rustytorch/demos/rtx-riskflow-demo/src/attribution.rs

//! Risk attribution to factors.
//!
//! Decomposes portfolio risk into factor contributions.

use crate::RiskFlowError;
use riskflow_shared::{FactorExposures, FactorRiskContribution, Portfolio, RiskAttribution};

/// Factor covariance matrix (simplified - diagonal).
#[derive(Debug, Clone)]
pub struct FactorCovariance {
    /// Market factor variance.
    pub market: f64,
    /// Size factor variance.
    pub size: f64,
    /// Value factor variance.
    pub value: f64,
    /// Momentum factor variance.
    pub momentum: f64,
    /// Low volatility factor variance.
    pub low_volatility: f64,
    /// Quality factor variance.
    pub quality: f64,
}

impl Default for FactorCovariance {
    fn default() -> Self {
        // Annualized factor volatilities squared
        Self {
            market: 0.16_f64.powi(2),         // ~16% market vol
            size: 0.08_f64.powi(2),           // ~8% SMB vol
            value: 0.07_f64.powi(2),          // ~7% HML vol
            momentum: 0.12_f64.powi(2),       // ~12% momentum vol
            low_volatility: 0.06_f64.powi(2), // ~6% low vol factor vol
            quality: 0.05_f64.powi(2),        // ~5% quality vol
        }
    }
}

/// Risk attributor.
#[derive(Debug)]
pub struct RiskAttributor {
    /// Factor covariance.
    factor_covariance: FactorCovariance,
    /// Specific risk per asset (simplified).
    specific_risk_base: f64,
}

impl Default for RiskAttributor {
    fn default() -> Self {
        Self::new()
    }
}

impl RiskAttributor {
    /// Create a new risk attributor.
    #[must_use]
    pub fn new() -> Self {
        Self {
            factor_covariance: FactorCovariance::default(),
            specific_risk_base: 0.25, // 25% idiosyncratic vol per stock
        }
    }

    /// Attribute risk to factors.
    pub fn attribute(
        &self,
        portfolio: &Portfolio,
        exposures: &FactorExposures,
    ) -> Result<RiskAttribution, RiskFlowError> {
        if portfolio.positions.is_empty() {
            return Err(RiskFlowError::EmptyPortfolio);
        }

        // Calculate factor risk contributions
        let factor_contributions = self.calculate_factor_contributions(exposures);

        // Calculate specific risk
        let specific_risk = self.calculate_specific_risk(portfolio);

        // Total factor risk
        let factor_risk = factor_contributions.total();

        // Interaction effects (simplified - cross-factor correlations)
        let interaction_risk = self.calculate_interaction_risk(exposures);

        // Total risk
        let total_risk =
            (factor_risk.powi(2) + specific_risk.powi(2) + interaction_risk.powi(2)).sqrt();

        Ok(RiskAttribution {
            total_risk: total_risk * 100.0, // Convert to %
            factor_contributions,
            specific_risk: specific_risk * 100.0,
            interaction_risk: interaction_risk * 100.0,
        })
    }

    /// Calculate factor risk contributions.
    fn calculate_factor_contributions(
        &self,
        exposures: &FactorExposures,
    ) -> FactorRiskContribution {
        // Risk contribution = exposure² × factor_variance (simplified diagonal model)
        let fc = &self.factor_covariance;

        FactorRiskContribution {
            market: (exposures.market.powi(2) * fc.market).sqrt(),
            size: (exposures.size.powi(2) * fc.size).sqrt(),
            value: (exposures.value.powi(2) * fc.value).sqrt(),
            momentum: (exposures.momentum.powi(2) * fc.momentum).sqrt(),
            low_volatility: (exposures.low_volatility.powi(2) * fc.low_volatility).sqrt(),
            quality: (exposures.quality.powi(2) * fc.quality).sqrt(),
        }
    }

    /// Calculate specific (idiosyncratic) risk.
    fn calculate_specific_risk(&self, portfolio: &Portfolio) -> f64 {
        let n = portfolio.positions.len() as f64;

        // Diversification reduces specific risk
        // Assume equal-weighted for simplicity
        let _weight = 1.0 / n;

        // Specific risk = sqrt(sum of (weight² × asset_specific_var))
        // With equal weights: specific_vol / sqrt(n)
        self.specific_risk_base / n.sqrt()
    }

    /// Calculate interaction risk (cross-factor correlations).
    fn calculate_interaction_risk(&self, exposures: &FactorExposures) -> f64 {
        // Simplified: assume some positive correlations between factors
        let market_size_corr = 0.2;
        let value_size_corr = 0.3;

        // Cross terms
        let interaction = exposures.market * exposures.size * market_size_corr
            + exposures.value * exposures.size * value_size_corr;

        interaction.abs() * 0.02 // Scale down
    }
}

#[cfg(test)]
mod tests {
    use super::*;
    use riskflow_shared::get_sample_portfolio;

    #[test]
    fn test_attributor_creation() {
        let attributor = RiskAttributor::new();
        assert!(attributor.specific_risk_base > 0.0);
    }

    #[test]
    fn test_factor_contributions() {
        let attributor = RiskAttributor::new();
        let exposures = FactorExposures {
            market: 1.1,
            size: 0.1,
            value: -0.05,
            momentum: 0.15,
            low_volatility: 0.0,
            quality: 0.08,
        };

        let contributions = attributor.calculate_factor_contributions(&exposures);

        // Market should have largest contribution (highest exposure × vol)
        assert!(contributions.market > contributions.size);
        assert!(contributions.market > contributions.value);
    }

    #[test]
    fn test_attribute() {
        let attributor = RiskAttributor::new();
        let portfolio = get_sample_portfolio();
        let exposures = FactorExposures {
            market: 1.0,
            size: 0.1,
            value: 0.05,
            momentum: 0.1,
            low_volatility: 0.0,
            quality: 0.05,
        };

        let result = attributor.attribute(&portfolio, &exposures);
        assert!(result.is_ok());

        let attribution = result.unwrap();
        assert!(attribution.total_risk > 0.0);
        assert!(attribution.factor_contributions.market > 0.0);
    }

    #[test]
    fn test_specific_risk_diversification() {
        let attributor = RiskAttributor::new();

        // More positions should reduce specific risk
        let mut small_portfolio = get_sample_portfolio();
        small_portfolio.positions = small_portfolio.positions[..2].to_vec();

        let mut large_portfolio = get_sample_portfolio();

        let small_specific = attributor.calculate_specific_risk(&small_portfolio);
        let large_specific = attributor.calculate_specific_risk(&large_portfolio);

        assert!(large_specific < small_specific);
    }
}