MarketVertexEntity.java
package org.drip.exposure.universe;
/*
* -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
*/
/*!
* Copyright (C) 2020 Lakshmi Krishnamurthy
* Copyright (C) 2019 Lakshmi Krishnamurthy
* Copyright (C) 2018 Lakshmi Krishnamurthy
* Copyright (C) 2017 Lakshmi Krishnamurthy
*
* This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
* asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
* analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
* equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
* numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
* and computational support.
*
* https://lakshmidrip.github.io/DROP/
*
* DROP is composed of three modules:
*
* - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
* - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
* - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
*
* DROP Product Core implements libraries for the following:
* - Fixed Income Analytics
* - Loan Analytics
* - Transaction Cost Analytics
*
* DROP Portfolio Core implements libraries for the following:
* - Asset Allocation Analytics
* - Asset Liability Management Analytics
* - Capital Estimation Analytics
* - Exposure Analytics
* - Margin Analytics
* - XVA Analytics
*
* DROP Computational Core implements libraries for the following:
* - Algorithm Support
* - Computation Support
* - Function Analysis
* - Model Validation
* - Numerical Analysis
* - Numerical Optimizer
* - Spline Builder
* - Statistical Learning
*
* Documentation for DROP is Spread Over:
*
* - Main => https://lakshmidrip.github.io/DROP/
* - Wiki => https://github.com/lakshmiDRIP/DROP/wiki
* - GitHub => https://github.com/lakshmiDRIP/DROP
* - Repo Layout Taxonomy => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
* - Javadoc => https://lakshmidrip.github.io/DROP/Javadoc/index.html
* - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
* - Release Versions => https://lakshmidrip.github.io/DROP/version.html
* - Community Credits => https://lakshmidrip.github.io/DROP/credits.html
* - Issues Catalog => https://github.com/lakshmiDRIP/DROP/issues
* - JUnit => https://lakshmidrip.github.io/DROP/junit/index.html
* - Jacoco => https://lakshmidrip.github.io/DROP/jacoco/index.html
*
* Licensed under the Apache License, Version 2.0 (the "License");
* you may not use this file except in compliance with the License.
*
* You may obtain a copy of the License at
* http://www.apache.org/licenses/LICENSE-2.0
*
* Unless required by applicable law or agreed to in writing, software
* distributed under the License is distributed on an "AS IS" BASIS,
* WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
*
* See the License for the specific language governing permissions and
* limitations under the License.
*/
/**
* <i>MarketVertexEntity</i> holds the Realizations at a Market Trajectory Vertex of the given XVA Entity
* (i.e., Dealer/Client). The References are:
*
* <br><br>
* <ul>
* <li>
* Burgard, C., and M. Kjaer (2013): Funding Costs, Funding Strategies <i>Risk</i> <b>23
* (12)</b> 82-87
* </li>
* <li>
* Burgard, C., and M. Kjaer (2014): In the Balance <i>Risk</i> <b>24 (11)</b> 72-75
* </li>
* <li>
* Burgard, C., and M. Kjaer (2014): PDE Representations of Derivatives with Bilateral Counter-
* party Risk and Funding Costs <i>Journal of Credit Risk</i> <b>7 (3)</b> 1-19
* </li>
* <li>
* Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk <i>Risk</i> <b>20 (2)</b>
* 86-90
* </li>
* <li>
* Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives
* Pricing <i>Risk</i> <b>21 (2)</b> 97-102
* </li>
* <li>
* </ul>
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ExposureAnalyticsLibrary.md">Exposure Analytics</a></li>
* <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>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/exposure/universe/README.md">Exposure Generation - Market States Simulation</a></li>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class MarketVertexEntity
{
private double _hazardRate = java.lang.Double.NaN;
private double _seniorRecoveryRate = java.lang.Double.NaN;
private double _seniorFundingSpread = java.lang.Double.NaN;
private double _survivalProbability = java.lang.Double.NaN;
private double _seniorFundingReplicator = java.lang.Double.NaN;
private double _subordinateRecoveryRate = java.lang.Double.NaN;
private double _subordinateFundingSpread = java.lang.Double.NaN;
private double _subordinateFundingReplicator = java.lang.Double.NaN;
/**
* Instance of Senior MarketVertexEntity
*
* @param timeWidth The Time Width of the Node
* @param hazardRate The Hazard Rate Latent State
* @param seniorRecoveryRate The Recovery Rate Latent State
* @param seniorFundingSpread The Funding Spread Latent State
* @param baseRate The Period Base Discount Rate
* @param previousMarketVertexEntity The Previous Instance of MarketVertexEntity
*
* @return Instance of Senior MarketVertexEntity
*/
public static final MarketVertexEntity Senior (
final double timeWidth,
final double hazardRate,
final double seniorRecoveryRate,
final double seniorFundingSpread,
final double baseRate,
final org.drip.exposure.universe.MarketVertexEntity previousMarketVertexEntity)
{
if (null == previousMarketVertexEntity)
{
return null;
}
try
{
return new org.drip.exposure.universe.MarketVertexEntity (
previousMarketVertexEntity.survivalProbability()
* java.lang.Math.exp (-1. * hazardRate * timeWidth),
hazardRate,
seniorRecoveryRate,
seniorFundingSpread,
previousMarketVertexEntity.seniorFundingReplicator() *
java.lang.Math.exp ((baseRate + seniorFundingSpread) * timeWidth),
java.lang.Double.NaN,
java.lang.Double.NaN,
java.lang.Double.NaN
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* Instance of Senior MarketVertexEntity
*
* @param timeWidth The Time Width of the Node
* @param hazardRate The Hazard Rate Latent State
* @param seniorRecoveryRate The Recovery Rate Latent State
* @param seniorFundingSpread The Funding Spread Latent State
* @param baseRate The Period Base Discount Rate
*
* @return Instance of Senior MarketVertexEntity
*/
public static final MarketVertexEntity Senior (
final double timeWidth,
final double hazardRate,
final double seniorRecoveryRate,
final double seniorFundingSpread,
final double baseRate)
{
try
{
return Senior (
timeWidth,
hazardRate,
seniorRecoveryRate,
seniorFundingSpread,
baseRate,
new MarketVertexEntity (
1.,
hazardRate,
seniorRecoveryRate,
seniorFundingSpread,
1.,
java.lang.Double.NaN,
java.lang.Double.NaN,
java.lang.Double.NaN
)
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* Instance of Senior + Subordinate MarketVertexEntity
*
* @param timeWidth The Time Width
* @param hazardRate The Hazard Rate Latent State
* @param seniorRecoveryRate The Senior Recovery Rate Latent State
* @param seniorFundingSpread The Senior Funding Spread Latent State
* @param subordinateRecoveryRate The Subordinate Recovery Rate Latent State
* @param subordinateFundingSpread The Subordinate Funding Spread Latent State
* @param baseRate The Period Base Discount Rate
* @param previousMarketVertexEntity The Previous Instance of MarketVertexEntity
*
* @return Instance of Senior MarketVertexEntity
*/
public static final MarketVertexEntity SeniorSubordinate (
final double timeWidth,
final double hazardRate,
final double seniorRecoveryRate,
final double seniorFundingSpread,
final double subordinateRecoveryRate,
final double subordinateFundingSpread,
final double baseRate,
final org.drip.exposure.universe.MarketVertexEntity previousMarketVertexEntity)
{
if (null == previousMarketVertexEntity)
{
return null;
}
try
{
return new org.drip.exposure.universe.MarketVertexEntity (
previousMarketVertexEntity.survivalProbability() *
java.lang.Math.exp (-1. * hazardRate * timeWidth),
hazardRate,
seniorRecoveryRate,
seniorFundingSpread,
previousMarketVertexEntity.seniorFundingReplicator() *
java.lang.Math.exp ((baseRate + seniorFundingSpread) * timeWidth),
subordinateRecoveryRate,
subordinateFundingSpread,
previousMarketVertexEntity.subordinateFundingReplicator() *
java.lang.Math.exp ((baseRate + subordinateFundingSpread) * timeWidth)
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* Instance of Senior + Subordinate MarketVertexEntity
*
* @param timeWidth The Time Width
* @param hazardRate The Hazard Rate Latent State
* @param seniorRecoveryRate The Senior Recovery Rate Latent State
* @param seniorFundingSpread The Senior Funding Spread Latent State
* @param subordinateRecoveryRate The Subordinate Recovery Rate Latent State
* @param subordinateFundingSpread The Subordinate Funding Spread Latent State
* @param baseRate The Period Base Discount Rate
*
* @return Instance of Senior MarketVertexEntity
*/
public static final MarketVertexEntity SeniorSubordinate (
final double timeWidth,
final double hazardRate,
final double seniorRecoveryRate,
final double seniorFundingSpread,
final double subordinateRecoveryRate,
final double subordinateFundingSpread,
final double baseRate)
{
try
{
return SeniorSubordinate (
timeWidth,
hazardRate,
seniorRecoveryRate,
seniorFundingSpread,
subordinateRecoveryRate,
subordinateFundingSpread,
baseRate,
new MarketVertexEntity (
1.,
hazardRate,
seniorRecoveryRate,
seniorFundingSpread,
1.,
subordinateRecoveryRate,
subordinateFundingSpread,
1.
)
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* MarketVertexEntity Constructor
*
* @param survivalProbability The Realized Entity Survival Probability
* @param hazardRate The Realized Entity Hazard Rate Latent State
* @param seniorRecoveryRate The Entity Senior Recovery Rate Latent State
* @param seniorFundingSpread The Entity Senior Funding Spread Latent State
* @param seniorFundingReplicator The Entity Senior Funding Replicator Vertex Latent State
* @param subordinateRecoveryRate The Entity Subordinate Recovery Rate Latent State
* @param subordinateFundingSpread The Entity Subordinate Funding Spread Latent State
* @param subordinateFundingReplicator The Entity Subordinate Funding Replicator Vertex Latent State
*
* @throws java.lang.Exception Thrown if the Inputs are Invalid
*/
public MarketVertexEntity (
final double survivalProbability,
final double hazardRate,
final double seniorRecoveryRate,
final double seniorFundingSpread,
final double seniorFundingReplicator,
final double subordinateRecoveryRate,
final double subordinateFundingSpread,
final double subordinateFundingReplicator)
throws java.lang.Exception
{
if (!org.drip.numerical.common.NumberUtil.IsValid (_survivalProbability = survivalProbability) ||
!org.drip.numerical.common.NumberUtil.IsValid (_hazardRate = hazardRate) ||
!org.drip.numerical.common.NumberUtil.IsValid (_seniorRecoveryRate = seniorRecoveryRate) ||
!org.drip.numerical.common.NumberUtil.IsValid (_seniorFundingSpread = seniorFundingSpread) ||
!org.drip.numerical.common.NumberUtil.IsValid (_seniorFundingReplicator = seniorFundingReplicator))
{
throw new java.lang.Exception ("MarketVertexEntity Constructor => Invalid Inputs");
}
_subordinateRecoveryRate = subordinateRecoveryRate;
_subordinateFundingSpread = subordinateFundingSpread;
_subordinateFundingReplicator = subordinateFundingReplicator;
}
/**
* Retrieve the Realized Entity Survival Probability
*
* @return The Realized Entity Survival Probability
*/
public double survivalProbability()
{
return _survivalProbability;
}
/**
* Retrieve the Realized Entity Hazard Rate Vertex Latent State
*
* @return The Realized Entity Hazard Rate Vertex Latent State
*/
public double hazardRate()
{
return _hazardRate;
}
/**
* Retrieve the Realized Entity Senior Recovery Rate Vertex Latent State
*
* @return The Realized Entity Senior Recovery Rate Vertex Latent State
*/
public double seniorRecoveryRate()
{
return _seniorRecoveryRate;
}
/**
* Retrieve the Realized Entity Senior Funding Spread Vertex Latent State
*
* @return The Realized Entity Senior Funding Spread Vertex Latent State
*/
public double seniorFundingSpread()
{
return _seniorFundingSpread;
}
/**
* Retrieve the Realized Entity Senior Funding Replicator Vertex Latent State
*
* @return The Realized Entity Senior Funding Replicator Vertex Latent State
*/
public double seniorFundingReplicator()
{
return _seniorFundingReplicator;
}
/**
* Retrieve the Realized Entity Subordinate Recovery Rate Vertex Latent State
*
* @return The Realized Entity Subordinate Recovery Rate Vertex Latent State
*/
public double subordinateRecoveryRate()
{
return _subordinateRecoveryRate;
}
/**
* Retrieve the Realized Entity Subordinate Funding Spread Vertex Latent State
*
* @return The Realized Entity Subordinate Funding Spread Vertex Latent State
*/
public double subordinateFundingSpread()
{
return _subordinateFundingSpread;
}
/**
* Retrieve the Realized Entity Subordinate Funding Replicator Vertex Latent State
*
* @return The Realized Entity Subordinate Funding Replicator Vertex Latent State
*/
public double subordinateFundingReplicator()
{
return _subordinateFundingReplicator;
}
}