NetLiabilityStream.java
package org.drip.portfolioconstruction.alm;
/*
* -*- 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
* Copyright (C) 2016 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>NetLiabilityStream</i> holds the Investor's Horizon, Consumption, and Income Settings needed to
* generate and value the Net Liability Cash Flow Stream.
*
* <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/ALMAnalyticsLibrary.md">Asset Liability Management Analytics</a></li>
* <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>
* <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>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class NetLiabilityStream
{
private double _afterTaxIncome = java.lang.Double.NaN;
private org.drip.portfolioconstruction.alm.InvestorCliffSettings _investorCliffSettings = null;
private org.drip.portfolioconstruction.alm.ExpectedBasicConsumption _expectedBasicConsumption = null;
private org.drip.portfolioconstruction.alm.ExpectedNonFinancialIncome _expectedNonFinancialIncome = null;
/**
* NetLiabilityStream Constructor
*
* @param investorCliffSettings The Investor's Time Cliff Settings
* @param expectedNonFinancialIncome The Investor's Non-Financial Income Settings
* @param expectedBasicConsumption The Investor's Basic Consumption Settings
* @param afterTaxIncome The Basic After-Tax Income
*
* @throws java.lang.Exception Thrown if the Inputs are Invalid
*/
public NetLiabilityStream (
final org.drip.portfolioconstruction.alm.InvestorCliffSettings investorCliffSettings,
final org.drip.portfolioconstruction.alm.ExpectedNonFinancialIncome expectedNonFinancialIncome,
final org.drip.portfolioconstruction.alm.ExpectedBasicConsumption expectedBasicConsumption,
final double afterTaxIncome)
throws java.lang.Exception
{
if (null == (_investorCliffSettings = investorCliffSettings) ||
null == (_expectedNonFinancialIncome = expectedNonFinancialIncome) ||
null == (_expectedBasicConsumption = expectedBasicConsumption) ||
!org.drip.numerical.common.NumberUtil.IsValid (_afterTaxIncome = afterTaxIncome))
{
throw new java.lang.Exception ("NetLiabilityStream Constructor => Invalid Inputs");
}
}
/**
* Retrieve the Investor's Time Horizon Settings
*
* @return The Investor's Time Horizon Settings
*/
public org.drip.portfolioconstruction.alm.InvestorCliffSettings investorCliffSettings()
{
return _investorCliffSettings;
}
/**
* Retrieve the Investor's Basic Consumption Settings
*
* @return The Investor's Basic Consumption Settings
*/
public org.drip.portfolioconstruction.alm.ExpectedBasicConsumption basicConsumption()
{
return _expectedBasicConsumption;
}
/**
* Retrieve the Investor's Non-Financial Income Settings
*
* @return The Investor's Non-Financial Income Settings
*/
public org.drip.portfolioconstruction.alm.ExpectedNonFinancialIncome nonFinancialIncome()
{
return _expectedNonFinancialIncome;
}
/**
* Retrieve the Basic After-Tax Income
*
* @return The Basic After-Tax Income
*/
public double afterTaxIncome()
{
return _afterTaxIncome;
}
/**
* Generate the NetLiabilityMetrics Instance
*
* @param startAge The Starting Age
* @param endAge The Ending Age
* @param discountRate The Discount Rate Instance
*
* @return The NetLiabilityMetrics Instance
*/
public org.drip.portfolioconstruction.alm.NetLiabilityMetrics generateMetrics (
final double startAge,
final double endAge,
final org.drip.portfolioconstruction.alm.DiscountRate discountRate)
{
if (!org.drip.numerical.common.NumberUtil.IsValid (startAge) ||
!org.drip.numerical.common.NumberUtil.IsValid (endAge) ||
startAge >= endAge ||
null == discountRate)
{
return null;
}
java.util.List<org.drip.portfolioconstruction.alm.NetLiabilityCashFlow> netLiabilityCashFlowList =
new java.util.ArrayList<org.drip.portfolioconstruction.alm.NetLiabilityCashFlow>();
double basicConsumptionPV = 0.;
double workingAgeIncomePV = 0.;
double pensionBenefitsIncomePV = 0.;
for (double currentAge = startAge + 1.; currentAge <= endAge; ++currentAge)
{
double horizon = currentAge - startAge;
try
{
boolean isAlive = _investorCliffSettings.isAlive (currentAge);
double basicConsumptionDF = discountRate.basicConsumptionDF (horizon);
double workingAgeIncomeDF = discountRate.workingAgeIncomeDF (horizon);
boolean isRetirement = _investorCliffSettings.retirementIndicator (currentAge);
double pensionBenefitsIncomeDF = discountRate.pensionBenefitsIncomeDF (horizon);
double basicConsumption = _afterTaxIncome * _expectedBasicConsumption.rate (
currentAge,
_investorCliffSettings
);
double workingAgeIncome = !isRetirement && isAlive ?
_afterTaxIncome * _expectedNonFinancialIncome.rate (
currentAge,
_investorCliffSettings
) : 0.;
double pensionBenefitsIncome = isRetirement && isAlive ?
_afterTaxIncome * _expectedNonFinancialIncome.rate (
currentAge,
_investorCliffSettings
) : 0.;
netLiabilityCashFlowList.add (
new org.drip.portfolioconstruction.alm.NetLiabilityCashFlow (
currentAge,
isRetirement,
isAlive,
horizon,
_afterTaxIncome,
workingAgeIncome,
pensionBenefitsIncome,
basicConsumption,
workingAgeIncomeDF,
pensionBenefitsIncomeDF,
basicConsumptionDF
)
);
basicConsumptionPV += basicConsumption * basicConsumptionDF;
workingAgeIncomePV += workingAgeIncome * workingAgeIncomeDF;
pensionBenefitsIncomePV += pensionBenefitsIncome * pensionBenefitsIncomeDF;
}
catch (java.lang.Exception e)
{
e.printStackTrace();
return null;
}
}
try
{
return new org.drip.portfolioconstruction.alm.NetLiabilityMetrics (
netLiabilityCashFlowList,
workingAgeIncomePV,
pensionBenefitsIncomePV,
basicConsumptionPV
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
}