FRAStandardComponent.java

  1. package org.drip.product.fra;

  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.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  14.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  15.  * 
  16.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  17.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  18.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  19.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  20.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  21.  *      and computational support.
  22.  *  
  23.  *      https://lakshmidrip.github.io/DROP/
  24.  *  
  25.  *  DROP is composed of three modules:
  26.  *  
  27.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  28.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  29.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  30.  * 
  31.  *  DROP Product Core implements libraries for the following:
  32.  *  - Fixed Income Analytics
  33.  *  - Loan Analytics
  34.  *  - Transaction Cost Analytics
  35.  * 
  36.  *  DROP Portfolio Core implements libraries for the following:
  37.  *  - Asset Allocation Analytics
  38.  *  - Asset Liability Management Analytics
  39.  *  - Capital Estimation Analytics
  40.  *  - Exposure Analytics
  41.  *  - Margin Analytics
  42.  *  - XVA Analytics
  43.  * 
  44.  *  DROP Computational Core implements libraries for the following:
  45.  *  - Algorithm Support
  46.  *  - Computation Support
  47.  *  - Function Analysis
  48.  *  - Model Validation
  49.  *  - Numerical Analysis
  50.  *  - Numerical Optimizer
  51.  *  - Spline Builder
  52.  *  - Statistical Learning
  53.  * 
  54.  *  Documentation for DROP is Spread Over:
  55.  * 
  56.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  57.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  58.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  59.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  60.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  61.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  62.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  63.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  64.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  65.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  66.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  67.  * 
  68.  *  Licensed under the Apache License, Version 2.0 (the "License");
  69.  *      you may not use this file except in compliance with the License.
  70.  *   
  71.  *  You may obtain a copy of the License at
  72.  *      http://www.apache.org/licenses/LICENSE-2.0
  73.  *  
  74.  *  Unless required by applicable law or agreed to in writing, software
  75.  *      distributed under the License is distributed on an "AS IS" BASIS,
  76.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  77.  *  
  78.  *  See the License for the specific language governing permissions and
  79.  *      limitations under the License.
  80.  */

  82. /**
  83.  * <i>FRAStandardComponent</i> contains the implementation of the Standard Multi-Curve FRA Component.
  84.  *
  85.  *  <br><br>
  86.  *  <ul>
  87.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  88.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  89.  *      <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>
  90.  *      <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>
  91.  *  </ul>
  92.  * <br><br>
  93.  * 
  94.  * @author Lakshmi Krishnamurthy
  95.  */

  97. public class FRAStandardComponent extends org.drip.product.rates.SingleStreamComponent {
  98.     private double _dblStrike = java.lang.Double.NaN;

  100.     /**
  101.      * FRAStandardComponent constructor
  102.      * 
  103.      * @param strName Futures Component Name
  104.      * @param stream Futures Stream
  105.      * @param dblStrike Futures Strike
  106.      * @param csp Cash Settle Parameters Instance
  107.      * 
  108.      * @throws java.lang.Exception Thrown if Inputs are Invalid
  109.      */

  111.     public FRAStandardComponent (
  112.         final java.lang.String strName,
  113.         final org.drip.product.rates.Stream stream,
  114.         final double dblStrike,
  115.         final org.drip.param.valuation.CashSettleParams csp)
  116.         throws java.lang.Exception
  117.     {
  118.         super (strName, stream, csp);

  120.         if (!org.drip.numerical.common.NumberUtil.IsValid (_dblStrike = dblStrike))
  121.             throw new java.lang.Exception ("FRAStandardComponent ctr => Invalid Inputs!");
  122.     }

  124.     @Override public org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> value (
  125.         final org.drip.param.valuation.ValuationParams valParams,
  126.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  127.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  128.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  129.     {
  130.         if (null == valParams || null == csqs) return null;

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

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

  137.         if (null == dcFunding) return null;

  139.         long lStart = System.nanoTime();

  141.         double dblParForward = java.lang.Double.NaN;

  143.         int iValueDate = valParams.valueDate();

  145.         int iEffectiveDate = effectiveDate().julian();

  147.         if (iValueDate > iEffectiveDate) return null;

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

  151.         int iMaturityDate = dtMaturity.julian();

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

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

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

  159.         org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapResult = new
  160.             org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double>();

  162.         org.drip.param.valuation.CashSettleParams settleParams = cashSettleParams();

  164.         try {
  165.             int dblCashSettle = null == settleParams ? valParams.cashPayDate() : settleParams.cashSettleDate
  166.                 (iValueDate);

  168.             dblParForward = csqs.available (dtMaturity, forwardLabel) ? csqs.fixing (dtMaturity,
  169.                 forwardLabel) : fc.forward (dtMaturity);

  171.             double dblMultiplicativeQuantoAdjustment = java.lang.Math.exp
  172.                 (org.drip.analytics.support.OptionHelper.IntegratedCrossVolQuanto (csqs.forwardVolatility
  173.                     (forwardLabel), csqs.fundingVolatility (fundingLabel), csqs.forwardFundingCorrelation
  174.                         (forwardLabel, fundingLabel), iValueDate, iEffectiveDate));

  176.             double dblDCF = org.drip.analytics.daycount.Convention.YearFraction (iEffectiveDate,
  177.                 iMaturityDate, stream().couponDC(), false, null, stream().calendar());

  179.             double dblQuantoAdjustedParForward = dblParForward * dblMultiplicativeQuantoAdjustment;

  181.             double dblDV01 = 0.0001 * dblDCF * dcFunding.df (iMaturityDate) / dcFunding.df (dblCashSettle)
  182.                 * notional (iValueDate);

  184.             double dblLevelLift = dblQuantoAdjustedParForward - _dblStrike;
  185.             double dblPV = dblDV01 * dblLevelLift;
  186.             double dblLevelCapLift = dblLevelLift < 0. ? -1. * dblLevelLift : 0.;
  187.             double dblLevelFloorLift = dblLevelLift > 0. ? dblLevelLift : 0.;

  189.             double dblDCParForward = dcFunding.libor (iEffectiveDate, iMaturityDate);

  191.             mapResult.put ("additivequantoadjustment", dblQuantoAdjustedParForward - dblParForward);

  193.             mapResult.put ("caplift", dblLevelCapLift);

  195.             mapResult.put ("discountcurveadditivebasis", dblQuantoAdjustedParForward - dblDCParForward);

  197.             mapResult.put ("discountcurvemultiplicativebasis", dblQuantoAdjustedParForward /
  198.                 dblDCParForward);

  200.             mapResult.put ("discountcurveparforward", dblDCParForward);

  202.             mapResult.put ("dv01", dblDV01);

  204.             mapResult.put ("floorlift", dblLevelFloorLift);

  206.             mapResult.put ("forward", dblParForward);

  208.             mapResult.put ("forwardrate", dblParForward);

  210.             mapResult.put ("mercuriorfactor", (dblDCF * dblDCParForward + 1.) / (dblDCF *
  211.                 dblQuantoAdjustedParForward + 1.));

  213.             mapResult.put ("multiplicativequantoadjustment", dblMultiplicativeQuantoAdjustment);

  215.             mapResult.put ("parforward", dblParForward);

  217.             mapResult.put ("parforwardrate", dblParForward);

  219.             mapResult.put ("price", dblPV);

  221.             mapResult.put ("pv", dblPV);

  223.             mapResult.put ("quantoadjustedparforward", dblQuantoAdjustedParForward);

  225.             mapResult.put ("upfront", dblPV);
  226.         } catch (java.lang.Exception e) {
  227.             e.printStackTrace();

  229.             return null;
  230.         }

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

  234.         return mapResult;
  235.     }

  237.     @Override public java.util.Set<java.lang.String> measureNames()
  238.     {
  239.         java.util.Set<java.lang.String> setstrMeasureNames = new java.util.TreeSet<java.lang.String>();

  241.         setstrMeasureNames.add ("AdditiveQuantoAdjustment");

  243.         setstrMeasureNames.add ("CalcTime");

  245.         setstrMeasureNames.add ("CapLift");

  247.         setstrMeasureNames.add ("DiscountCurveAdditiveBasis");

  249.         setstrMeasureNames.add ("DiscountCurveMultiplicativeBasis");

  251.         setstrMeasureNames.add ("DiscountCurveParForward");

  253.         setstrMeasureNames.add ("DV01");

  255.         setstrMeasureNames.add ("FloorLift");

  257.         setstrMeasureNames.add ("Forward");

  259.         setstrMeasureNames.add ("ForwardRate");

  261.         setstrMeasureNames.add ("MercurioRFactor");

  263.         setstrMeasureNames.add ("MultiplicativeQuantoAdjustment");

  265.         setstrMeasureNames.add ("ParForward");

  267.         setstrMeasureNames.add ("ParForwardRate");

  269.         setstrMeasureNames.add ("Price");

  271.         setstrMeasureNames.add ("PV");

  273.         setstrMeasureNames.add ("QuantoAdjustedParForward");

  275.         setstrMeasureNames.add ("Upfront");

  277.         return setstrMeasureNames;
  278.     }

  280.     @Override public org.drip.numerical.differentiation.WengertJacobian jackDDirtyPVDManifestMeasure (
  281.         final org.drip.param.valuation.ValuationParams valParams,
  282.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  283.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  284.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  285.     {
  286.         return null;
  287.     }

  289.     @Override public org.drip.numerical.differentiation.WengertJacobian manifestMeasureDFMicroJack (
  290.         final java.lang.String strManifestMeasure,
  291.         final org.drip.param.valuation.ValuationParams valParams,
  292.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  293.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  294.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  295.     {
  296.         return null;
  297.     }

  299.     @Override public org.drip.product.calib.ProductQuoteSet calibQuoteSet (
  300.         final org.drip.state.representation.LatentStateSpecification[] aLSS)
  301.     {
  302.         try {
  303.             return new org.drip.product.calib.FRAComponentQuoteSet (aLSS);
  304.         } catch (java.lang.Exception e) {
  305.             e.printStackTrace();
  306.         }

  308.         return null;
  309.     }

  311.     @Override public org.drip.state.estimator.PredictorResponseWeightConstraint fundingPRWC (
  312.         final org.drip.param.valuation.ValuationParams valParams,
  313.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  314.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  315.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  316.         final org.drip.product.calib.ProductQuoteSet pqs)
  317.     {
  318.         return null;
  319.     }

  321.     @Override public org.drip.state.estimator.PredictorResponseWeightConstraint forwardPRWC (
  322.         final org.drip.param.valuation.ValuationParams valParams,
  323.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  324.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  325.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  326.         final org.drip.product.calib.ProductQuoteSet pqs)
  327.     {
  328.         if (null == valParams || null == pqs || !(pqs instanceof
  329.             org.drip.product.calib.FRAComponentQuoteSet))
  330.             return null;

  332.         if (valParams.valueDate() > effectiveDate().julian()) return null;

  334.         org.drip.product.calib.FRAComponentQuoteSet fcqs = (org.drip.product.calib.FRAComponentQuoteSet) pqs;

  336.         if (!fcqs.containsFRARate() && !fcqs.containsParForwardRate()) return null;

  338.         double dblForwardRate = java.lang.Double.NaN;

  340.         try {
  341.             if (fcqs.containsParForwardRate())
  342.                 dblForwardRate = fcqs.parForwardRate();
  343.             else if (fcqs.containsFRARate())
  344.                 dblForwardRate = fcqs.fraRate();
  345.         } catch (java.lang.Exception e) {
  346.             e.printStackTrace();

  348.             return null;
  349.         }

  351.         org.drip.state.estimator.PredictorResponseWeightConstraint prwc = new
  352.             org.drip.state.estimator.PredictorResponseWeightConstraint();

  354.         double dblMaturity = maturityDate().julian();

  356.         if (!prwc.addPredictorResponseWeight (dblMaturity, 1.)) return null;

  358.         if (!prwc.addDResponseWeightDManifestMeasure ("Rate", dblMaturity, 1.)) return null;

  360.         if (!prwc.updateValue (dblForwardRate)) return null;

  362.         if (!prwc.updateDValueDManifestMeasure ("Rate", 1.)) return null;

  364.         return prwc;
  365.     }

  367.     /**
  368.      * Retrieve the FRA Strike
  369.      * 
  370.      * @return The FRA Strike
  371.      */

  373.     public double strike()
  374.     {
  375.         return _dblStrike;
  376.     }
  377. }
Created with JaCoCo 0.7.9.201702052155