ContinuousForwardRateUpdate.java

  1. package org.drip.dynamics.lmm;

  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>ContinuousForwardRateUpdate</i> contains the Instantaneous Snapshot of the Evolving Discount Latent
  83.  * State Quantification Metrics Updated using the Continuously Compounded Forward Rate Dynamics.
  84.  *
  85.  *  <br><br>
  86.  *  <ul>
  87.  *      <li>
  88.  *          Goldys, B., M. Musiela, and D. Sondermann (1994): <i>Log-normality of Rates and Term Structure
  89.  *              Models</i> <b>The University of New South Wales</b>
  90.  *      </li>
  91.  *      <li>
  92.  *          Musiela, M. (1994): <i>Nominal Annual Rates and Log-normal Volatility Structure</i> <b>The
  93.  *              University of New South Wales</b>
  94.  *      </li>
  95.  *      <li>
  96.  *          Brace, A., D. Gatarek, and M. Musiela (1997): The Market Model of Interest Rate Dynamics
  97.  *              <i>Mathematical Finance</i> <b>7 (2)</b> 127-155
  98.  *      </li>
  99.  *  </ul>
  100.  *
  101.  *  <br><br>
  102.  *  <ul>
  103.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  104.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  105.  *      <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>
  106.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/dynamics/lmm/README.md">LMM Based Latent State Evolution</a></li>
  107.  *  </ul>
  108.  *
  109.  * @author Lakshmi Krishnamurthy
  110.  */

  112. public class ContinuousForwardRateUpdate extends org.drip.dynamics.evolution.LSQMPointUpdate {
  113.     private org.drip.state.identifier.ForwardLabel _lslForward = null;
  114.     private org.drip.state.identifier.FundingLabel _lslFunding = null;
  115.     private double _dblDContinuousForwardDXInitial = java.lang.Double.NaN;
  116.     private double _dblDContinuousForwardDXTerminal = java.lang.Double.NaN;

  118.     /**
  119.      * Construct an Instance of ContinuousForwardRateUpdate
  120.      * 
  121.      * @param lslFunding The Funding Latent State Label
  122.      * @param lslForward The Forward Latent State Label
  123.      * @param iInitialDate The Initial Date
  124.      * @param iFinalDate The Final Date
  125.      * @param iTargetPointDate The Target Point Date
  126.      * @param dblContinuousForwardRate The Continuously Compounded Forward Rate
  127.      * @param dblContinuousForwardRateIncrement The Continuously Compounded Forward Rate Increment
  128.      * @param dblSpotRate The Spot Rate
  129.      * @param dblSpotRateIncrement The Spot Rate Increment
  130.      * @param dblDiscountFactor The Discount Factor
  131.      * @param dblDiscountFactorIncrement The Discount Factor Increment
  132.      * @param dblDContinuousForwardDXInitial Initial D {Continuously Compounded Forward Rate} / DX
  133.      * @param dblDContinuousForwardDXTerminal Terminal D {Continuously Compounded Forward Rate} / DX
  134.      * 
  135.      * @return Instance of ContinuousForwardRateUpdate
  136.      */

  138.     public static final ContinuousForwardRateUpdate Create (
  139.         final org.drip.state.identifier.FundingLabel lslFunding,
  140.         final org.drip.state.identifier.ForwardLabel lslForward,
  141.         final int iInitialDate,
  142.         final int iFinalDate,
  143.         final int iTargetPointDate,
  144.         final double dblContinuousForwardRate,
  145.         final double dblContinuousForwardRateIncrement,
  146.         final double dblSpotRate,
  147.         final double dblSpotRateIncrement,
  148.         final double dblDiscountFactor,
  149.         final double dblDiscountFactorIncrement,
  150.         final double dblDContinuousForwardDXInitial,
  151.         final double dblDContinuousForwardDXTerminal)
  152.     {
  153.         org.drip.dynamics.evolution.LSQMPointRecord lrSnapshot = new org.drip.dynamics.evolution.LSQMPointRecord();

  155.         if (!lrSnapshot.setQM (lslForward,
  156.             org.drip.analytics.definition.LatentStateStatic.FORWARD_QM_CONTINUOUSLY_COMPOUNDED_FORWARD_RATE,
  157.                 dblContinuousForwardRate))
  158.             return null;

  160.         if (!lrSnapshot.setQM (lslFunding,
  161.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE, dblSpotRate))
  162.             return null;

  164.         if (!lrSnapshot.setQM (lslFunding,
  165.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_DISCOUNT_FACTOR, dblDiscountFactor))
  166.             return null;

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

  170.         if (!lrIncrement.setQM (lslForward,
  171.             org.drip.analytics.definition.LatentStateStatic.FORWARD_QM_CONTINUOUSLY_COMPOUNDED_FORWARD_RATE,
  172.                 dblContinuousForwardRateIncrement))
  173.             return null;

  175.         if (!lrIncrement.setQM (lslFunding,
  176.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE, dblSpotRateIncrement))
  177.             return null;

  179.         if (!lrIncrement.setQM (lslFunding,
  180.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_DISCOUNT_FACTOR,
  181.                 dblDiscountFactorIncrement))
  182.             return null;

  184.         try {
  185.             return new ContinuousForwardRateUpdate (lslFunding, lslForward, iInitialDate, iFinalDate,
  186.                 iTargetPointDate, lrSnapshot, lrIncrement, dblDContinuousForwardDXInitial,
  187.                     dblDContinuousForwardDXTerminal);
  188.         } catch (java.lang.Exception e) {
  189.             e.printStackTrace();
  190.         }

  192.         return null;
  193.     }

  195.     private ContinuousForwardRateUpdate (
  196.         final org.drip.state.identifier.FundingLabel lslFunding,
  197.         final org.drip.state.identifier.ForwardLabel lslForward,
  198.         final int iInitialDate,
  199.         final int iFinalDate,
  200.         final int iViewDate,
  201.         final org.drip.dynamics.evolution.LSQMPointRecord lrSnapshot,
  202.         final org.drip.dynamics.evolution.LSQMPointRecord lrIncrement,
  203.         final double dblDContinuousForwardDXInitial,
  204.         final double dblDContinuousForwardDXTerminal)
  205.         throws java.lang.Exception
  206.     {
  207.         super (iInitialDate, iFinalDate, iViewDate, lrSnapshot, lrIncrement);

  209.         if (null == (_lslFunding = lslFunding) || null == (_lslForward = lslForward) ||
  210.             !org.drip.numerical.common.NumberUtil.IsValid (_dblDContinuousForwardDXTerminal =
  211.                 dblDContinuousForwardDXTerminal) || !org.drip.numerical.common.NumberUtil.IsValid
  212.                     (_dblDContinuousForwardDXInitial = dblDContinuousForwardDXInitial))
  213.             throw new java.lang.Exception ("ContinuousForwardRateUpdate ctr: Invalid Inputs");
  214.     }

  216.     /**
  217.      * Retrieve the Continuously Compounded Forward Rate
  218.      * 
  219.      * @return The Continuously Compounded Forward Rate
  220.      * 
  221.      * @throws java.lang.Exception Thrown if the Continuously Compounded Forward Rate is not available
  222.      */

  224.     public double continuousForwardRate()
  225.         throws java.lang.Exception
  226.     {
  227.         return snapshot().qm (_lslForward,
  228.             org.drip.analytics.definition.LatentStateStatic.FORWARD_QM_CONTINUOUSLY_COMPOUNDED_FORWARD_RATE);
  229.     }

  231.     /**
  232.      * Retrieve the Continuously Compounded Forward Rate Increment
  233.      * 
  234.      * @return The Continuously Compounded Forward Rate Increment
  235.      * 
  236.      * @throws java.lang.Exception Thrown if the Continuously Compounded Forward Rate Increment is not available
  237.      */

  239.     public double continuousForwardRateIncrement()
  240.         throws java.lang.Exception
  241.     {
  242.         return increment().qm (_lslForward,
  243.             org.drip.analytics.definition.LatentStateStatic.FORWARD_QM_CONTINUOUSLY_COMPOUNDED_FORWARD_RATE);
  244.     }

  246.     /**
  247.      * Retrieve the Spot Rate
  248.      * 
  249.      * @return The Spot Rate
  250.      * 
  251.      * @throws java.lang.Exception Thrown if the Spot Rate is not available
  252.      */

  254.     public double spotRate()
  255.         throws java.lang.Exception
  256.     {
  257.         return snapshot().qm (_lslFunding,
  258.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE);
  259.     }

  261.     /**
  262.      * Retrieve the Spot Rate Increment
  263.      * 
  264.      * @return The Spot Rate Increment
  265.      * 
  266.      * @throws java.lang.Exception Thrown if the Spot Rate Increment is not available
  267.      */

  269.     public double spotRateIncrement()
  270.         throws java.lang.Exception
  271.     {
  272.         return increment().qm (_lslFunding,
  273.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_ZERO_RATE);
  274.     }

  276.     /**
  277.      * Retrieve the Discount Factor
  278.      * 
  279.      * @return The Discount Factor
  280.      * 
  281.      * @throws java.lang.Exception Thrown if the Discount Factor is not available
  282.      */

  284.     public double discountFactor()
  285.         throws java.lang.Exception
  286.     {
  287.         return snapshot().qm (_lslFunding,
  288.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_DISCOUNT_FACTOR);
  289.     }

  291.     /**
  292.      * Retrieve the Discount Factor Increment
  293.      * 
  294.      * @return The Discount Factor Increment
  295.      * 
  296.      * @throws java.lang.Exception Thrown if the Discount Factor Increment is not available
  297.      */

  299.     public double discountFactorIncrement()
  300.         throws java.lang.Exception
  301.     {
  302.         return increment().qm (_lslFunding,
  303.             org.drip.analytics.definition.LatentStateStatic.DISCOUNT_QM_DISCOUNT_FACTOR);
  304.     }

  306.     /**
  307.      * Retrieve the Initial D {Continuously Compounded Forward Rate} / DX
  308.      * 
  309.      * @return The Initial D {Continuously Compounded Forward Rate} / DX
  310.      */

  312.     public double dContinuousForwardDXInitial()
  313.     {
  314.         return _dblDContinuousForwardDXInitial;
  315.     }

  317.     /**
  318.      * Retrieve the Terminal D {Continuously Compounded Forward Rate} / DX
  319.      * 
  320.      * @return The Terminal D {Continuously Compounded Forward Rate} / DX
  321.      */

  323.     public double dContinuousForwardDXTerminal()
  324.     {
  325.         return _dblDContinuousForwardDXTerminal;
  326.     }
  327. }
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