
    }

}