FRAMarketComponent.java

package org.drip.product.fra;

/*
 * -*- 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
 * Copyright (C) 2015 Lakshmi Krishnamurthy
 * Copyright (C) 2014 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>FRAMarketComponent</i> contains the implementation of the Standard Multi-Curve FRA product whose payoff
 * is dictated off of Market FRA Conventions.
 *
 *  <br><br>
 *  <ul>
 *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
 *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
 *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/product/README.md">Product Components/Baskets for Credit, FRA, FX, Govvie, Rates, and Option AssetClasses</a></li>
 *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/product/fra/README.md">Standard/Market FRAs - Caps/Floors</a></li>
 *  </ul>
 * <br><br>
 * 
 * @author Lakshmi Krishnamurthy
 */

public class FRAMarketComponent extends org.drip.product.fra.FRAStandardComponent {

    /**
     * FRAMarketComponent constructor
     * 
     * @param strName Futures Component Name
     * @param stream Futures Stream
     * @param dblStrike Futures Strike
     * @param csp Cash Settle Parameters Instance
     * 
     * @throws java.lang.Exception Thrown if Inputs are Invalid
     */

    public FRAMarketComponent (
        final java.lang.String strName,
        final org.drip.product.rates.Stream stream,
        final double dblStrike,
        final org.drip.param.valuation.CashSettleParams csp)
        throws java.lang.Exception
    {
        super (strName, stream, dblStrike, csp);
    }

    @Override public org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> value (
        final org.drip.param.valuation.ValuationParams valParams,
        final org.drip.param.pricer.CreditPricerParams pricerParams,
        final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
        final org.drip.param.valuation.ValuationCustomizationParams vcp)
    {
        if (null == valParams || null == csqs) return null;

        long lStart = System.nanoTime();

        int iValueDate = valParams.valueDate();

        int iEffectiveDate = effectiveDate().julian();

        if (iValueDate > iEffectiveDate) return null;

        org.drip.state.identifier.FundingLabel fundingLabel = org.drip.state.identifier.FundingLabel.Standard
            (payCurrency());

        org.drip.state.discount.MergedDiscountForwardCurve dcFunding = csqs.fundingState (fundingLabel);

        if (null == dcFunding) return null;

        org.drip.analytics.date.JulianDate dtMaturity = maturityDate();

        int iMaturityDate = dtMaturity.julian();

        org.drip.state.identifier.ForwardLabel forwardLabel = forwardLabel().get ("DERIVED");

        org.drip.state.forward.ForwardRateEstimator fc = csqs.forwardState (forwardLabel);

        if (null == fc || !forwardLabel.match (fc.index())) return null;

        org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapResult = super.value
            (valParams, pricerParams, csqs, vcp);

        if (null == mapResult || 0 == mapResult.size()) return null;

        try {
            double dblParStandardFRA = csqs.available (dtMaturity, forwardLabel) ? csqs.fixing (dtMaturity,
                forwardLabel) : fc.forward (iMaturityDate);

            double dblForwardDCF = org.drip.analytics.daycount.Convention.YearFraction (iMaturityDate, new
                org.drip.analytics.date.JulianDate (iMaturityDate).addTenor (forwardLabel.tenor()).julian(),
                    stream().couponDC(), false, null, stream().calendar());

            double dblParDCForward = dcFunding.libor (iEffectiveDate, iMaturityDate);

            double dblShiftedLogNormalScaler = dblForwardDCF * dblParStandardFRA;
            dblShiftedLogNormalScaler = dblShiftedLogNormalScaler / (1. + dblShiftedLogNormalScaler);

            double dblForwardPrice = dblForwardDCF * (dblParStandardFRA - strike()) / (1. + dblForwardDCF *
                dblParStandardFRA);

            double dblShiftedLogNormalConvexityAdjustmentExponent =
                org.drip.analytics.support.OptionHelper.IntegratedFRACrossVolConvexityExponent
                    (csqs.forwardVolatility (forwardLabel), csqs.fundingVolatility (fundingLabel),
                        csqs.forwardFundingCorrelation (forwardLabel, fundingLabel),
                            dblShiftedLogNormalScaler, dblShiftedLogNormalScaler, iValueDate,
                                iEffectiveDate);

            double dblShiftedLogNormalParMarketFRA = ((dblForwardDCF * dblParStandardFRA + 1.) *
                java.lang.Math.exp (dblShiftedLogNormalConvexityAdjustmentExponent) - 1.) / dblForwardDCF;

            mapResult.put ("discountcurveparforward", dblParDCForward);

            mapResult.put ("forwardprice", dblForwardPrice);

            mapResult.put ("parstandardfra", dblParStandardFRA);

            mapResult.put ("parstandardfradc", dblParDCForward);

            mapResult.put ("shiftedlognormalconvexityadjustment",
                dblShiftedLogNormalConvexityAdjustmentExponent);

            mapResult.put ("shiftedlognormalconvexitycorrection", dblShiftedLogNormalParMarketFRA -
                dblParStandardFRA);

            mapResult.put ("shiftedlognormalparmarketfra", dblShiftedLogNormalParMarketFRA);
        } catch (java.lang.Exception e) {
            e.printStackTrace();

            return null;
        }

        mapResult.put ("calctime", (System.nanoTime() - lStart) * 1.e-09);

        return mapResult;
    }
}