Bisection_XIRR.java

import java.util.Date;

public class XirrEngineBiSection {

    // variables settings
    private final double DAY_IN_YEAR = 365.0; // XIRR use default 365 in a year. No leap year consideration
    private final double DEFAULT_XIRR = -99999;
    private final int MAX_XIRR_TRY = 1000;

    // main function
    public double calculateBiSectionXirr(double[] cashFlow, Date[] cashFlowDate) {
        double tolerance = Math.pow(10, -8);
        double xirrDiscountRate01 = -1 + tolerance;
        double xirrDiscountRate02 = -1 + 2 * tolerance;
//        System.out.println(xirrDiscountRate02);

        int i = 1;
        double XIRR = DEFAULT_XIRR;
        double xirrCalculationPoint01 = 0;
        double xirrCalculationPoint02 = 0;
        double nextGuess = 0;

        try {
            // default checking to ensure, default negative XIRR so that, can start calculation
            if (xirrDiscountRate01 <= -1) {
                return DEFAULT_XIRR;
            }
//            System.out.println(xirrDiscountRate01);
            xirrCalculationPoint01 = calculateCurrentPointNpv(cashFlow, cashFlowDate, xirrDiscountRate01);

            // control looping, the attempt to calculate.
            while (i < MAX_XIRR_TRY) {
                System.out.println("try " + i);
                if (xirrDiscountRate02 <= -1) {
                    return DEFAULT_XIRR;
                }
//                System.out.println(xirrCalculationPoint02);

                xirrCalculationPoint02 = calculateCurrentPointNpv(cashFlow, cashFlowDate, xirrDiscountRate02);
//                System.out.println(xirrDiscountRate01);
//                System.out.println(xirrDiscountRate02);
//                System.out.println(xirrCalculationPoint01);
//                System.out.println(xirrCalculationPoint02);


                // check if the slope touch the interection. If touched, the slope will be the XIRR
                if (Math.abs(xirrCalculationPoint02) > tolerance) {


                    // check if the calculation is moving forward
                    // if calculation using slope is not moving, this calculation will forever stuck here, return default
                    if (xirrCalculationPoint02 == xirrCalculationPoint01 || xirrDiscountRate02 == xirrDiscountRate01) {
                        return DEFAULT_XIRR;
                    }

                    // get the next guess. This is by calculating the slope.
                    nextGuess = nextGuessRate(xirrDiscountRate01, xirrCalculationPoint01, xirrDiscountRate02, xirrCalculationPoint02);
                    xirrDiscountRate01 = xirrDiscountRate02;
                    xirrDiscountRate02 = nextGuess;
                    xirrCalculationPoint01 = xirrCalculationPoint02;
                } else {
                    if (new Double(xirrDiscountRate02).isInfinite() && xirrDiscountRate02 > 0) {
                        return DEFAULT_XIRR;
                    } else {
                        XIRR = xirrDiscountRate02;

                        // deannualise if the effective cashflow (exclude the 0 start) is > 365 days
                        double xirrPeriod = dateDiffFromCashFlowStartToEndDate(cashFlow, cashFlowDate);
                        if (xirrPeriod < DAY_IN_YEAR) {
                            XIRR = deAnnualiseXirr(XIRR, xirrPeriod);
                        }
                        XIRR = XIRR * 100;
                    }
                    break;
                }
                i++;
            }
        } catch (Exception e) {
            return DEFAULT_XIRR;
        }
        return XIRR;
    }

    private double deAnnualiseXirr(double xirr, double xirrPeriod) {
        return Math.pow((1 + xirr), (xirrPeriod / DAY_IN_YEAR)) - 1;
    }

    private double nextGuessRate(double x1, double y1, double x2, double y2) {
        double calculationSlope = (y2 - y1) / (x2 - x1);
        System.out.println(x1);
        System.out.println(x2);
        System.out.println(y1);
        System.out.println(y2);
        System.out.println(calculationSlope);
        return ((x1 * calculationSlope - y1) / calculationSlope);
    }

    private double dateDiff(Date dateEnd, Date dateStart) {
        return ((dateEnd.getTime() - dateStart.getTime()) / (24 * 60 * 60 * 1000)); // use time to calculate for accuracy.
    }

    private double calculateCurrentPointNpv(double[] cashFlow, Date[] cashFlowDate, double rate) {
        double residual = 0;
        double dtDiff = 0;

        double currentResidual = 0;

        try {
            for (int i = 0; i < cashFlow.length; i++) {
                dtDiff = dateDiff(cashFlowDate[i], cashFlowDate[0]);
                currentResidual = cashFlow[i] / Math.pow((1 + rate), (dtDiff / 365));
                residual += currentResidual;
            }
        } catch (Exception e) {
            residual = -1;
        }
        return residual;
    }

    private double dateDiffFromCashFlowStartToEndDate(double[] cashFlow, Date[] cashFlowDate) {
        int cashflowIndex = 0;
        double cashflowStart = cashFlow[cashflowIndex];
        double dateDifference = 0;

        while (cashflowStart == 0 && cashflowIndex < MAX_XIRR_TRY) {
            cashflowIndex++;
            if (cashflowIndex >= cashFlow.length) {
                break;
            }
            cashflowStart = cashFlow[cashflowIndex];
        }

        if (cashflowStart != 0) {
            Date dateStart = cashFlowDate[cashflowIndex];
            Date dateEnd = cashFlowDate[(cashFlowDate.length - 1)];
            dateDifference = ((dateEnd.getTime() - dateStart.getTime()) / (24 * 60 * 60 * 1000));
        }
        return dateDifference;
    }
}