Package org.drip.exposure.csadynamics

Class FundingBasisEvolver

java.lang.Object

org.drip.exposure.csadynamics.FundingBasisEvolver

public class FundingBasisEvolver
extends java.lang.Object

FundingBasisEvolver implements a Two Factor Stochastic Funding Model Evolver with a Log Normal Forward Process and a Mean Reverting Diffusion Process for the Funding Spread. The References are:

• Antonov, A., and M. Arneguy (2009): Analytical Formulas for Pricing CMS Products in the LIBOR Market Model with Stochastic Volatility https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=1352606 eSSRN
• Burgard, C., and M. Kjaer (2009): Modeling and successful Management of Credit Counter-party Risk of Derivative Portfolios ICBI Conference Rome
• Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk Risk 20 (2) 86-90
• Johannes, M., and S. Sundaresan (2007): Pricing Collateralized Swaps Journal of Finance 62 383-410
• Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing Risk 21 (2) 97-102

• Module = Portfolio Core Module
• Library = Exposure Analytics
• Project = Exposure Group Level Collateralized/Uncollateralized Exposure
• Package = CSA Numeraire Basis/Measure Dynamics

Author:

Lakshmi Krishnamurthy

Constructor Summary

Constructors

Constructor	Description
FundingBasisEvolver(DiffusionEvaluatorLogarithmic underlyingEvolver, DiffusionEvaluatorMeanReversion fundingSpreadEvolver, double correlation)	FundingBasisEvolver Constructor

Method Summary

Modifier and Type	Method	Description
DiffusionEvolver	csaForwardProcess()	Generate the CSA Forward Diffusion Process
double	CSANoCSARatio(java.lang.String tenor)	Compute the CSA vs.
DiffusionEvolver	fundingNumeraireProcess(java.lang.String tenor)	Generate the Funding Numeraire Diffusion Process
DiffusionEvaluatorMeanReversion	fundingSpreadEvolver()	Retrieve the Funding Spread Diffusion Evolver
DiffusionEvolver	fundingSpreadNumeraireProcess(java.lang.String tenor)	Generate the Funding Spread Numeraire Diffusion Process
DiffusionEvaluatorLogarithmic	underlyingEvolver()	Retrieve the Underlying Diffusion Evolver
double	underlyingFundingSpreadCorrelation()	Retrieve the Correlation between the Underlying and the Funding Spread Processes

Methods inherited from class java.lang.Object

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

Constructor Details

FundingBasisEvolver

public FundingBasisEvolver(DiffusionEvaluatorLogarithmic underlyingEvolver,
DiffusionEvaluatorMeanReversion fundingSpreadEvolver,
double correlation)
                    throws java.lang.Exception

FundingBasisEvolver Constructor

Parameters:

underlyingEvolver - The Underlying Diffusion Evolver

fundingSpreadEvolver - The Funding Spread Diffusion Evolver

correlation - Correlation between the Underlying and the Funding Spread Processes

Throws:

java.lang.Exception - Thrown if the Inputs are Invalid

Method Details

underlyingEvolver

public DiffusionEvaluatorLogarithmic underlyingEvolver()

Retrieve the Underlying Diffusion Evolver

Returns:

The Underlying Diffusion Evolver

fundingSpreadEvolver

public DiffusionEvaluatorMeanReversion fundingSpreadEvolver()

Retrieve the Funding Spread Diffusion Evolver

Returns:

The Funding Spread Diffusion Evolver

underlyingFundingSpreadCorrelation

public double underlyingFundingSpreadCorrelation()

Retrieve the Correlation between the Underlying and the Funding Spread Processes

Returns:

The Correlation between the Underlying and the Funding Spread Processes

csaForwardProcess

public DiffusionEvolver csaForwardProcess()

Generate the CSA Forward Diffusion Process

Returns:

The CSA Forward Diffusion Process

fundingNumeraireProcess

public DiffusionEvolver fundingNumeraireProcess(java.lang.String tenor)

Generate the Funding Numeraire Diffusion Process

Parameters:

tenor - The Tenor of the Underlying Forward

Returns:

The Funding Numeraire Diffusion Process

fundingSpreadNumeraireProcess

public DiffusionEvolver fundingSpreadNumeraireProcess(java.lang.String tenor)

Generate the Funding Spread Numeraire Diffusion Process

Parameters:

tenor - The Tenor of the Underlying Forward

Returns:

The Funding Spread Numeraire Diffusion Process

CSANoCSARatio

public double CSANoCSARatio(java.lang.String tenor)
                     throws java.lang.Exception

Compute the CSA vs. No CSA Forward Ratio

Parameters:

tenor - The Tenor of the Underlying Forward

Returns:

The CSA vs. No CSA Forward Ratio

Throws:

java.lang.Exception - Thrown if the Inputs are Invalid