DiscountRate.java

  1. package org.drip.portfolioconstruction.alm;

  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.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  13.  * 
  14.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  15.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  16.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  17.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  18.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  19.  *      and computational support.
  20.  *  
  21.  *      https://lakshmidrip.github.io/DROP/
  22.  *  
  23.  *  DROP is composed of three modules:
  24.  *  
  25.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  26.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  27.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  28.  * 
  29.  *  DROP Product Core implements libraries for the following:
  30.  *  - Fixed Income Analytics
  31.  *  - Loan Analytics
  32.  *  - Transaction Cost Analytics
  33.  * 
  34.  *  DROP Portfolio Core implements libraries for the following:
  35.  *  - Asset Allocation Analytics
  36.  *  - Asset Liability Management Analytics
  37.  *  - Capital Estimation Analytics
  38.  *  - Exposure Analytics
  39.  *  - Margin Analytics
  40.  *  - XVA Analytics
  41.  * 
  42.  *  DROP Computational Core implements libraries for the following:
  43.  *  - Algorithm Support
  44.  *  - Computation Support
  45.  *  - Function Analysis
  46.  *  - Model Validation
  47.  *  - Numerical Analysis
  48.  *  - Numerical Optimizer
  49.  *  - Spline Builder
  50.  *  - Statistical Learning
  51.  * 
  52.  *  Documentation for DROP is Spread Over:
  53.  * 
  54.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  55.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  56.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  57.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  58.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  59.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  60.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  61.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  62.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  63.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  64.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  65.  * 
  66.  *  Licensed under the Apache License, Version 2.0 (the "License");
  67.  *      you may not use this file except in compliance with the License.
  68.  *   
  69.  *  You may obtain a copy of the License at
  70.  *      http://www.apache.org/licenses/LICENSE-2.0
  71.  *  
  72.  *  Unless required by applicable law or agreed to in writing, software
  73.  *      distributed under the License is distributed on an "AS IS" BASIS,
  74.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  75.  *  
  76.  *  See the License for the specific language governing permissions and
  77.  *      limitations under the License.
  78.  */

  80. /**
  81.  * <i>DiscountRate</i> holds the Cash Flow Discount Rate Parameters for each Type, i.e., Discount Rates for
  82.  * Working Age Income, Pension Benefits, and Basic Consumption.
  83.  *
  84.  *  <br><br>
  85.  *  <ul>
  86.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  87.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ALMAnalyticsLibrary.md">Asset Liability Management Analytics</a></li>
  88.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/portfolioconstruction/README.md">Portfolio Construction under Allocation Constraints</a></li>
  89.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/portfolioconstruction/alm/README.md">Sharpe-Tint Asset Liability Manager</a></li>
  90.  *  </ul>
  91.  *
  92.  * @author Lakshmi Krishnamurthy
  93.  */

  95. public class DiscountRate
  96. {
  97.     private double _yield = java.lang.Double.NaN;
  98.     private double _basicConsumptionSpread = java.lang.Double.NaN;
  99.     private double _workingAgeIncomeSpread = java.lang.Double.NaN;
  100.     private double _pensionBenefitsIncomeSpread = java.lang.Double.NaN;

  102.     /**
  103.      * DiscountRate Constructor
  104.      * 
  105.      * @param yield The Base Discounting Yield
  106.      * @param workingAgeIncomeSpread The Working Age Income Spread
  107.      * @param pensionBenefitsIncomeSpread The Pension Benefits Income Spread
  108.      * @param basicConsumptionSpread The Basic Consumption Spread
  109.      * 
  110.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  111.      */

  113.     public DiscountRate (
  114.         final double yield,
  115.         final double workingAgeIncomeSpread,
  116.         final double pensionBenefitsIncomeSpread,
  117.         final double basicConsumptionSpread)
  118.         throws java.lang.Exception
  119.     {
  120.         if (!org.drip.numerical.common.NumberUtil.IsValid (_yield = yield) ||
  121.             !org.drip.numerical.common.NumberUtil.IsValid (_workingAgeIncomeSpread =
  122.                 workingAgeIncomeSpread) ||
  123.             !org.drip.numerical.common.NumberUtil.IsValid (_basicConsumptionSpread =
  124.                 basicConsumptionSpread) ||
  125.             !org.drip.numerical.common.NumberUtil.IsValid (_pensionBenefitsIncomeSpread =
  126.                 pensionBenefitsIncomeSpread))
  127.         {
  128.             throw new java.lang.Exception ("DiscountRate Constructor => Invalid Inputs");
  129.         }
  130.     }

  132.     /**
  133.      * Retrieve the Base Discounting Yield
  134.      * 
  135.      * @return The Base Discounting Yield
  136.      */

  138.     public double yield()
  139.     {
  140.         return _yield;
  141.     }

  143.     /**
  144.      * Retrieve the Working Age Income Spread
  145.      * 
  146.      * @return The Working Age Income Spread
  147.      */

  149.     public double workingAgeIncomeSpread()
  150.     {
  151.         return _workingAgeIncomeSpread;
  152.     }

  154.     /**
  155.      * Retrieve the Working Age Income Discount Rate
  156.      * 
  157.      * @return The Working Age Income Discount Rate
  158.      */

  160.     public double workingAgeIncomeRate()
  161.     {
  162.         return _yield + _workingAgeIncomeSpread;
  163.     }

  165.     /**
  166.      * Retrieve the Working Age Income Discount Factor
  167.      * 
  168.      * @param dblHorizon The Horizon to which the Discount Factor is to be computed
  169.      * 
  170.      * @return The Working Age Income Discount Factor
  171.      * 
  172.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  173.      */

  175.     public double workingAgeIncomeDF (
  176.         final double dblHorizon)
  177.         throws java.lang.Exception
  178.     {
  179.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblHorizon))
  180.         {
  181.             throw new java.lang.Exception ("DiscountRate::workingAgeIncomeDF => Invalid Inputs");
  182.         }

  184.         return java.lang.Math.exp (-1. * dblHorizon * (_yield + _workingAgeIncomeSpread));
  185.     }

  187.     /**
  188.      * Retrieve the Pension Benefits Income Spread
  189.      * 
  190.      * @return The Pension Benefits Income Spread
  191.      */

  193.     public double pensionBenefitsIncomeSpread()
  194.     {
  195.         return _pensionBenefitsIncomeSpread;
  196.     }

  198.     /**
  199.      * Retrieve the Pension Benefits Income Discount Rate
  200.      * 
  201.      * @return The Pension Benefits Income Discount Rate
  202.      */

  204.     public double pensionBenefitsIncomeRate()
  205.     {
  206.         return _yield + _pensionBenefitsIncomeSpread;
  207.     }

  209.     /**
  210.      * Retrieve the Pension Benefits Income Discount Factor
  211.      * 
  212.      * @param dblHorizon The Horizon to which the Discount Factor is to be computed
  213.      * 
  214.      * @return The Pension Benefits Income Discount Factor
  215.      * 
  216.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  217.      */

  219.     public double pensionBenefitsIncomeDF (
  220.         final double dblHorizon)
  221.         throws java.lang.Exception
  222.     {
  223.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblHorizon))
  224.         {
  225.             throw new java.lang.Exception ("DiscountRate::pensionBenefitsIncomeDF => Invalid Inputs");
  226.         }

  228.         return java.lang.Math.exp (-1. * dblHorizon * (_yield + _pensionBenefitsIncomeSpread));
  229.     }

  231.     /**
  232.      * Retrieve the Basic Consumption Spread
  233.      * 
  234.      * @return The Basic Consumption Spread
  235.      */

  237.     public double basicConsumptionSpread()
  238.     {
  239.         return _basicConsumptionSpread;
  240.     }

  242.     /**
  243.      * Retrieve the Basic Consumption Discount Rate
  244.      * 
  245.      * @return The Basic Consumption Discount Rate
  246.      */

  248.     public double basicConsumptionRate()
  249.     {
  250.         return _yield + _basicConsumptionSpread;
  251.     }

  253.     /**
  254.      * Retrieve the Basic Consumption Discount Factor
  255.      * 
  256.      * @param dblHorizon The Horizon to which the Discount Factor is to be computed
  257.      * 
  258.      * @return The Basic Consumption Discount Factor
  259.      * 
  260.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  261.      */

  263.     public double basicConsumptionDF (
  264.         final double dblHorizon)
  265.         throws java.lang.Exception
  266.     {
  267.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblHorizon))
  268.         {
  269.             throw new java.lang.Exception ("DiscountRate::basicConsumptionDF => Invalid Inputs");
  270.         }

  272.         return java.lang.Math.exp (-1. * dblHorizon * (_yield + _basicConsumptionSpread));
  273.     }
  274. }
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