DiffusionEvaluatorOrnsteinUhlenbeck.java

  1. package org.drip.measure.dynamics;

  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>DiffusionEvaluatorOrnsteinUhlenbeck</i> evaluates the Drift/Volatility of the Diffusion Random Variable
  81.  * Evolution according to R<sup>1</sup> Ornstein Uhlenbeck Process.
  82.  *
  83.  *  <br><br>
  84.  *  <ul>
  85.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ComputationalCore.md">Computational Core Module</a></li>
  86.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/NumericalAnalysisLibrary.md">Numerical Analysis Library</a></li>
  87.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/measure/README.md">R<sup>d</sup> Continuous/Discrete Probability Measures</a></li>
  88.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/measure/dynamics/README.md">Jump Diffusion Evolution Evaluator Variants</a></li>
  89.  *  </ul>
  90.  *
  91.  * @author Lakshmi Krishnamurthy
  92.  */

  94. public class DiffusionEvaluatorOrnsteinUhlenbeck extends org.drip.measure.dynamics.DiffusionEvaluator
  95.     implements org.drip.measure.process.OrnsteinUhlenbeck {
  96.     private double _dblBurstiness = java.lang.Double.NaN;
  97.     private double _dblRelaxationTime = java.lang.Double.NaN;
  98.     private double _dblMeanReversionLevel = java.lang.Double.NaN;

  100.     /**
  101.      * Construct a Standard Instance of DiffusionEvaluatorOrnsteinUhlenbeck
  102.      * 
  103.      * @param dblMeanReversionLevel The Mean Reversion Level
  104.      * @param dblBurstiness The Burstiness Parameter
  105.      * @param dblRelaxationTime The Relaxation Time
  106.      * 
  107.      * @return The Standard Instance of DiffusionEvaluatorOrnsteinUhlenbeck
  108.      */

  110.     public static final DiffusionEvaluatorOrnsteinUhlenbeck Standard (
  111.         final double dblMeanReversionLevel,
  112.         final double dblBurstiness,
  113.         final double dblRelaxationTime)
  114.     {
  115.         org.drip.measure.dynamics.LocalEvaluator leDrift = new org.drip.measure.dynamics.LocalEvaluator() {
  116.             @Override public double value (
  117.                 final org.drip.measure.realization.JumpDiffusionVertex jdv)
  118.                 throws java.lang.Exception
  119.             {
  120.                 if (null == jdv)
  121.                     throw new java.lang.Exception
  122.                         ("DiffusionEvaluatorOrnsteinUhlenbeck::DriftLDEV::value => Invalid Inputs");

  124.                 return -1. * jdv.value() / dblRelaxationTime;
  125.             }
  126.         };

  128.         org.drip.measure.dynamics.LocalEvaluator leVolatility = new
  129.             org.drip.measure.dynamics.LocalEvaluator() {
  130.             @Override public double value (
  131.                 final org.drip.measure.realization.JumpDiffusionVertex jdv)
  132.                 throws java.lang.Exception
  133.             {
  134.                 return dblBurstiness * java.lang.Math.sqrt (1. / dblRelaxationTime);
  135.             }
  136.         };

  138.         try {
  139.             return new DiffusionEvaluatorOrnsteinUhlenbeck (dblMeanReversionLevel, dblBurstiness,
  140.                 dblRelaxationTime, leDrift, leVolatility);
  141.         } catch (java.lang.Exception e) {
  142.             e.printStackTrace();
  143.         }

  145.         return null;
  146.     }

  148.     /**
  149.      * Construct a Zero-Mean Instance of DiffusionEvaluatorOrnsteinUhlenbeck
  150.      * 
  151.      * @param dblBurstiness The Burstiness Parameter
  152.      * @param dblRelaxationTime The Relaxation Time
  153.      * 
  154.      * @return The Zero-Mean Instance of DiffusionEvaluatorOrnsteinUhlenbeck
  155.      */

  157.     public static final DiffusionEvaluatorOrnsteinUhlenbeck ZeroMean (
  158.         final double dblBurstiness,
  159.         final double dblRelaxationTime)
  160.     {
  161.         return Standard (0., dblBurstiness, dblRelaxationTime);
  162.     }

  164.     private DiffusionEvaluatorOrnsteinUhlenbeck (
  165.         final double dblMeanReversionLevel,
  166.         final double dblBurstiness,
  167.         final double dblRelaxationTime,
  168.         final org.drip.measure.dynamics.LocalEvaluator leDrift,
  169.         final org.drip.measure.dynamics.LocalEvaluator leVolatility)
  170.         throws java.lang.Exception
  171.     {
  172.         super (leDrift, leVolatility);

  174.         if (!org.drip.numerical.common.NumberUtil.IsValid (_dblMeanReversionLevel = dblMeanReversionLevel) ||
  175.             !org.drip.numerical.common.NumberUtil.IsValid (_dblBurstiness = dblBurstiness) || 0. >=
  176.                 _dblBurstiness || !org.drip.numerical.common.NumberUtil.IsValid (_dblRelaxationTime =
  177.                     dblRelaxationTime) || 0. >= _dblRelaxationTime)
  178.             throw new java.lang.Exception
  179.                 ("DiffusionEvaluatorOrnsteinUhlenbeck Constructor => Invalid Inputs");
  180.     }

  182.     /**
  183.      * Retrieve the Mean Reversion Level
  184.      * 
  185.      * @return The Mean Reversion Level
  186.      */

  188.     public double meanReversionLevel()
  189.     {
  190.         return _dblMeanReversionLevel;
  191.     }

  193.     /**
  194.      * Retrieve the Burstiness Parameter
  195.      * 
  196.      * @return The Burstiness Parameter
  197.      */

  199.     public double burstiness()
  200.     {
  201.         return _dblBurstiness;
  202.     }

  204.     /**
  205.      * Retrieve the Relaxation Time
  206.      * 
  207.      * @return The Relaxation Time
  208.      */

  210.     public double relaxationTime()
  211.     {
  212.         return _dblRelaxationTime;
  213.     }

  215.     @Override public double referenceRelaxationTime()
  216.     {
  217.         return relaxationTime();
  218.     }

  220.     @Override public double referenceBurstiness()
  221.     {
  222.         return burstiness();
  223.     }

  225.     @Override public double referenceMeanReversionLevel()
  226.     {
  227.         return meanReversionLevel();
  228.     }
  229. }
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