CollateralAmountEstimator.java

  1. package org.drip.exposure.mpor;

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

  79. /**
  80.  * <i>CollateralAmountEstimator</i> estimates the Amount of Collateral Hypothecation that is to be Posted
  81.  * during a Single Run of a Collateral Hypothecation Group Valuation. The References are:
  82.  *  
  83.  * <br><br>
  84.  *      <ul>
  85.  *          <li>
  86.  *              Burgard, C., and M. Kjaer (2014): PDE Representations of Derivatives with Bilateral Counter-
  87.  *                  party Risk and Funding Costs <i>Journal of Credit Risk</i> <b>7 (3)</b> 1-19
  88.  *          </li>
  89.  *          <li>
  90.  *              Burgard, C., and M. Kjaer (2014): In the Balance, Risk, 24 (11) 72-75
  91.  *          </li>
  92.  *          <li>
  93.  *              Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk <i>Risk</i> <b>20 (2)</b>
  94.  *                  86-90
  95.  *          </li>
  96.  *          <li>
  97.  *              Li, B., and Y. Tang (2007): Quantitative Analysis, Derivatives Modeling, and Trading
  98.  *                  Strategies in the Presence of Counter-party Credit Risk for the Fixed Income Market
  99.  *                  <i>World Scientific Publishing </i> <b>Singapore</b>
  100.  *          </li>
  101.  *          <li>
  102.  *              Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives
  103.  *                  Pricing <i>Risk</i> <b>21 (2)</b> 97-102
  104.  *          </li>
  105.  *          <li>
  106.  *      </ul>
  107.  *
  108.  *  <br><br>
  109.  *  <ul>
  110.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  111.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ExposureAnalyticsLibrary.md">Exposure Analytics</a></li>
  112.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/exposure/README.md">Exposure Group Level Collateralized/Uncollateralized Exposure</a></li>
  113.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/exposure/mpor/README.md">Margin Period Collateral Amount Estimation</a></li>
  114.  *  </ul>
  115.  *  
  116.  * @author Lakshmi Krishnamurthy
  117.  */

  119. public class CollateralAmountEstimator
  120. {
  121.     private double _currentBalance = java.lang.Double.NaN;
  122.     private org.drip.measure.bridge.BrokenDateInterpolator _brokenDateInterpolator = null;
  123.     private org.drip.xva.proto.PositionGroupSpecification _positionGroupSpecification = null;

  125.     /**
  126.      * CollateralAmountEstimator Constructor
  127.      * 
  128.      * @param positionGroupSpecification The Position Group Specification
  129.      * @param brokenDateInterpolator The Stochastic Value Broken Date Bridge Estimator
  130.      * @param currentBalance The Current Collateral Balance
  131.      * 
  132.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  133.      */

  135.     public CollateralAmountEstimator (
  136.         final org.drip.xva.proto.PositionGroupSpecification positionGroupSpecification,
  137.         final org.drip.measure.bridge.BrokenDateInterpolator brokenDateInterpolator,
  138.         final double currentBalance)
  139.         throws java.lang.Exception
  140.     {
  141.         if (null == (_positionGroupSpecification = positionGroupSpecification) ||
  142.             null == (_brokenDateInterpolator = brokenDateInterpolator))
  143.         {
  144.             throw new java.lang.Exception ("CollateralAmountEstimator Constructor => Invalid Inputs");
  145.         }

  147.         _currentBalance = currentBalance;
  148.     }

  150.     /**
  151.      * Retrieve the Position Group Specification
  152.      * 
  153.      * @return The Position Group Specification
  154.      */

  156.     public org.drip.xva.proto.PositionGroupSpecification positionGroupSpecification()
  157.     {
  158.         return _positionGroupSpecification;
  159.     }

  161.     /**
  162.      * Retrieve the Stochastic Value Broken Date Bridge Estimator
  163.      * 
  164.      * @return The Stochastic Value Broken Date Bridge Estimator
  165.      */

  167.     public org.drip.measure.bridge.BrokenDateInterpolator brokenDateBridge()
  168.     {
  169.         return _brokenDateInterpolator;
  170.     }

  172.     /**
  173.      * Retrieve the Current Collateral Balance
  174.      * 
  175.      * @return The Current Collateral Balance
  176.      */

  178.     public double currentCollateralBalance()
  179.     {
  180.         return _currentBalance;
  181.     }

  183.     /**
  184.      * Calculate the Margin Value at the Dealer Default Window
  185.      * 
  186.      * @param valuationDateJulian The Valuation Date
  187.      * 
  188.      * @return The Margin Value at the Dealer Default Window
  189.      * 
  190.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  191.      */

  193.     public double dealerWindowMarginValue (
  194.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  195.         throws java.lang.Exception
  196.     {
  197.         if (null == valuationDateJulian)
  198.         {
  199.             throw new java.lang.Exception
  200.                 ("CollateralAmountEstimator::dealerWindowMarginValue => Invalid Inputs");
  201.         }

  203.         org.drip.analytics.date.JulianDate marginDate = valuationDateJulian.subtractDays
  204.             (_positionGroupSpecification.dealerDefaultWindow());

  206.         if (null == marginDate)
  207.         {
  208.             throw new java.lang.Exception
  209.                 ("CollateralAmountEstimator::dealerWindowMarginValue => Invalid Inputs");
  210.         }

  212.         return _brokenDateInterpolator.interpolate (marginDate.julian());
  213.     }

  215.     /**
  216.      * Calculate the Dealer Margin Threshold
  217.      * 
  218.      * @param valuationDateJulian The Valuation Date
  219.      * 
  220.      * @return The Dealer Margin Threshold
  221.      * 
  222.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  223.      */

  225.     public double dealerThreshold (
  226.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  227.         throws java.lang.Exception
  228.     {
  229.         org.drip.function.definition.R1ToR1 dealerThresholdFunction =
  230.             _positionGroupSpecification.dealerThresholdFunction();

  232.         return null == dealerThresholdFunction ? 0. : dealerThresholdFunction.evaluate
  233.             (valuationDateJulian.julian());
  234.     }

  236.     /**
  237.      * Calculate the Margin Amount Required to be Posted by the Dealer
  238.      * 
  239.      * @param valuationDateJulian The Valuation Date
  240.      * 
  241.      * @return The Margin Amount Required to be Posted by the Dealer
  242.      * 
  243.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  244.      */

  246.     public double dealerPostingRequirement (
  247.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  248.         throws java.lang.Exception
  249.     {
  250.         double dealerPostingRequirement = dealerWindowMarginValue (valuationDateJulian) - dealerThreshold
  251.             (valuationDateJulian);

  253.         return 0. < dealerPostingRequirement ? 0. : dealerPostingRequirement;
  254.     }

  256.     /**
  257.      * Calculate the Margin Value at the Client Default Window
  258.      * 
  259.      * @param valuationDateJulian The Valuation Date
  260.      * 
  261.      * @return The Margin Value at the Client Default Window
  262.      * 
  263.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  264.      */

  266.     public double clientWindowMarginValue (
  267.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  268.         throws java.lang.Exception
  269.     {
  270.         if (null == valuationDateJulian)
  271.         {
  272.             throw new java.lang.Exception
  273.                 ("CollateralAmountEstimator::clientWindowMarginValue => Invalid Inputs");
  274.         }

  276.         org.drip.analytics.date.JulianDate marginDate = valuationDateJulian.subtractDays
  277.             (_positionGroupSpecification.clientDefaultWindow());

  279.         if (null == marginDate)
  280.         {
  281.             throw new java.lang.Exception
  282.                 ("CollateralAmountEstimator::clientWindowMarginValue => Invalid Inputs");
  283.         }

  285.         return _brokenDateInterpolator.interpolate (marginDate.julian());
  286.     }

  288.     /**
  289.      * Calculate the Client Margin Threshold
  290.      * 
  291.      * @param valuationDateJulian The Valuation Date
  292.      * 
  293.      * @return The Client Margin Threshold
  294.      * 
  295.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  296.      */

  298.     public double clientThreshold (
  299.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  300.         throws java.lang.Exception
  301.     {
  302.         org.drip.function.definition.R1ToR1[] clientThresholdFunctionArray =
  303.             _positionGroupSpecification.clientThresholdFunctionArray();

  305.         return null == clientThresholdFunctionArray || null == clientThresholdFunctionArray[0] ? 0. :
  306.             clientThresholdFunctionArray[0].evaluate (valuationDateJulian.julian());
  307.     }

  309.     /**
  310.      * Calculate the Margin Amount Required to be Posted by the Client
  311.      * 
  312.      * @param valuationDateJulian The Valuation Date
  313.      * 
  314.      * @return The Margin Amount Required to be Posted by the Client
  315.      * 
  316.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  317.      */

  319.     public double clientPostingRequirement (
  320.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  321.         throws java.lang.Exception
  322.     {
  323.         double clientPostingRequirement = clientWindowMarginValue (valuationDateJulian) - clientThreshold
  324.             (valuationDateJulian);

  326.         return 0. > clientPostingRequirement ? 0. : clientPostingRequirement;
  327.     }

  329.     /**
  330.      * Calculate the Gross Margin Amount Required to be Posted
  331.      * 
  332.      * @param valuationDateJulian The Valuation Date
  333.      * 
  334.      * @return The Gross Margin Amount Required to be Posted
  335.      * 
  336.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  337.      */

  339.     public double postingRequirement (
  340.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  341.         throws java.lang.Exception
  342.     {
  343.         return org.drip.numerical.common.NumberUtil.IsValid (_currentBalance) ? _currentBalance :
  344.             dealerPostingRequirement (valuationDateJulian) + clientPostingRequirement (valuationDateJulian);
  345.     }

  347.     /**
  348.      * Generate the MarginAmountEstimatorOutput Instance
  349.      * 
  350.      * @param valuationDateJulian The Valuation Date
  351.      * 
  352.      * @return The MarginAmountEstimatorOutput Instance
  353.      */

  355.     public org.drip.exposure.mpor.CollateralAmountEstimatorOutput output (
  356.         final org.drip.analytics.date.JulianDate valuationDateJulian)
  357.     {
  358.         if (null == valuationDateJulian)
  359.         {
  360.             return null;
  361.         }

  363.         org.drip.analytics.date.JulianDate dealerMarginDate = valuationDateJulian.subtractDays
  364.             (_positionGroupSpecification.dealerDefaultWindow());

  366.         org.drip.analytics.date.JulianDate clientMarginDate = valuationDateJulian.subtractDays
  367.             (_positionGroupSpecification.clientDefaultWindow());

  369.         if (null == dealerMarginDate ||
  370.             null == clientMarginDate)
  371.         {
  372.             return null;
  373.         }

  375.         org.drip.function.definition.R1ToR1[] clientThresholdFunctionArray =
  376.             _positionGroupSpecification.clientThresholdFunctionArray();

  378.         org.drip.function.definition.R1ToR1 dealerThresholdFunction =
  379.             _positionGroupSpecification.dealerThresholdFunction();

  381.         double valuationDate = valuationDateJulian.julian();

  383.         try
  384.         {
  385.             double dealerWindowMarginValue = _brokenDateInterpolator.interpolate (dealerMarginDate.julian());

  387.             double clientWindowMarginValue = _brokenDateInterpolator.interpolate (clientMarginDate.julian());

  389.             double dealerThresholdValue = null == dealerThresholdFunction ? 0. :
  390.                 dealerThresholdFunction.evaluate (valuationDate);

  392.             double clientThresholdValue = null == clientThresholdFunctionArray || null ==
  393.                 clientThresholdFunctionArray[0] ? 0. : clientThresholdFunctionArray[0].evaluate
  394.                     (valuationDate);

  396.             double dealerPostingRequirement = dealerWindowMarginValue - dealerThresholdValue;
  397.             dealerPostingRequirement = 0. < dealerPostingRequirement ? 0. : dealerPostingRequirement;
  398.             double clientPostingRequirement = clientWindowMarginValue - clientThresholdValue;
  399.             clientPostingRequirement = 0. > clientPostingRequirement ? 0. : clientPostingRequirement;

  401.             return new org.drip.exposure.mpor.CollateralAmountEstimatorOutput (
  402.                 dealerMarginDate,
  403.                 clientMarginDate,
  404.                 dealerWindowMarginValue,
  405.                 dealerThresholdValue,
  406.                 dealerPostingRequirement,
  407.                 clientWindowMarginValue,
  408.                 clientThresholdValue,
  409.                 clientPostingRequirement,
  410.                 org.drip.numerical.common.NumberUtil.IsValid (_currentBalance) ? _currentBalance :
  411.                     dealerPostingRequirement + clientPostingRequirement);
  412.         }
  413.         catch (java.lang.Exception e)
  414.         {
  415.             e.printStackTrace();
  416.         }

  418.         return null;
  419.     }
  420. }
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