R1CKLSStochasticEvolver.java

  1. package org.drip.dynamics.meanreverting;

  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>R1CKLSStochasticEvolver</i> implements the R<sup>1</sup> Chan-Karolyi-Longstaff-Sanders 1992 Stochastic
  79.  *  Evolver. The References are:
  80.  *  
  81.  *  <br><br>
  82.  *  <ul>
  83.  *      <li>
  84.  *          Doob, J. L. (1942): The Brownian Movement and Stochastic Equations <i>Annals of Mathematics</i>
  85.  *              <b>43 (2)</b> 351-369
  86.  *      </li>
  87.  *      <li>
  88.  *          Gardiner, C. W. (2009): <i>Stochastic Methods: A Handbook for the Natural and Social Sciences
  89.  *              4<sup>th</sup> Edition</i> <b>Springer-Verlag</b>
  90.  *      </li>
  91.  *      <li>
  92.  *          Kadanoff, L. P. (2000): <i>Statistical Physics: Statics, Dynamics, and Re-normalization</i>
  93.  *              <b>World Scientific</b>
  94.  *      </li>
  95.  *      <li>
  96.  *          Karatzas, I., and S. E. Shreve (1991): <i>Brownian Motion and Stochastic Calculus 2<sup>nd</sup>
  97.  *              Edition</i> <b>Springer-Verlag</b>
  98.  *      </li>
  99.  *      <li>
  100.  *          Risken, H., and F. Till (1996): <i>The Fokker-Planck Equation – Methods of Solution and
  101.  *              Applications</i> <b>Springer</b>
  102.  *      </li>
  103.  *  </ul>
  104.  *
  105.  *  <br><br>
  106.  *  <ul>
  107.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  108.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  109.  *      <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>
  110.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/dynamics/meanreverting/README.md">Mean Reverting Stochastic Process Dynamics</a></li>
  111.  *  </ul>
  112.  *
  113.  * @author Lakshmi Krishnamurthy
  114.  */

  116. public class R1CKLSStochasticEvolver
  117.     extends org.drip.dynamics.process.R1StochasticEvolver
  118. {
  119.     private org.drip.dynamics.meanreverting.CKLSParameters _cklsParameters = null;

  121.     /**
  122.      * Construct a Weiner Instance of R1CKLSStochasticEvolver Process
  123.      * 
  124.      * @param meanReversionSpeed The Mean Reversion Speed
  125.      * @param meanReversionLevel The Mean Reversion Level
  126.      * @param volatility The Volatility
  127.      * @param cklsExponent The CKLS Exponent
  128.      * @param timeWidth Wiener Time Width
  129.      * 
  130.      * @return Weiner Instance of R1CKLSStochasticEvolver Process
  131.      */

  133.     public static R1CKLSStochasticEvolver Wiener (
  134.         final double meanReversionSpeed,
  135.         final double meanReversionLevel,
  136.         final double volatility,
  137.         final double cklsExponent,
  138.         final double timeWidth)
  139.     {
  140.         try
  141.         {
  142.             return new R1CKLSStochasticEvolver (
  143.                 new org.drip.dynamics.meanreverting.CKLSParameters (
  144.                     meanReversionSpeed,
  145.                     meanReversionLevel,
  146.                     volatility,
  147.                     cklsExponent
  148.                 ), new org.drip.dynamics.ito.R1WienerDriver (
  149.                     timeWidth
  150.                 )
  151.             );
  152.         }
  153.         catch (java.lang.Exception e)
  154.         {
  155.             e.printStackTrace();
  156.         }

  158.         return null;
  159.     }

  161.     /**
  162.      * R1CKLSStochasticEvolver Constructor
  163.      * 
  164.      * @param cklsParameters The CKLS Parameters
  165.      * @param r1StochasticDriver The Stochastic Driver
  166.      * 
  167.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  168.      */

  170.     public R1CKLSStochasticEvolver (
  171.         final org.drip.dynamics.meanreverting.CKLSParameters cklsParameters,
  172.         final org.drip.dynamics.ito.R1StochasticDriver r1StochasticDriver)
  173.         throws java.lang.Exception
  174.     {
  175.         super (
  176.             new org.drip.dynamics.ito.R1ToR1Drift()
  177.             {
  178.                 @Override public double drift (
  179.                     final org.drip.dynamics.ito.TimeR1Vertex r1TimeVertex)
  180.                     throws java.lang.Exception
  181.                 {
  182.                     if (null == r1TimeVertex)
  183.                     {
  184.                         throw new java.lang.Exception (
  185.                             "R1CKLSStochasticEvolver::drift => Invalid Inputs"
  186.                         );
  187.                     }

  189.                     return cklsParameters.meanReversionSpeed() * (
  190.                         cklsParameters.meanReversionLevel() - r1TimeVertex.x()
  191.                     );
  192.                 }
  193.             },
  194.             new org.drip.dynamics.ito.R1ToR1Volatility()
  195.             {
  196.                 @Override public double volatility (
  197.                     final org.drip.dynamics.ito.TimeR1Vertex r1TimeVertex)
  198.                     throws java.lang.Exception
  199.                 {
  200.                     if (null == r1TimeVertex)
  201.                     {
  202.                         throw new java.lang.Exception (
  203.                             "R1CKLSStochasticEvolver::volatility => Invalid Inputs"
  204.                         );
  205.                     }

  207.                     return cklsParameters.volatilityCoefficient() * java.lang.Math.pow (
  208.                         r1TimeVertex.x(),
  209.                         cklsParameters.volatilityExponent()
  210.                     );
  211.                 }
  212.             },
  213.             r1StochasticDriver
  214.         );

  216.         _cklsParameters = cklsParameters;
  217.     }

  219.     /**
  220.      * Retrieve the CKLS Parameters
  221.      * 
  222.      * @return The CKLS Parameters
  223.      */

  225.     public org.drip.dynamics.meanreverting.CKLSParameters cklsParameters()
  226.     {
  227.         return _cklsParameters;
  228.     }

  230.     @Override public org.drip.dynamics.kolmogorov.R1FokkerPlanck fokkerPlanckGenerator()
  231.     {
  232.         try
  233.         {
  234.             return new org.drip.dynamics.kolmogorov.R1FokkerPlanckCKLS (
  235.                 _cklsParameters
  236.             );
  237.         }
  238.         catch (java.lang.Exception e)
  239.         {
  240.             e.printStackTrace();
  241.         }

  243.         return null;
  244.     }
  245. }
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