BalanceSheetCapital.java

  1. package org.drip.capital.bcbs;

  3. /*
  4.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  5.  */

  7. /*!
  8.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  9.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  10.  * 
  11.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  12.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  13.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  14.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  15.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  16.  *      and computational support.
  17.  *  
  18.  *      https://lakshmidrip.github.io/DROP/
  19.  *  
  20.  *  DROP is composed of three modules:
  21.  *  
  22.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  23.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  24.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  25.  * 
  26.  *  DROP Product Core implements libraries for the following:
  27.  *  - Fixed Income Analytics
  28.  *  - Loan Analytics
  29.  *  - Transaction Cost Analytics
  30.  * 
  31.  *  DROP Portfolio Core implements libraries for the following:
  32.  *  - Asset Allocation Analytics
  33.  *  - Asset Liability Management Analytics
  34.  *  - Capital Estimation Analytics
  35.  *  - Exposure Analytics
  36.  *  - Margin Analytics
  37.  *  - XVA Analytics
  38.  * 
  39.  *  DROP Computational Core implements libraries for the following:
  40.  *  - Algorithm Support
  41.  *  - Computation Support
  42.  *  - Function Analysis
  43.  *  - Model Validation
  44.  *  - Numerical Analysis
  45.  *  - Numerical Optimizer
  46.  *  - Spline Builder
  47.  *  - Statistical Learning
  48.  * 
  49.  *  Documentation for DROP is Spread Over:
  50.  * 
  51.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  52.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  53.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  54.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  55.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  56.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  57.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  58.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  59.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  60.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  61.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  62.  * 
  63.  *  Licensed under the Apache License, Version 2.0 (the "License");
  64.  *      you may not use this file except in compliance with the License.
  65.  *   
  66.  *  You may obtain a copy of the License at
  67.  *      http://www.apache.org/licenses/LICENSE-2.0
  68.  *  
  69.  *  Unless required by applicable law or agreed to in writing, software
  70.  *      distributed under the License is distributed on an "AS IS" BASIS,
  71.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  72.  *  
  73.  *  See the License for the specific language governing permissions and
  74.  *      limitations under the License.
  75.  */

  77. /**
  78.  * <i>BalanceSheetCapital</i> holds the Quantities used to compute the Capital Compliance Ratios in the BCBS
  79.  * Standards. The References are:
  80.  *  
  81.  * <br><br>
  82.  *  <ul>
  83.  *      <li>
  84.  *          Basel Committee on Banking Supervision (2017): Basel III Leverage Ratio Framework and Disclosure
  85.  *              Requirements https://www.bis.org/publ/bcbs270.pdf
  86.  *      </li>
  87.  *      <li>
  88.  *          Central Banking (2013): Fed and FDIC agree 6% Leverage Ratio for US SIFIs
  89.  *              https://www.centralbanking.com/central-banking/news/2280726/fed-and-fdic-agree-6-leverage-ratio-for-us-sifis
  90.  *      </li>
  91.  *      <li>
  92.  *          European Banking Agency (2013): Implementing Basel III in Europe: CRD IV Package
  93.  *              https://eba.europa.eu/regulation-and-policy/implementing-basel-iii-europe
  94.  *      </li>
  95.  *      <li>
  96.  *          Federal Reserve (2013): Liquidity Coverage Ratio – Liquidity Risk Measurements, Standards, and
  97.  *              Monitoring
  98.  *              https://web.archive.org/web/20131102074614/http:/www.federalreserve.gov/FR_notice_lcr_20131024.pdf
  99.  *      </li>
  100.  *      <li>
  101.  *          Wikipedia (2018): Basel III https://en.wikipedia.org/wiki/Basel_III
  102.  *      </li>
  103.  *  </ul>
  104.  *
  105.  *  <br><br>
  106.  *  <ul>
  107.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  108.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/CapitalAnalyticsLibrary.md">Capital Analytics</a></li>
  109.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/capital/README.md">Basel Market Risk and Operational Capital</a></li>
  110.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/capital/bcbs/README.md">BCBS and Jurisdictional Capital Ratios</a></li>
  111.  *  </ul>
  112.  * 
  113.  * @author Lakshmi Krishnamurthy
  114.  */

  116. public class BalanceSheetCapital
  117. {
  118.     private double _at1 = java.lang.Double.NaN;
  119.     private double _rwa = java.lang.Double.NaN;
  120.     private double _cet1 = java.lang.Double.NaN;
  121.     private double _totalExposure = java.lang.Double.NaN;
  122.     private double _additionalCapital = java.lang.Double.NaN;

  124.     /**
  125.      * BalanceSheetCapital Constructor
  126.      * 
  127.      * @param cet1 Common Equity Tier 1 Capital
  128.      * @param at1 Additional Tier 1 Capital
  129.      * @param additionalCapital Additional Capital
  130.      * @param rwa Risk Weighted Assets
  131.      * @param totalExposure Total Exposure
  132.      * 
  133.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  134.      */

  136.     public BalanceSheetCapital (
  137.         final double cet1,
  138.         final double at1,
  139.         final double additionalCapital,
  140.         final double rwa,
  141.         final double totalExposure)
  142.         throws java.lang.Exception
  143.     {
  144.         if (!org.drip.numerical.common.NumberUtil.IsValid (_cet1 = cet1) || 0. > _cet1 ||
  145.             !org.drip.numerical.common.NumberUtil.IsValid (_at1 = at1) || 0. > _at1 ||
  146.             !org.drip.numerical.common.NumberUtil.IsValid (_additionalCapital = additionalCapital) ||
  147.                 0. > _additionalCapital ||
  148.             !org.drip.numerical.common.NumberUtil.IsValid (_rwa = rwa) || 0. > _rwa ||
  149.             !org.drip.numerical.common.NumberUtil.IsValid (_totalExposure = totalExposure) ||
  150.                 0. > _totalExposure)
  151.         {
  152.             throw new java.lang.Exception ("BalanceSheetCapital Constructor => Invalid Inputs");
  153.         }
  154.     }

  156.     /**
  157.      * Retrieve the Common Equity Tier 1 Capital
  158.      * 
  159.      * @return The Common Equity Tier 1 Capital
  160.      */

  162.     public double commonEquityTier1()
  163.     {
  164.         return _cet1;
  165.     }

  167.     /**
  168.      * Retrieve the Additional Tier 1 Capital
  169.      * 
  170.      * @return The Additional Tier 1 Capital
  171.      */

  173.     public double additionalTier1()
  174.     {
  175.         return _at1;
  176.     }

  178.     /**
  179.      * Retrieve the Additional Capital
  180.      * 
  181.      * @return The Additional Capital
  182.      */

  184.     public double additionalCapital()
  185.     {
  186.         return _additionalCapital;
  187.     }

  189.     /**
  190.      * Retrieve the Risk Weighted Assets
  191.      * 
  192.      * @return The Risk Weighted Assets
  193.      */

  195.     public double riskWeightedAssets()
  196.     {
  197.         return _rwa;
  198.     }

  200.     /**
  201.      * Retrieve the Total Exposure
  202.      * 
  203.      * @return The Total Exposure
  204.      */

  206.     public double totalExposure()
  207.     {
  208.         return _totalExposure;
  209.     }

  211.     /**
  212.      * Retrieve the Tier 1 Capital
  213.      * 
  214.      * @return The Tier 1 Capital
  215.      */

  217.     public double tier1()
  218.     {
  219.         return _cet1 + _at1;
  220.     }

  222.     /**
  223.      * Retrieve the Total Capital
  224.      * 
  225.      * @return The Total Capital
  226.      */

  228.     public double totalCapital()
  229.     {
  230.         return _cet1 + _at1 + _additionalCapital;
  231.     }

  233.     /**
  234.      * Retrieve the CET 1 Ratio
  235.      * 
  236.      * @return The CET 1 Ratio
  237.      */

  239.     public double cet1Ratio()
  240.     {
  241.         return _cet1 / _rwa;
  242.     }

  244.     /**
  245.      * Retrieve the Tier 1 Ratio
  246.      * 
  247.      * @return The Tier 1 Ratio
  248.      */

  250.     public double tier1Ratio()
  251.     {
  252.         return (_cet1 + _at1) / _rwa;
  253.     }

  255.     /**
  256.      * Retrieve the Total Capital Ratio
  257.      * 
  258.      * @return The Total Capital Ratio
  259.      */

  261.     public double totalCapitalRatio()
  262.     {
  263.         return (_cet1 + _at1 + _additionalCapital) / _rwa;
  264.     }

  266.     /**
  267.      * Retrieve the Leverage Ratio
  268.      * 
  269.      * @return The Leverage Ratio
  270.      */

  272.     public double leverageRatio()
  273.     {
  274.         return (_cet1 + _at1) / _totalExposure;
  275.     }

  277.     /**
  278.      * Generate the Balance Sheet Capital Metrics
  279.      * 
  280.      * @return The Balance Sheet Capital Metrics
  281.      */

  283.     public org.drip.capital.bcbs.CapitalMetrics capitalMetrics()
  284.     {
  285.         double commonEquityCapitalRatio = _cet1 / _rwa;
  286.         double totalCapitalRatio = (_cet1 + _at1 + _additionalCapital) / _rwa;

  288.         try
  289.         {
  290.             return new org.drip.capital.bcbs.CapitalMetrics (
  291.                 (_cet1 + _at1) / _totalExposure,
  292.                 commonEquityCapitalRatio,
  293.                 commonEquityCapitalRatio,
  294.                 (_cet1 + _at1) / _rwa,
  295.                 totalCapitalRatio,
  296.                 totalCapitalRatio
  297.             );
  298.         }
  299.         catch (java.lang.Exception e)
  300.         {
  301.             e.printStackTrace();
  302.         }

  304.         return null;
  305.     }
  306. }
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