HighQualityLiquidAsset.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>HighQualityLiquidAsset</i> contains the Amounts and the Settings associated with Levels 1, 2A, and 2B.
  79.  * 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 HighQualityLiquidAsset
  117. {
  118.     private double _level1 = java.lang.Double.NaN;
  119.     private double _level2A = java.lang.Double.NaN;
  120.     private double _level2B = java.lang.Double.NaN;

  122.     /**
  123.      * HighQualityLiquidAsset Constructor
  124.      * 
  125.      * @param level1 Level 1 HQLA
  126.      * @param level2A Level 2A HQLA
  127.      * @param level2B Level 2B HQLA
  128.      * 
  129.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  130.      */

  132.     public HighQualityLiquidAsset (
  133.         final double level1,
  134.         final double level2A,
  135.         final double level2B)
  136.         throws java.lang.Exception
  137.     {
  138.         if (!org.drip.numerical.common.NumberUtil.IsValid (_level1 = level1) ||
  139.             !org.drip.numerical.common.NumberUtil.IsValid (_level2A = level2A) ||
  140.             !org.drip.numerical.common.NumberUtil.IsValid (_level2B = level2B))
  141.         {
  142.             throw new java.lang.Exception ("HighQualityLiquidAsset Constructor => Invalid Inputs");
  143.         }
  144.     }

  146.     /**
  147.      * Retrieve the Amount of Level 1 Assets
  148.      * 
  149.      * @return The Amount of Level 1 Assets
  150.      */

  152.     public double level1()
  153.     {
  154.         return _level1;
  155.     }

  157.     /**
  158.      * Retrieve the Amount of Level 2A Assets
  159.      * 
  160.      * @return The Amount of Level 2A Assets
  161.      */

  163.     public double level2A()
  164.     {
  165.         return _level2A;
  166.     }

  168.     /**
  169.      * Retrieve the Amount of Level 2B Assets
  170.      * 
  171.      * @return The Amount of Level 2B Assets
  172.      */

  174.     public double level2B()
  175.     {
  176.         return _level2B;
  177.     }

  179.     /**
  180.      * Retrieve the Total HQLA
  181.      * 
  182.      * @return The Total HQLA
  183.      */

  185.     public double total()
  186.     {
  187.         return _level1 + _level2A + _level2B;
  188.     }

  190.     /**
  191.      * Retrieve the Level 2 Shares to the Total HQLA
  192.      * 
  193.      * @return The Level 2 Shares to the Total HQLA
  194.      */

  196.     public double level2Ratio()
  197.     {
  198.         return (_level2A + _level2B) / (_level1 + _level2A + _level2B);
  199.     }

  201.     /**
  202.      * Retrieve the Level 2B Share to the Total HQLA
  203.      * 
  204.      * @return The Level 2B Shares to the Total HQLA
  205.      */

  207.     public double level2BRatio()
  208.     {
  209.         return _level2B / (_level1 + _level2A + _level2B);
  210.     }

  212.     /**
  213.      * Apply the appropriate Risk Weight and Hair cut to each of the Level x Assets
  214.      *  
  215.      * @param hqlaSettings THe HQLA Settings
  216.      * 
  217.      * @return The Risk Weight and Hair cut to each of the Level x Assets
  218.      */

  220.     public HighQualityLiquidAsset applyRiskWeightAndHaircut (
  221.         final org.drip.capital.bcbs.HighQualityLiquidAssetSettings hqlaSettings)
  222.     {
  223.         if (null == hqlaSettings)
  224.         {
  225.             return null;
  226.         }

  228.         try
  229.         {
  230.             return new HighQualityLiquidAsset (
  231.                 _level1,
  232.                 _level2A * (1. - hqlaSettings.level2AHaircut()) / (1. + hqlaSettings.level2ARiskWeight()),
  233.                 _level2B * (1. - hqlaSettings.level2BHaircut()) / (1. + hqlaSettings.level2BRiskWeight())
  234.             );
  235.         }
  236.         catch (java.lang.Exception e)
  237.         {
  238.             e.printStackTrace();
  239.         }

  241.         return null;
  242.     }

  244.     /**
  245.      * Verify if the HQLA is Compliant with the Level 2 and 2B Standards
  246.      * 
  247.      * @param hqlaStandard The HQLA Standard
  248.      * 
  249.      * @return TRUE - The HQLA is Compliant with the Level 2 and 2B Standards
  250.      */

  252.     public boolean isCompliant (
  253.         final org.drip.capital.bcbs.HighQualityLiquidAssetStandard hqlaStandard)
  254.     {
  255.         return null == hqlaStandard ? false :
  256.             level2Ratio() <= hqlaStandard.level2Ratio() &&
  257.             level2BRatio() <= hqlaStandard.level2BRatio();
  258.     }

  260.     /**
  261.      * Compute the Risk Weight and Hair cut HQLA Total
  262.      *  
  263.      * @param hqlaSettings THe HQLA Settings
  264.      * 
  265.      * @return The Risk Weight and Hair cut HQLA Total
  266.      * 
  267.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  268.      */

  270.     public double totalRiskWeightAndHaircut (
  271.         final org.drip.capital.bcbs.HighQualityLiquidAssetSettings hqlaSettings)
  272.         throws java.lang.Exception
  273.     {
  274.         HighQualityLiquidAsset hqla = applyRiskWeightAndHaircut (hqlaSettings);

  276.         if (null == hqla)
  277.         {
  278.             throw new java.lang.Exception
  279.                 ("HighQualityLiquidAsset::totalRiskWeightAndHaircut => Invalid Inputs");
  280.         }

  282.         return hqla.total();
  283.     }
  284. }
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