ShortRateUpdate.java

  1. package org.drip.dynamics.hullwhite;

  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.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  11.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  12.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  13.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  14.  * 
  15.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  16.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  17.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  18.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  19.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  20.  *      and computational support.
  21.  *  
  22.  *      https://lakshmidrip.github.io/DROP/
  23.  *  
  24.  *  DROP is composed of three modules:
  25.  *  
  26.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  27.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  28.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  29.  * 
  30.  *  DROP Product Core implements libraries for the following:
  31.  *  - Fixed Income Analytics
  32.  *  - Loan Analytics
  33.  *  - Transaction Cost Analytics
  34.  * 
  35.  *  DROP Portfolio Core implements libraries for the following:
  36.  *  - Asset Allocation Analytics
  37.  *  - Asset Liability Management Analytics
  38.  *  - Capital Estimation Analytics
  39.  *  - Exposure Analytics
  40.  *  - Margin Analytics
  41.  *  - XVA Analytics
  42.  * 
  43.  *  DROP Computational Core implements libraries for the following:
  44.  *  - Algorithm Support
  45.  *  - Computation Support
  46.  *  - Function Analysis
  47.  *  - Model Validation
  48.  *  - Numerical Analysis
  49.  *  - Numerical Optimizer
  50.  *  - Spline Builder
  51.  *  - Statistical Learning
  52.  * 
  53.  *  Documentation for DROP is Spread Over:
  54.  * 
  55.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  56.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  57.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  58.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  59.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  60.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  61.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  62.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  63.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  64.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  65.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  66.  * 
  67.  *  Licensed under the Apache License, Version 2.0 (the "License");
  68.  *      you may not use this file except in compliance with the License.
  69.  *   
  70.  *  You may obtain a copy of the License at
  71.  *      http://www.apache.org/licenses/LICENSE-2.0
  72.  *  
  73.  *  Unless required by applicable law or agreed to in writing, software
  74.  *      distributed under the License is distributed on an "AS IS" BASIS,
  75.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  76.  *  
  77.  *  See the License for the specific language governing permissions and
  78.  *      limitations under the License.
  79.  */

  81. /**
  82.  * <i>ShortRateUpdate</i> records the Metrics associated with the Evolution of the Instantaneous Short Rate
  83.  * from a Starting to the Terminal Date.
  84.  *
  85.  *  <br><br>
  86.  *  <ul>
  87.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  88.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  89.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/dynamics/README.md">HJM, Hull White, LMM, and SABR Dynamic Evolution Models</a></li>
  90.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/dynamics/hullwhite/README.md">Hull White Latent State Evolution</a></li>
  91.  *  </ul>
  92.  *
  93.  * @author Lakshmi Krishnamurthy
  94.  */

  96. public class ShortRateUpdate extends org.drip.dynamics.evolution.LSQMPointUpdate {
  97.     private double _dblExpectedFinalShortRate = java.lang.Double.NaN;
  98.     private double _dblFinalShortRateVariance = java.lang.Double.NaN;
  99.     private org.drip.state.identifier.FundingLabel _lslFunding = null;

  101.     /**
  102.      * Construct an Instance of ShortRateUpdate
  103.      * 
  104.      * @param lslFunding The Funding Latent State Label
  105.      * @param iInitialDate The Initial Date
  106.      * @param iFinalDate The Final Date
  107.      * @param iTargetPointDate The Target Point Date
  108.      * @param dblInitialShortRate The Initial Short Rate
  109.      * @param dblRealizedFinalShortRate The Realized Final Short Rate
  110.      * @param dblExpectedFinalShortRate The Expected Final Short Rate
  111.      * @param dblFinalShortRateVariance The Final Variance of the Short Rate
  112.      * @param dblZeroCouponBondPrice The Zero Coupon Bond Price
  113.      * 
  114.      * @return The ShortRateUpdate Instance
  115.      * 
  116.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  117.      */

  119.     public static final ShortRateUpdate Create (
  120.         final org.drip.state.identifier.FundingLabel lslFunding,
  121.         final int iInitialDate,
  122.         final int iFinalDate,
  123.         final int iTargetPointDate,
  124.         final double dblInitialShortRate,
  125.         final double dblRealizedFinalShortRate,
  126.         final double dblExpectedFinalShortRate,
  127.         final double dblFinalShortRateVariance,
  128.         final double dblZeroCouponBondPrice)
  129.         throws java.lang.Exception
  130.     {
  131.         org.drip.dynamics.evolution.LSQMPointRecord lrSnapshot = new
  132.             org.drip.dynamics.evolution.LSQMPointRecord();

  134.         if (!lrSnapshot.setQM (lslFunding,
  135.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE,
  136.                 dblRealizedFinalShortRate))
  137.             return null;

  139.         if (!lrSnapshot.setQM (lslFunding,
  140.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_DISCOUNT_FACTOR,
  141.                 dblZeroCouponBondPrice))
  142.             return null;

  144.         org.drip.dynamics.evolution.LSQMPointRecord lrIncrement = new
  145.             org.drip.dynamics.evolution.LSQMPointRecord();

  147.         if (!lrIncrement.setQM (lslFunding,
  148.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE,
  149.                 dblRealizedFinalShortRate - dblInitialShortRate))
  150.             return null;

  152.         try {
  153.             return new ShortRateUpdate (lslFunding, iInitialDate, iFinalDate, iTargetPointDate, lrSnapshot,
  154.                 lrIncrement, dblExpectedFinalShortRate, dblFinalShortRateVariance);
  155.         } catch (java.lang.Exception e) {
  156.             e.printStackTrace();
  157.         }

  159.         return null;
  160.     }

  162.     private ShortRateUpdate (
  163.         final org.drip.state.identifier.FundingLabel lslFunding,
  164.         final int iInitialDate,
  165.         final int iFinalDate,
  166.         final int iViewDate,
  167.         final org.drip.dynamics.evolution.LSQMPointRecord lrSnapshot,
  168.         final org.drip.dynamics.evolution.LSQMPointRecord lrIncrement,
  169.         final double dblExpectedFinalShortRate,
  170.         final double dblFinalShortRateVariance)
  171.         throws java.lang.Exception
  172.     {
  173.         super (iInitialDate, iFinalDate, iViewDate, lrSnapshot, lrIncrement);

  175.         if (null == (_lslFunding = lslFunding) || !org.drip.numerical.common.NumberUtil.IsValid
  176.             (_dblExpectedFinalShortRate = dblExpectedFinalShortRate) ||
  177.                 !org.drip.numerical.common.NumberUtil.IsValid (_dblFinalShortRateVariance =
  178.                     dblFinalShortRateVariance)) {
  179.             System.out.println (_lslFunding.fullyQualifiedName());

  181.             System.out.println ("Final Short Rate: " + _dblExpectedFinalShortRate);

  183.             System.out.println ("Final Short Rate Variance: " + _dblFinalShortRateVariance);

  185.             throw new java.lang.Exception ("ShortRateUpdate ctr: Invalid Inputs!");
  186.         }
  187.     }

  189.     /**
  190.      * Retrieve the Initial Short Rate
  191.      * 
  192.      * @return The Initial Short Rate
  193.      * 
  194.      * @throws java.lang.Exception Thrown if the Initial Short Rate is not available
  195.      */

  197.     public double initialShortRate()
  198.         throws java.lang.Exception
  199.     {
  200.         return realizedFinalShortRate() - shortRateIncrement();
  201.     }

  203.     /**
  204.      * Retrieve the Realized Final Short Rate
  205.      * 
  206.      * @return The Realized Final Short Rate
  207.      * 
  208.      * @throws java.lang.Exception Thrown if the Realized Final Short Rate is not available
  209.      */

  211.     public double realizedFinalShortRate()
  212.         throws java.lang.Exception
  213.     {
  214.         return snapshot().qm (_lslFunding,
  215.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE);
  216.     }

  218.     /**
  219.      * Retrieve the Short Rate Increment
  220.      * 
  221.      * @return The Short Rate Increment
  222.      * 
  223.      * @throws java.lang.Exception Thrown if the Short Rate Increment is not available
  224.      */

  226.     public double shortRateIncrement()
  227.         throws java.lang.Exception
  228.     {
  229.         return increment().qm (_lslFunding,
  230.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE);
  231.     }

  233.     /**
  234.      * Retrieve the Expected Final Short Rate
  235.      * 
  236.      * @return The Expected Final Short Rate
  237.      */

  239.     public double expectedFinalShortRate()
  240.     {
  241.         return _dblExpectedFinalShortRate;
  242.     }

  244.     /**
  245.      * Retrieve the Final Short Rate Variance
  246.      * 
  247.      * @return The Final Short Rate Variance
  248.      */

  250.     public double finalShortRateVariance()
  251.     {
  252.         return _dblFinalShortRateVariance;
  253.     }

  255.     /**
  256.      * Compute the Zero Coupon Bond Price
  257.      * 
  258.      * @param dblFinalInitialZeroRatio The Final-to-Initial Zero-Coupon Bond Price Ratio
  259.      * 
  260.      * @return The Zero Coupon Bond Price
  261.      * 
  262.      * @throws java.lang.Exception Thrown if the Zero Coupon Bond Price cannot be computed
  263.      */

  265.     public double zeroCouponBondPrice (
  266.         final double dblFinalInitialZeroRatio)
  267.         throws java.lang.Exception
  268.     {
  269.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblFinalInitialZeroRatio))
  270.             throw new java.lang.Exception ("ShortRateUpdate::zeroCouponBondPrice => Invalid Inputs");

  272.         return dblFinalInitialZeroRatio * snapshot().qm (_lslFunding,
  273.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_DISCOUNT_FACTOR);
  274.     }
  275. }
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