AdjustedVariationMarginEstimator.java

  1. package org.drip.exposure.regressiontrade;

  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>AdjustedVariationMarginEstimator</i> coordinates the Generation of the Path-specific Trade Payment
  80.  * Adjusted Variation Margin Flows. The References are:
  81.  *  
  82.  * <br><br>
  83.  *      <ul>
  84.  *          <li>
  85.  *              Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Re-thinking Margin Period of Risk
  86.  *                  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2902737 <b>eSSRN</b>
  87.  *          </li>
  88.  *          <li>
  89.  *              Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Credit Exposure in the Presence of
  90.  *                  Initial Margin https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2806156 <b>eSSRN</b>
  91.  *          </li>
  92.  *          <li>
  93.  *              Albanese, C., and L. Andersen (2014): Accounting for OTC Derivatives: Funding Adjustments and
  94.  *                  the Re-Hypothecation Option https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482955
  95.  *                  <b>eSSRN</b>
  96.  *          </li>
  97.  *          <li>
  98.  *              Burgard, C., and M. Kjaer (2017): Derivatives Funding, Netting, and Accounting
  99.  *                  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2534011 <b>eSSRN</b>
  100.  *          </li>
  101.  *          <li>
  102.  *              Pykhtin, M. (2009): Modeling Counter-party Credit Exposure in the Presence of Margin
  103.  *                  Agreements http://www.risk-europe.com/protected/michael-pykhtin.pdf
  104.  *          </li>
  105.  *      </ul>
  106.  *
  107.  *  <br><br>
  108.  *  <ul>
  109.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  110.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ExposureAnalyticsLibrary.md">Exposure Analytics</a></li>
  111.  *      <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>
  112.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/exposure/regressiontrade/README.md">Exposure Regression under Margin and Trade Payments</a></li>
  113.  *  </ul>
  114.  * 
  115.  * @author Lakshmi Krishnamurthy
  116.  */

  118. public class AdjustedVariationMarginEstimator
  119. {
  120.     private org.drip.exposure.universe.MarketPath _marketPath = null;
  121.     private org.drip.exposure.mpor.VariationMarginTradePaymentVertex _marginTradePaymentGenerator = null;

  123.     private static final double CumulativeTradePayment (
  124.         final org.drip.exposure.mpor.TradePayment[] denseTradePaymentArray,
  125.         final int startIndex,
  126.         final int endIndex)
  127.     {
  128.         double cumulativeTradePayment = 0.;

  130.         for (int index = startIndex + 1; index <= endIndex; ++index)
  131.         {
  132.             cumulativeTradePayment += (denseTradePaymentArray[index].dealer() +
  133.                 denseTradePaymentArray[index].client());
  134.         }

  136.         return cumulativeTradePayment;
  137.     }

  139.     /**
  140.      * AdjustedVariationMarginEstimator Constructor
  141.      * 
  142.      * @param marginTradePaymentGenerator The Path-wise Variation Margin/Trade Payment Generator
  143.      * @param marketPath The Market Path
  144.      * 
  145.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  146.      */

  148.     public AdjustedVariationMarginEstimator (
  149.         final org.drip.exposure.mpor.VariationMarginTradePaymentVertex marginTradePaymentGenerator,
  150.         final org.drip.exposure.universe.MarketPath marketPath)
  151.         throws java.lang.Exception
  152.     {
  153.         if (null == (_marginTradePaymentGenerator = marginTradePaymentGenerator) ||
  154.             null == (_marketPath = marketPath))
  155.         {
  156.             throw new java.lang.Exception ("AdjustedVariationMarginEstimator Constructor => Invalid Inputs");
  157.         }
  158.     }

  160.     /**
  161.      * Retrieve the Path-wise Variation Margin/Trade Payment Generator
  162.      * 
  163.      * @return The Path-wise Variation Margin/Trade Payment Generator
  164.      */

  166.     public org.drip.exposure.mpor.VariationMarginTradePaymentVertex marginTradePaymentGenerator()
  167.     {
  168.         return _marginTradePaymentGenerator;
  169.     }

  171.     /**
  172.      * Retrieve the Path-wise Market Path
  173.      * 
  174.      * @return The Path-wise Market Path
  175.      */

  177.     public org.drip.exposure.universe.MarketPath marketPath()
  178.     {
  179.         return _marketPath;
  180.     }

  182.     /**
  183.      * Generate the Path-wise Variation Margin Estimate on the Exposure Dates
  184.      * 
  185.      * @param exposureDateArray The Path-wise Exposure Dates
  186.      * 
  187.      * @return The Path-wise Variation Margin Estimate on the Exposure Dates
  188.      */

  190.     public double[] variationMarginEstimate (
  191.         final int[] exposureDateArray)
  192.     {
  193.         if (null == exposureDateArray)
  194.         {
  195.             return null;
  196.         }

  198.         int exposureDateCount = exposureDateArray.length;
  199.         double[] variationMarginEstimateArray = 0 == exposureDateCount ? null : new double[exposureDateCount];

  201.         if (0 == exposureDateCount)
  202.         {
  203.             return null;
  204.         }

  206.         for (int exposureDateIndex = 0; exposureDateIndex < exposureDateCount; ++exposureDateIndex)
  207.         {
  208.             try
  209.             {
  210.                 variationMarginEstimateArray[exposureDateIndex] =
  211.                     _marginTradePaymentGenerator.variationMarginEstimate (
  212.                         exposureDateArray[exposureDateIndex],
  213.                         _marketPath
  214.                     );
  215.             }
  216.             catch (java.lang.Exception e)
  217.             {
  218.                 e.printStackTrace();

  220.                 return null;
  221.             }
  222.         }

  224.         return variationMarginEstimateArray;
  225.     }

  227.     /**
  228.      * Retrieve the Dense Trade Payment Array across the Exposure Date Range
  229.      * 
  230.      * @param startDate The Exposure Range Start Date
  231.      * @param endDate The Exposure Range End Date
  232.      * 
  233.      * @return The Dense Trade Payment Array
  234.      */

  236.     public org.drip.exposure.mpor.TradePayment[] denseTradePayment (
  237.         final int startDate,
  238.         final int endDate)
  239.     {
  240.         return _marginTradePaymentGenerator.denseTradePaymentArray (
  241.             startDate,
  242.             endDate,
  243.             _marketPath
  244.         );
  245.     }

  247.     /**
  248.      * Generate the Path-wise Andersen Pykhtin Sokol (2017) Variation Margin Estimates on the Exposure Dates
  249.      * 
  250.      * @param exposureDateArray The Path-wise Exposure Dates
  251.      * 
  252.      * @return The Path-wise Andersen Pykhtin Sokol (2017) Variation Margin Estimates on the Exposure Dates
  253.      */

  255.     public org.drip.exposure.regressiontrade.AndersenPykhtinSokolPath andersenPykhtinSokolPath (
  256.         final int[] exposureDateArray)
  257.     {
  258.         double[] variationMarginEstimateArray = variationMarginEstimate (exposureDateArray);

  260.         if (null == variationMarginEstimateArray)
  261.         {
  262.             return null;
  263.         }

  265.         int exposureDateCount = variationMarginEstimateArray.length;
  266.         org.drip.exposure.regressiontrade.AndersenPykhtinSokolPath andersenPykhtinSokolPath = null;

  268.         org.drip.exposure.mpor.TradePayment[] denseTradePaymentArray = denseTradePayment (
  269.             exposureDateArray[0],
  270.             exposureDateArray[exposureDateArray.length - 1]
  271.         );

  273.         try
  274.         {
  275.             andersenPykhtinSokolPath = new org.drip.exposure.regressiontrade.AndersenPykhtinSokolPath
  276.                 (denseTradePaymentArray);
  277.         }
  278.         catch (java.lang.Exception e)
  279.         {
  280.             e.printStackTrace();

  282.             return null;
  283.         }

  285.         for (int exposureDateIndex = 0; exposureDateIndex < exposureDateCount; ++exposureDateIndex)
  286.         {
  287.             double periodCumulativeTradePayment = 0 == exposureDateIndex ? 0. : CumulativeTradePayment (
  288.                 denseTradePaymentArray,
  289.                 exposureDateArray[exposureDateIndex - 1] - exposureDateArray[0],
  290.                 exposureDateArray[exposureDateIndex] - exposureDateArray[0]
  291.             );

  293.             if (!andersenPykhtinSokolPath.addVariationMarginEstimateVertex (
  294.                 exposureDateArray[exposureDateIndex],
  295.                 variationMarginEstimateArray[exposureDateIndex],
  296.                 variationMarginEstimateArray[exposureDateIndex] - periodCumulativeTradePayment
  297.             ))
  298.             {
  299.                 return null;
  300.             }
  301.         }

  303.         return andersenPykhtinSokolPath;
  304.     }

  306.     /**
  307.      * Generate the Path-wise Andersen Pykhtin Sokol (2017) Adjusted Variation Margin Estimates
  308.      * 
  309.      * @param exposureDateArray The Path-wise Exposure Dates
  310.      * 
  311.      * @return The Path-wise Andersen Pykhtin Sokol (2017) Adjusted Variation Margin Estimates
  312.      */

  314.     public org.drip.exposure.regressiontrade.AdjustedVariationMarginEstimate adjustedVariationMarginEstimate (
  315.         final int[] exposureDateArray)
  316.     {
  317.         double[] variationMarginEstimateArray = variationMarginEstimate (exposureDateArray);

  319.         if (null == variationMarginEstimateArray)
  320.         {
  321.             return null;
  322.         }

  324.         int exposureDateCount = variationMarginEstimateArray.length;
  325.         double[] adjustedVariationMarginEstimateArray = new double[exposureDateCount];

  327.         org.drip.exposure.mpor.TradePayment[] denseTradePaymentArray = denseTradePayment (
  328.             exposureDateArray[0],
  329.             exposureDateArray[exposureDateArray.length - 1]
  330.         );

  332.         if (null == denseTradePaymentArray)
  333.         {
  334.             return null;
  335.         }

  337.         for (int exposureDateIndex = 0; exposureDateIndex < exposureDateCount; ++exposureDateIndex)
  338.         {
  339.             adjustedVariationMarginEstimateArray[exposureDateIndex] =
  340.                 variationMarginEstimateArray[exposureDateIndex] - (0 == exposureDateIndex ? 0. :
  341.                     CumulativeTradePayment (
  342.                         denseTradePaymentArray,
  343.                         exposureDateArray[exposureDateIndex - 1] - exposureDateArray[0],
  344.                         exposureDateArray[exposureDateIndex] - exposureDateArray[0]
  345.                     )
  346.                 );
  347.         }

  349.         try
  350.         {
  351.             return new org.drip.exposure.regressiontrade.AdjustedVariationMarginEstimate (
  352.                 adjustedVariationMarginEstimateArray,
  353.                 denseTradePaymentArray
  354.             );
  355.         }
  356.         catch (java.lang.Exception e)
  357.         {
  358.             e.printStackTrace();
  359.         }

  361.         return null;
  362.     }
  363. }
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