Package org.drip.dynamics.hjm

Class MultiFactorStateEvolver

java.lang.Object

org.drip.dynamics.hjm.MultiFactorStateEvolver

All Implemented Interfaces:

PointStateEvolver

public class MultiFactorStateEvolver
extends java.lang.Object
implements PointStateEvolver

MultiFactorStateEvolver sets up and implements the Base Multi-Factor No-arbitrage Dynamics of the Rates State Quantifiers as formulated in:

• Heath, D., R. Jarrow, and A. Morton (1992): Bond Pricing and Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation Econometrica 60 (1) 77-105

In particular it looks to evolve the Multi-factor Instantaneous Forward Rates.

• Module = Product Core Module
• Library = Fixed Income Analytics
• Project = HJM, Hull White, LMM, and SABR Dynamic Evolution Models
• Package = HJM Based Latent State Evolution

Author:

Lakshmi Krishnamurthy

Constructor Summary

Constructors

Constructor	Description
MultiFactorStateEvolver(FundingLabel lslFunding, ForwardLabel lslForward, MultiFactorVolatility mfv, R1ToR1 auInitialInstantaneousForwardRate)	MultiFactorStateEvolver Constructor

Method Summary

Modifier and Type	Method	Description
double	compoundedShortRateIncrement(int iSpotDate, int iViewDate, int iTargetDate, double dblCompoundedShortRate, double dblShortRate, int iViewTimeIncrement)	Compute the Continuously Compounded Short Rate Increment given the Spot Date, the View Date, the Target Date, the Continuously Compounded Short Rate, the Current Short Rate, and the View Time Increment.
LSQMPointUpdate	evolve(int iSpotDate, int iViewDate, int iSpotTimeIncrement, LSQMPointUpdate lsqmPrev)	Evolve the Latent State and return the LSQM Point Update
ForwardLabel	forwardLabel()	Retrieve the Forward Label
FundingLabel	fundingLabel()	Retrieve the Funding Label
R1ToR1	instantaneousForwardInitialTermStructure()	Retrieve the Initial Instantaneous Forward Rate Term Structure
double	instantaneousForwardRateIncrement(int iViewDate, int iTargetDate, int iViewTimeIncrement)	Compute the Instantaneous Forward Rate Increment given the View Date, the Target Date, and the View Time Increment
double	liborForwardRateIncrement(int iSpotDate, int iViewDate, int iTargetDate, double dblLIBORForwardRate, int iViewTimeIncrement)	Compute the LIBOR Forward Rate Increment given the Spot Date, the View Date, the Target Date, the Current LIBOR Forward Rate, and the View Time Increment
MultiFactorVolatility	mfv()	Retrieve the Multi-factor Volatility Instance
double	proportionalPriceIncrement(int iViewDate, int iTargetDate, double dblShortRate, int iViewTimeIncrement)	Compute the Proportional Price Increment given the View Date, the Target Date, the Short Rate, and the View Time Increment
double	shiftedLIBORForwardIncrement(int iSpotDate, int iViewDate, int iTargetDate, double dblShiftedLIBORForwardRate, int iViewTimeIncrement)	Compute the Shifted LIBOR Forward Rate Increment given the Spot Date, the View Date, the Target Date, the Current Shifted LIBOR Forward Rate, and the View Time Increment
double	shortRateIncrement(int iSpotDate, int iViewDate, int iViewTimeIncrement)	Compute the Short Rate Increment given the Spot Date, the View Date, and the View Time Increment

Methods inherited from class java.lang.Object

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

Constructor Details

MultiFactorStateEvolver

public MultiFactorStateEvolver(FundingLabel lslFunding,
ForwardLabel lslForward,
MultiFactorVolatility mfv,
R1ToR1 auInitialInstantaneousForwardRate)
                        throws java.lang.Exception

MultiFactorStateEvolver Constructor

Parameters:

lslFunding - The Funding Latent State Label

lslForward - The Forward Latent State Label

mfv - The Multi-Factor Volatility Instance

auInitialInstantaneousForwardRate - The Initial Instantaneous Forward Rate Term Structure

Throws:

java.lang.Exception - Thrown if Inputs are Invalid

Method Details

fundingLabel

public FundingLabel fundingLabel()

Retrieve the Funding Label

Returns:

The Funding Label

forwardLabel

public ForwardLabel forwardLabel()

Retrieve the Forward Label

Returns:

The Forward Label

mfv

public MultiFactorVolatility mfv()

Retrieve the Multi-factor Volatility Instance

Returns:

The Multi-factor Volatility Instance

instantaneousForwardInitialTermStructure

public R1ToR1 instantaneousForwardInitialTermStructure()

Retrieve the Initial Instantaneous Forward Rate Term Structure

Returns:

The Initial Instantaneous Forward Rate Term Structure

instantaneousForwardRateIncrement

public double instantaneousForwardRateIncrement(int iViewDate,
int iTargetDate,
int iViewTimeIncrement)
                                         throws java.lang.Exception

Compute the Instantaneous Forward Rate Increment given the View Date, the Target Date, and the View Time Increment

Parameters:

iViewDate - The View Date

iTargetDate - The Target Date

iViewTimeIncrement - The View Time Increment

Returns:

The Instantaneous Forward Rate Increment

Throws:

java.lang.Exception - Thrown if the Instantaneous Forward Rate Increment cannot be computed

proportionalPriceIncrement

public double proportionalPriceIncrement(int iViewDate,
int iTargetDate,
double dblShortRate,
int iViewTimeIncrement)
                                  throws java.lang.Exception

Compute the Proportional Price Increment given the View Date, the Target Date, the Short Rate, and the View Time Increment

Parameters:

iViewDate - The View Date

iTargetDate - The Target Date

dblShortRate - The Short Rate

iViewTimeIncrement - The View Time Increment

Returns:

The Proportional Price Increment

Throws:

java.lang.Exception - Thrown if the Proportional Price Increment cannot be computed

shortRateIncrement

public double shortRateIncrement(int iSpotDate,
int iViewDate,
int iViewTimeIncrement)
                          throws java.lang.Exception

Compute the Short Rate Increment given the Spot Date, the View Date, and the View Time Increment

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iViewTimeIncrement - The View Time Increment

Returns:

The Short Rate Increment

Throws:

java.lang.Exception - Thrown if the Short Rate Increment cannot be computed

compoundedShortRateIncrement

public double compoundedShortRateIncrement(int iSpotDate,
int iViewDate,
int iTargetDate,
double dblCompoundedShortRate,
double dblShortRate,
int iViewTimeIncrement)
                                    throws java.lang.Exception

Compute the Continuously Compounded Short Rate Increment given the Spot Date, the View Date, the Target Date, the Continuously Compounded Short Rate, the Current Short Rate, and the View Time Increment.

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iTargetDate - The Target Date

dblCompoundedShortRate - The Compounded Short Rate

dblShortRate - The Short Rate

iViewTimeIncrement - The View Time Increment

Returns:

The Short Rate Increment

Throws:

java.lang.Exception - Thrown if the Continuously Compounded Short Rate Increment cannot be computed

liborForwardRateIncrement

public double liborForwardRateIncrement(int iSpotDate,
int iViewDate,
int iTargetDate,
double dblLIBORForwardRate,
int iViewTimeIncrement)
                                 throws java.lang.Exception

Compute the LIBOR Forward Rate Increment given the Spot Date, the View Date, the Target Date, the Current LIBOR Forward Rate, and the View Time Increment

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iTargetDate - The Target Date

dblLIBORForwardRate - The LIBOR Forward Rate

iViewTimeIncrement - The View Time Increment

Returns:

The Forward Rate Increment

Throws:

java.lang.Exception - Thrown if the LIBOR Forward Rate Increment cannot be computed

shiftedLIBORForwardIncrement

public double shiftedLIBORForwardIncrement(int iSpotDate,
int iViewDate,
int iTargetDate,
double dblShiftedLIBORForwardRate,
int iViewTimeIncrement)
                                    throws java.lang.Exception

Compute the Shifted LIBOR Forward Rate Increment given the Spot Date, the View Date, the Target Date, the Current Shifted LIBOR Forward Rate, and the View Time Increment

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iTargetDate - The Target Date

dblShiftedLIBORForwardRate - The Shifted LIBOR Forward Rate

iViewTimeIncrement - The View Time Increment

Returns:

The Shifted Forward Rate Increment

Throws:

java.lang.Exception - Thrown if the Shifted LIBOR Forward Rate Increment cannot be computed

evolve

public LSQMPointUpdate evolve(int iSpotDate,
int iViewDate,
int iSpotTimeIncrement,
LSQMPointUpdate lsqmPrev)

Description copied from interface: PointStateEvolver

Evolve the Latent State and return the LSQM Point Update

Specified by:

evolve in interface PointStateEvolver

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iSpotTimeIncrement - The Spot Time Increment

lsqmPrev - The Previous LSQM Point Update

Returns:

The LSQM Point Update