AndersenPykhtinSokolStretch.java

  1. package org.drip.exposure.regression;

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

  78. /**
  79.  * <i>AndersenPykhtinSokolStretch</i> generates the Regression Based Path Exposures off of the Pillar
  80.  * Vertexes using the Pykhtin (2009) Scheme. Eventual Unadjusted Variation Margin Calculation follows
  81.  * Andersen, Pykhtin, and Sokol (2017). The References are:
  82.  *  
  83.  * <br><br>
  84.  *      <ul>
  85.  *          <li>
  86.  *              Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Re-thinking Margin Period of Risk
  87.  *                  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2902737 <b>eSSRN</b>
  88.  *          </li>
  89.  *          <li>
  90.  *              Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Credit Exposure in the Presence of
  91.  *                  Initial Margin https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2806156 <b>eSSRN</b>
  92.  *          </li>
  93.  *          <li>
  94.  *              Albanese, C., and L. Andersen (2014): Accounting for OTC Derivatives: Funding Adjustments and
  95.  *                  the Re-Hypothecation Option https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482955
  96.  *                  <b>eSSRN</b>
  97.  *          </li>
  98.  *          <li>
  99.  *              Burgard, C., and M. Kjaer (2017): Derivatives Funding, Netting, and Accounting
  100.  *                  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2534011 <b>eSSRN</b>
  101.  *          </li>
  102.  *          <li>
  103.  *              Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives
  104.  *                  Pricing <i>Risk</i> <b>21 (2)</b> 97-102
  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/regression/README.md">Regression Based Path Exposure Generation</a></li>
  114.  *  </ul>
  115.  * 
  116.  * @author Lakshmi Krishnamurthy
  117.  */

  119. public class AndersenPykhtinSokolStretch
  120. {
  121.     private int[] _sparseDateArray = null;
  122.     private double[] _sparseExposureArray = null;
  123.     private org.drip.exposure.mpor.TradePayment[] _denseTradePaymentArray = null;
  124.     private org.drip.function.definition.R1ToR1[] _sparseLocalVolatilityArray = null;

  126.     /**
  127.      * AndersenPykhtinSokolStretch Constructor
  128.      * 
  129.      * @param sparseDateArray Array of Sparse Exposure Dates
  130.      * @param sparseExposureArray Array of Sparse Exposures
  131.      * @param sparseLocalVolatilityArray Array of Sparse Local Volatility R1 To R1 Functions
  132.      * @param denseTradePaymentArray Array of Dense Trade Payments
  133.      * 
  134.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  135.      */

  137.     public AndersenPykhtinSokolStretch (
  138.         final int[] sparseDateArray,
  139.         final double[] sparseExposureArray,
  140.         final org.drip.function.definition.R1ToR1[] sparseLocalVolatilityArray,
  141.         final org.drip.exposure.mpor.TradePayment[] denseTradePaymentArray)
  142.         throws java.lang.Exception
  143.     {
  144.         if (null == (_sparseDateArray = sparseDateArray) ||
  145.             null == (_sparseExposureArray = sparseExposureArray) ||
  146.             null == (_sparseLocalVolatilityArray = sparseLocalVolatilityArray) ||
  147.             null == (_denseTradePaymentArray = denseTradePaymentArray))
  148.         {
  149.             throw new java.lang.Exception ("AndersenPykhtinSokolStretch Constructor => Invalid Inputs");
  150.         }

  152.         int sparseExposureDateCount = _sparseDateArray.length;
  153.         int denseExposureDateCount = _denseTradePaymentArray.length;

  155.         if (0 == sparseExposureDateCount ||
  156.             sparseExposureDateCount != _sparseExposureArray.length ||
  157.             !org.drip.numerical.common.NumberUtil.IsValid (_sparseExposureArray) ||
  158.             sparseExposureDateCount != _sparseLocalVolatilityArray.length ||
  159.             sparseExposureDateCount > denseExposureDateCount)
  160.         {
  161.             throw new java.lang.Exception ("AndersenPykhtinSokolStretch Constructor => Invalid Inputs");
  162.         }

  164.         for (int sparseExposureDateIndex = 0;
  165.             sparseExposureDateIndex < sparseExposureDateCount;
  166.             ++sparseExposureDateIndex)
  167.         {
  168.             if (null == _sparseLocalVolatilityArray[sparseExposureDateIndex])
  169.             {
  170.                 throw new java.lang.Exception ("AndersenPykhtinSokolStretch Constructor => Invalid Inputs");
  171.             }
  172.         }

  174.         for (int denseExposureDateIndex = 0;
  175.             denseExposureDateIndex < denseExposureDateCount;
  176.             ++denseExposureDateIndex)
  177.         {
  178.             if (null == _denseTradePaymentArray[denseExposureDateIndex])
  179.             {
  180.                 throw new java.lang.Exception ("AndersenPykhtinSokolStretch Constructor => Invalid Inputs");
  181.             }
  182.         }
  183.     }

  185.     /**
  186.      * Retrieve the Sparse Exposure Date Array
  187.      * 
  188.      * @return The Sparse Exposure Date Array
  189.      */

  191.     public int[] sparseDateArray()
  192.     {
  193.         return _sparseDateArray;
  194.     }

  196.     /**
  197.      * Retrieve the Sparse Exposure Array
  198.      * 
  199.      * @return The Sparse Exposure Array
  200.      */

  202.     public double[] sparseExposureArray()
  203.     {
  204.         return _sparseExposureArray;
  205.     }

  207.     /**
  208.      * Retrieve the Sparse Local Volatility R1 To R1 Array
  209.      * 
  210.      * @return The Sparse Local Volatility R1 To R1 Array
  211.      */

  213.     public org.drip.function.definition.R1ToR1[] sparseLocalVolatilityArray()
  214.     {
  215.         return _sparseLocalVolatilityArray;
  216.     }

  218.     /**
  219.      * Retrieve the Dense Trade Payment Array
  220.      * 
  221.      * @return The Dense Trade Payment Array
  222.      */

  224.     public org.drip.exposure.mpor.TradePayment[] denseTradePaymentArray()
  225.     {
  226.         return _denseTradePaymentArray;
  227.     }

  229.     /**
  230.      * Generate the Dense (Complete) Segment Exposures
  231.      * 
  232.      * @param wanderTrajectory The Wander Date Trajectory
  233.      * 
  234.      * @return The Dense (Complete) Segment Exposures
  235.      */

  237.     public double[] denseExposure (
  238.         final double[] wanderTrajectory)
  239.     {
  240.         int epochDate = _sparseDateArray[0];
  241.         int sparseExposureDateCount = _sparseDateArray.length;
  242.         int denseExposureDateCount = _denseTradePaymentArray.length;
  243.         double[] denseExposureTrajectory = new double[denseExposureDateCount];

  245.         for (int sparseExposureDateIndex = 1;
  246.             sparseExposureDateIndex < sparseExposureDateCount;
  247.             ++sparseExposureDateIndex)
  248.         {
  249.             try
  250.             {
  251.                 new AndersenPykhtinSokolSegment (
  252.                     epochDate,
  253.                     new org.drip.exposure.regression.PillarVertex (
  254.                         _sparseDateArray[sparseExposureDateIndex - 1],
  255.                         _sparseExposureArray[sparseExposureDateIndex - 1]
  256.                     ),
  257.                     new org.drip.exposure.regression.PillarVertex (
  258.                         _sparseDateArray[sparseExposureDateIndex],
  259.                         _sparseExposureArray[sparseExposureDateIndex]
  260.                     ),
  261.                     _sparseLocalVolatilityArray[sparseExposureDateIndex]
  262.                 ).denseExposureTrajectoryUpdate (
  263.                     denseExposureTrajectory,
  264.                     wanderTrajectory
  265.                 );
  266.             }
  267.             catch (java.lang.Exception e)
  268.             {
  269.                 e.printStackTrace();

  271.                 return null;
  272.             }
  273.         }

  275.         for (int denseExposureDateIndex = 0;
  276.             denseExposureDateIndex < denseExposureDateCount;
  277.             ++denseExposureDateIndex)
  278.         {
  279.             org.drip.exposure.mpor.TradePayment tradePayment =
  280.                 _denseTradePaymentArray[denseExposureDateIndex];

  282.             denseExposureTrajectory[denseExposureDateIndex] = denseExposureTrajectory[denseExposureDateIndex]
  283.                 + tradePayment.dealer() - tradePayment.client();
  284.         }

  286.         return denseExposureTrajectory;
  287.     }
  288. }
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