SystemicStressShockIndicator.java

  1. package org.drip.capital.systemicscenario;

  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>SystemicStressShockIndicator</i> holds the Directional Indicator Settings for a given Systemic Stress
  79.  *  Shock Event. The References are:
  80.  * 
  81.  * <br><br>
  82.  *  <ul>
  83.  *      <li>
  84.  *          Bank for International Supervision(2005): Stress Testing at Major Financial Institutions: Survey
  85.  *              Results and Practice https://www.bis.org/publ/cgfs24.htm
  86.  *      </li>
  87.  *      <li>
  88.  *          Glasserman, P. (2004): <i>Monte Carlo Methods in Financial Engineering</i> <b>Springer</b>
  89.  *      </li>
  90.  *      <li>
  91.  *          Kupiec, P. H. (2000): Stress Tests and Risk Capital <i>Risk</i> <b>2 (4)</b> 27-39
  92.  *      </li>
  93.  *  </ul>
  94.  *
  95.  *  <br><br>
  96.  *  <ul>
  97.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  98.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/CapitalAnalyticsLibrary.md">Capital Analytics</a></li>
  99.  *      <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>
  100.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/capital/systemicscenario/README.md">Systemic Stress Scenario Design/Construction</a></li>
  101.  *  </ul>
  102.  * 
  103.  * @author Lakshmi Krishnamurthy
  104.  */

  106. public class SystemicStressShockIndicator
  107. {

  109.     /**
  110.      * Systemic Stress Shock Direction UP
  111.      */

  113.     public static final int UP = 1;

  115.     /**
  116.      * Systemic Stress Shock Direction DOWN
  117.      */

  119.     public static final int DOWN = -1;

  121.     /**
  122.      * Systemic Stress Shock Direction UNSPECIFIED
  123.      */

  125.     public static final int UNSPECIFIED = 0;

  127.     /**
  128.      * DEFLATIONARY Systemic Stress Scenario
  129.      */

  131.     public static final java.lang.String DEFLATIONARY = "DEFLATIONARY";

  133.     /**
  134.      * INFLATIONARY Systemic Stress Scenario
  135.      */

  137.     public static final java.lang.String INFLATIONARY = "INFLATIONARY";

  139.     /**
  140.      * Neither DEFLATIONARY nor INFLATIONARY Systemic Stress Scenario
  141.      */

  143.     public static final java.lang.String NEITHER = "NEITHER";

  145.     private int _energy = java.lang.Integer.MIN_VALUE;
  146.     private int _commodities = java.lang.Integer.MIN_VALUE;
  147.     private int _creditSpreads = java.lang.Integer.MIN_VALUE;
  148.     private int _equityMarkets = java.lang.Integer.MIN_VALUE;
  149.     private int _yieldCurveLevel = java.lang.Integer.MIN_VALUE;

  151.     private static final boolean VerifyIndicator (
  152.         final int indicator)
  153.     {
  154.         return DOWN == indicator || UP == indicator || UNSPECIFIED == indicator;
  155.     }

  157.     /**
  158.      * Construct a Deflationary Systemic Stress Shock Indicator
  159.      * 
  160.      * @return Deflationary Systemic Stress Shock Indicator
  161.      */

  163.     public static final SystemicStressShockIndicator Deflationary()
  164.     {
  165.         try
  166.         {
  167.             return new SystemicStressShockIndicator (
  168.                 UP,
  169.                 DOWN,
  170.                 DOWN,
  171.                 DOWN,
  172.                 DOWN
  173.             );
  174.         }
  175.         catch (java.lang.Exception e)
  176.         {
  177.             e.printStackTrace();
  178.         }

  180.         return null;
  181.     }

  183.     /**
  184.      * Construct a Inflationary Systemic Stress Shock Indicator
  185.      * 
  186.      * @return Inflationary Systemic Stress Shock Indicator
  187.      */

  189.     public static final SystemicStressShockIndicator Inflationary()
  190.     {
  191.         try
  192.         {
  193.             return new SystemicStressShockIndicator (
  194.                 UP,
  195.                 DOWN,
  196.                 UP,
  197.                 UP,
  198.                 UP
  199.             );
  200.         }
  201.         catch (java.lang.Exception e)
  202.         {
  203.             e.printStackTrace();
  204.         }

  206.         return null;
  207.     }

  209.     /**
  210.      * SystemicStressShockIndicator Constructor
  211.      * 
  212.      * @param creditSpreads Credit Spreads Directional Indicator
  213.      * @param equityMarkets Equity Markets Directional Indicator
  214.      * @param yieldCurveLevel Yield Curve Level Directional Indicator
  215.      * @param commodities Commodities Directional Indicator
  216.      * @param energy Energy Directional Indicator
  217.      * 
  218.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  219.      */

  221.     public SystemicStressShockIndicator (
  222.         final int creditSpreads,
  223.         final int equityMarkets,
  224.         final int yieldCurveLevel,
  225.         final int commodities,
  226.         final int energy)
  227.         throws java.lang.Exception
  228.     {
  229.         if (!VerifyIndicator (
  230.                 _creditSpreads = creditSpreads
  231.             ) || !VerifyIndicator (
  232.                 _equityMarkets = equityMarkets
  233.             ) || !VerifyIndicator (
  234.                 _yieldCurveLevel = yieldCurveLevel
  235.             ) || !VerifyIndicator (
  236.                 _commodities = commodities
  237.             ) || !VerifyIndicator (
  238.                 _energy = energy
  239.             )
  240.         )
  241.         {
  242.             throw new java.lang.Exception (
  243.                 "SystemicStressShockIndicator Cnstructor => Invalid Inputs"
  244.             );
  245.         }
  246.     }

  248.     /**
  249.      * Retrieve the Credit Spreads Directional Indicator
  250.      * 
  251.      * @return The Credit Spreads Directional Indicator
  252.      */

  254.     public int creditSpreads()
  255.     {
  256.         return _creditSpreads;
  257.     }

  259.     /**
  260.      * Retrieve the Equity Markets Directional Indicator
  261.      * 
  262.      * @return The Equity Markets Directional Indicator
  263.      */

  265.     public int equityMarkets()
  266.     {
  267.         return _equityMarkets;
  268.     }

  270.     /**
  271.      * Retrieve the Yield Curve Level Directional Indicator
  272.      * 
  273.      * @return The Yield Curve Level Directional Indicator
  274.      */

  276.     public int yieldCurveLevel()
  277.     {
  278.         return _yieldCurveLevel;
  279.     }

  281.     /**
  282.      * Retrieve the Commodities Directional Indicator
  283.      * 
  284.      * @return The Commodities Directional Indicator
  285.      */

  287.     public int commodities()
  288.     {
  289.         return _commodities;
  290.     }

  292.     /**
  293.      * Retrieve the Energy Directional Indicator
  294.      * 
  295.      * @return The Energy Directional Indicator
  296.      */

  298.     public int energy()
  299.     {
  300.         return _energy;
  301.     }

  303.     /**
  304.      * Indicate if the Scenario is DEFLATIONARY
  305.      * 
  306.      * @return TRUE - The Scenario is DEFLATIONARY
  307.      */

  309.     public boolean isDeflationary()
  310.     {
  311.         return UP == _creditSpreads &&
  312.             DOWN == _equityMarkets &&
  313.             DOWN == _yieldCurveLevel && 
  314.             DOWN == _commodities &&
  315.             DOWN == _energy;
  316.     }

  318.     /**
  319.      * Indicate if the Scenario is INFLATIONARY
  320.      * 
  321.      * @return TRUE - The Scenario is INFLATIONARY
  322.      */

  324.     public boolean isInflationary()
  325.     {
  326.         return UP == _creditSpreads &&
  327.             DOWN == _equityMarkets &&
  328.             UP == _yieldCurveLevel && 
  329.             UP == _commodities &&
  330.             UP == _energy;
  331.     }

  333.     /**
  334.      * Indicate the Inflation Type
  335.      * 
  336.      * @return The Inflation Type
  337.      */

  339.     public java.lang.String inflationType()
  340.     {
  341.         if (isDeflationary())
  342.         {
  343.             return DEFLATIONARY;
  344.         }

  346.         return isInflationary() ? INFLATIONARY : NEITHER;
  347.     }
  348. }
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