cflow_irr.cc

Financial Recipes

#include <cmath>
#include <algorithm>
#include <vector>
using namespace std;
#include "fin_recipes.h"

const double ERROR=-1e30;

double cash_flow_irr(const vector<double>& cflow_times, 
		     const vector<double>& cflow_amounts) {
    // simple minded irr function.  Will find one root (if it exists.)
    // adapted from routine in Numerical Recipes in C.
    if (cflow_times.size()!=cflow_amounts.size()) return ERROR;
    const double ACCURACY = 1.0e-5;
    const int MAX_ITERATIONS = 50;
    double x1=0.0;
    double x2 = 0.2;
    
    // create an initial bracket, with a root somewhere between bot,top
    double f1 = cash_flow_pv(cflow_times, cflow_amounts,  x1);
    double f2 = cash_flow_pv(cflow_times, cflow_amounts,  x2);
    int i;
    for (i=0;i<MAX_ITERATIONS;i++) {
	if ( (f1*f2) < 0.0) { break; }; // 
	if (fabs(f1)<fabs(f2)) { 
	    f1 = cash_flow_pv(cflow_times,cflow_amounts,  x1+=1.6*(x1-x2)); 
	}
	else {
	    f2 = cash_flow_pv(cflow_times,cflow_amounts,  x2+=1.6*(x2-x1)); 
	};
    };
    if (f2*f1>0.0) { return ERROR; };
    double f = cash_flow_pv(cflow_times,cflow_amounts, x1);
    double rtb;
    double dx=0;
    if (f<0.0) { 
	rtb = x1; 
	dx=x2-x1; 
    }
    else {
	rtb = x2;
	dx = x1-x2;     
    };
    for (i=0;i<MAX_ITERATIONS;i++){
	dx *= 0.5;
	double x_mid = rtb+dx;
	double f_mid = cash_flow_pv(cflow_times,cflow_amounts, x_mid);
	if (f_mid<=0.0) { rtb = x_mid; }
	if ( (fabs(f_mid)<ACCURACY) || (fabs(dx)<ACCURACY) ) return x_mid;
    }; 
    return ERROR;   // error.
};