org.drip.dynamics.lmm

Class LognormalLIBORCurveEvolver

java.lang.Object

org.drip.dynamics.lmm.LognormalLIBORCurveEvolver

All Implemented Interfaces:

CurveStateEvolver

public class LognormalLIBORCurveEvolver
extends java.lang.Object
implements CurveStateEvolver

LognormalLIBORCurveEvolver sets up and implements the Multi-Factor No-arbitrage Dynamics of the full Curve Rates State Quantifiers traced from the Evolution of the LIBOR Forward Rate as formulated in: 1) Goldys, B., M. Musiela, and D. Sondermann (1994): Log-normality of Rates and Term Structure Models, The University of New South Wales. 2) Musiela, M. (1994): Nominal Annual Rates and Log-normal Volatility Structure, The University of New South Wales. 3) Brace, A., D. Gatarek, and M. Musiela (1997): The Market Model of Interest Rate Dynamics, Mathematical Finance 7 (2), 127-155.

Author:

Lakshmi Krishnamurthy

Constructor Summary

Constructors

Constructor and Description

LognormalLIBORCurveEvolver(FundingLabel lslFunding, ForwardLabel lslForward, int iNumForwardTenor, SegmentCustomBuilderControl scbcLIBOR, SegmentCustomBuilderControl scbcDiscountFactor, SegmentCustomBuilderControl scbcLIBORIncrement, SegmentCustomBuilderControl scbcDiscountFactorIncrement, SegmentCustomBuilderControl scbcContinuousForwardIncrement, SegmentCustomBuilderControl scbcSpotRateIncrement, SegmentCustomBuilderControl scbcInstantaneousEffectiveForward, SegmentCustomBuilderControl scbcInstantaneousNominalForward) LognormalLIBORCurveEvolver Constructor

Method Summary

Modifier and Type	Method and Description
static LognormalLIBORCurveEvolver	Create(FundingLabel lslFunding, ForwardLabel lslForward, int iNumForwardTenor, SegmentCustomBuilderControl scbc) Create a LognormalLIBORCurveEvolver Instance
BGMCurveUpdate	evolve(int iSpotDate, int iViewDate, int iSpotTimeIncrement, LSQMCurveUpdate lsqmPrev) Evolve the Latent State and return the LSQM Curve Update
ForwardLabel	forwardLabel() Retrieve the Forward Label
FundingLabel	fundingLabel() Retrieve the Funding Label
SegmentCustomBuilderControl	scbcContinuousForwardIncrement() Retrieve the Instantaneous Continuously Compounded Forward Rate Increment Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcDiscountFactor() Retrieve the Discount Factor Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcDiscountFactorIncrement() Retrieve the Discount Factor Increment Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcInstantaneousEffectiveForward() Retrieve the Instantaneous Effective Annual Forward Rate Increment Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcInstantaneousNominalForward() Retrieve the Instantaneous Nominal Annual Forward Rate Increment Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcLIBOR() Retrieve the LIBOR Curve Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcLIBORIncrement() Retrieve the LIBOR Increment Segment Custom Builder Control Instance
SegmentCustomBuilderControl	scbcSpotRateIncrement() Retrieve the Spot Rate Increment Segment Custom Builder Control Instance
double[][]	simulatePrincipalMetric(int iEvolutionStartDate, int iEvolutionFinishDate, int iEvolutionIncrement, int iViewDate, LSQMCurveUpdate lsqmStart, int iNumSimulation) Simulate the Principal Metric from the Start to the End Date
ForwardCurve[]	simulateTerminalLatentState(int iEvolutionStartDate, int iEvolutionFinishDate, int iEvolutionIncrement, int iViewDate, LSQMCurveUpdate lsqmStart, int iNumSimulation) Construct an Array of Forward Curves that Result from the Simulation
int	spanTenor() Retrieve the Number of Forward Tenors comprising the Span Tenor

Methods inherited from class java.lang.Object

equals, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

LognormalLIBORCurveEvolver

public LognormalLIBORCurveEvolver(FundingLabel lslFunding,
                                  ForwardLabel lslForward,
                                  int iNumForwardTenor,
                                  SegmentCustomBuilderControl scbcLIBOR,
                                  SegmentCustomBuilderControl scbcDiscountFactor,
                                  SegmentCustomBuilderControl scbcLIBORIncrement,
                                  SegmentCustomBuilderControl scbcDiscountFactorIncrement,
                                  SegmentCustomBuilderControl scbcContinuousForwardIncrement,
                                  SegmentCustomBuilderControl scbcSpotRateIncrement,
                                  SegmentCustomBuilderControl scbcInstantaneousEffectiveForward,
                                  SegmentCustomBuilderControl scbcInstantaneousNominalForward)
                           throws java.lang.Exception

LognormalLIBORCurveEvolver Constructor

Parameters:

lslFunding - The Funding Latent State Label

lslForward - The Forward Latent State Label

iNumForwardTenor - Number of Forward Tenors to Build the Span

scbcLIBOR - LIBOR Span Segment Custom Builder Control Instance

scbcDiscountFactor - Discount Factor Span Segment Custom Builder Control Instance

scbcLIBORIncrement - LIBOR Increment Span Segment Custom Builder Control Instance

scbcDiscountFactorIncrement - Discount Factor Increment Span Segment Custom Builder Control Instance

scbcContinuousForwardIncrement - Instantaneous Continuously Compounded Forward Rate Increment Span Segment Custom Builder Control Instance

scbcSpotRateIncrement - Spot Rate Increment Span Segment Custom Builder Control Instance

scbcInstantaneousEffectiveForward - Instantaneous Effective Annual Forward Rate Span Segment Custom Builder Control Instance

scbcInstantaneousNominalForward - Instantaneous Nominal Annual Forward Rate Span Segment Custom Builder Control Instance

Throws:

java.lang.Exception - Thrown if Inputs are Invalid

Method Detail

Create

public static final LognormalLIBORCurveEvolver Create(FundingLabel lslFunding,
                                                      ForwardLabel lslForward,
                                                      int iNumForwardTenor,
                                                      SegmentCustomBuilderControl scbc)

Create a LognormalLIBORCurveEvolver Instance

Parameters:

lslFunding - The Funding Latent State Label

lslForward - The Forward Latent State Label

iNumForwardTenor - Number of Forward Tenors to Build the Span

scbc - The Common Span Segment Custom Builder Control Instance

Returns:

The LognormalLIBORCurveEvolver Instance

fundingLabel

public FundingLabel fundingLabel()

Retrieve the Funding Label

Returns:

The Funding Label

forwardLabel

public ForwardLabel forwardLabel()

Retrieve the Forward Label

Returns:

The Forward Label

spanTenor

public int spanTenor()

Retrieve the Number of Forward Tenors comprising the Span Tenor

Returns:

Number of Forward Tenors comprising the Span Tenor

scbcLIBOR

public SegmentCustomBuilderControl scbcLIBOR()

Retrieve the LIBOR Curve Segment Custom Builder Control Instance

Returns:

The LIBOR Curve Segment Custom Builder Control Instance

scbcDiscountFactor

public SegmentCustomBuilderControl scbcDiscountFactor()

Retrieve the Discount Factor Segment Custom Builder Control Instance

Returns:

The Discount Factor Segment Custom Builder Control Instance

scbcLIBORIncrement

public SegmentCustomBuilderControl scbcLIBORIncrement()

Retrieve the LIBOR Increment Segment Custom Builder Control Instance

Returns:

The LIBOR Increment Segment Custom Builder Control Instance

scbcDiscountFactorIncrement

public SegmentCustomBuilderControl scbcDiscountFactorIncrement()

Retrieve the Discount Factor Increment Segment Custom Builder Control Instance

Returns:

The Discount Factor Increment Segment Custom Builder Control Instance

scbcContinuousForwardIncrement

public SegmentCustomBuilderControl scbcContinuousForwardIncrement()

Retrieve the Instantaneous Continuously Compounded Forward Rate Increment Segment Custom Builder Control Instance

Returns:

The Instantaneous Continuously Compounded Forward Rate Increment Segment Custom Builder Control Instance

scbcSpotRateIncrement

public SegmentCustomBuilderControl scbcSpotRateIncrement()

Retrieve the Spot Rate Increment Segment Custom Builder Control Instance

Returns:

The Spot Rate Increment Segment Custom Builder Control Instance

scbcInstantaneousEffectiveForward

public SegmentCustomBuilderControl scbcInstantaneousEffectiveForward()

Retrieve the Instantaneous Effective Annual Forward Rate Increment Segment Custom Builder Control Instance

Returns:

The Instantaneous Effective Annual Forward Rate Increment Segment Custom Builder Control Instance

scbcInstantaneousNominalForward

public SegmentCustomBuilderControl scbcInstantaneousNominalForward()

Retrieve the Instantaneous Nominal Annual Forward Rate Increment Segment Custom Builder Control Instance

Returns:

The Instantaneous Nominal Annual Forward Rate Increment Segment Custom Builder Control Instance

evolve

public BGMCurveUpdate evolve(int iSpotDate,
                             int iViewDate,
                             int iSpotTimeIncrement,
                             LSQMCurveUpdate lsqmPrev)

Description copied from interface: CurveStateEvolver

Evolve the Latent State and return the LSQM Curve Update

Specified by:

evolve in interface CurveStateEvolver

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iSpotTimeIncrement - The Spot Evolution Increment

lsqmPrev - The Previous LSQM Curve Update

Returns:

The LSQM Curve Update

simulatePrincipalMetric

public double[][] simulatePrincipalMetric(int iEvolutionStartDate,
                                          int iEvolutionFinishDate,
                                          int iEvolutionIncrement,
                                          int iViewDate,
                                          LSQMCurveUpdate lsqmStart,
                                          int iNumSimulation)

Description copied from interface: CurveStateEvolver

Simulate the Principal Metric from the Start to the End Date

Specified by:

simulatePrincipalMetric in interface CurveStateEvolver

Parameters:

iEvolutionStartDate - The Evolution Start Date

iEvolutionFinishDate - The Evolution Finish Date

iEvolutionIncrement - The Evolution Increment

iViewDate - The View Date

lsqmStart - The Starting State Metrics

iNumSimulation - Number of Simulations

Returns:

The Array of the Evolved Tenor LIBOR's

simulateTerminalLatentState

public ForwardCurve[] simulateTerminalLatentState(int iEvolutionStartDate,
                                                  int iEvolutionFinishDate,
                                                  int iEvolutionIncrement,
                                                  int iViewDate,
                                                  LSQMCurveUpdate lsqmStart,
                                                  int iNumSimulation)

Construct an Array of Forward Curves that Result from the Simulation

Parameters:

iEvolutionStartDate - The Start Date of the Simulation

iEvolutionFinishDate - The Finish Date of the Simulation

iEvolutionIncrement - The Simulation Evolution Increment

iViewDate - The Forward View Date

lsqmStart - The Initial/Starting LSQM State

iNumSimulation - Number of Simulations

Returns:

The Array of Forward Curves that Result from the Simulation