EnsembleVariationMarginEstimate.java

  1. package org.drip.sample.andersen2017vm;

  3. import java.util.ArrayList;
  4. import java.util.List;

  6. import org.drip.analytics.date.DateUtil;
  7. import org.drip.analytics.date.JulianDate;
  8. import org.drip.exposure.evolver.EntityDynamicsContainer;
  9. import org.drip.exposure.evolver.LatentStateDynamicsContainer;
  10. import org.drip.exposure.evolver.LatentStateVertexContainer;
  11. import org.drip.exposure.evolver.PrimarySecurity;
  12. import org.drip.exposure.evolver.PrimarySecurityDynamicsContainer;
  13. import org.drip.exposure.evolver.TerminalLatentState;
  14. import org.drip.exposure.generator.FixFloatMPoR;
  15. import org.drip.exposure.regression.LocalVolatilityGenerationControl;
  16. import org.drip.exposure.regressiontrade.AndersenPykhtinSokolEnsemble;
  17. import org.drip.exposure.universe.LatentStateWeiner;
  18. import org.drip.exposure.universe.MarketPath;
  19. import org.drip.exposure.universe.MarketVertex;
  20. import org.drip.exposure.universe.MarketVertexGenerator;
  21. import org.drip.market.otc.FixedFloatSwapConvention;
  22. import org.drip.market.otc.IBORFixedFloatContainer;
  23. import org.drip.measure.crng.RandomNumberGenerator;
  24. import org.drip.measure.discrete.CorrelatedPathVertexDimension;
  25. import org.drip.measure.dynamics.DiffusionEvaluatorLinear;
  26. import org.drip.measure.dynamics.DiffusionEvaluatorLogarithmic;
  27. import org.drip.measure.dynamics.HazardJumpEvaluator;
  28. import org.drip.measure.gaussian.NormalQuadrature;
  29. import org.drip.measure.process.DiffusionEvolver;
  30. import org.drip.measure.process.JumpDiffusionEvolver;
  31. import org.drip.measure.statistics.UnivariateDiscreteThin;
  32. import org.drip.numerical.common.FormatUtil;
  33. import org.drip.numerical.linearalgebra.Matrix;
  34. import org.drip.product.rates.FixFloatComponent;
  35. import org.drip.service.env.EnvManager;
  36. import org.drip.state.identifier.CSALabel;
  37. import org.drip.state.identifier.EntityFundingLabel;
  38. import org.drip.state.identifier.EntityHazardLabel;
  39. import org.drip.state.identifier.EntityRecoveryLabel;
  40. import org.drip.state.identifier.ForwardLabel;
  41. import org.drip.state.identifier.LatentStateLabel;
  42. import org.drip.state.identifier.OvernightLabel;

  44. /*
  45.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  46.  */

  48. /*!
  49.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  50.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  51.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  52.  * 
  53.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  54.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  55.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  56.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  57.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  58.  *      and computational support.
  59.  *  
  60.  *      https://lakshmidrip.github.io/DROP/
  61.  *  
  62.  *  DROP is composed of three modules:
  63.  *  
  64.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  65.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  66.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  67.  * 
  68.  *  DROP Product Core implements libraries for the following:
  69.  *  - Fixed Income Analytics
  70.  *  - Loan Analytics
  71.  *  - Transaction Cost Analytics
  72.  * 
  73.  *  DROP Portfolio Core implements libraries for the following:
  74.  *  - Asset Allocation Analytics
  75.  *  - Asset Liability Management Analytics
  76.  *  - Capital Estimation Analytics
  77.  *  - Exposure Analytics
  78.  *  - Margin Analytics
  79.  *  - XVA Analytics
  80.  * 
  81.  *  DROP Computational Core implements libraries for the following:
  82.  *  - Algorithm Support
  83.  *  - Computation Support
  84.  *  - Function Analysis
  85.  *  - Model Validation
  86.  *  - Numerical Analysis
  87.  *  - Numerical Optimizer
  88.  *  - Spline Builder
  89.  *  - Statistical Learning
  90.  * 
  91.  *  Documentation for DROP is Spread Over:
  92.  * 
  93.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  94.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  95.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  96.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  97.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  98.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  99.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  100.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  101.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  102.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  103.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  104.  * 
  105.  *  Licensed under the Apache License, Version 2.0 (the "License");
  106.  *      you may not use this file except in compliance with the License.
  107.  *   
  108.  *  You may obtain a copy of the License at
  109.  *      http://www.apache.org/licenses/LICENSE-2.0
  110.  *  
  111.  *  Unless required by applicable law or agreed to in writing, software
  112.  *      distributed under the License is distributed on an "AS IS" BASIS,
  113.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  114.  *  
  115.  *  See the License for the specific language governing permissions and
  116.  *      limitations under the License.
  117.  */

  119. /**
  120.  * <i>EnsembleVariationMarginEstimate</i> generates the Ensemble of Dense Variation Margin Estimates from
  121.  * Sparse Nodes for a Fix-Float Swap across the Ensemble of Paths. The References are:
  122.  * 
  123.  * <br><br>
  124.  *  <ul>
  125.  *      <li>
  126.  *          Albanese, C., and L. Andersen (2014): Accounting for OTC Derivatives: Funding Adjustments and the
  127.  *              Re-Hypothecation Option, eSSRN, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482955
  128.  *              <b>eSSRN</b>
  129.  *      </li>
  130.  *      <li>
  131.  *          Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Re-thinking Margin Period of Risk
  132.  *              https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2902737 <b>eSSRN</b>
  133.  *      </li>
  134.  *      <li>
  135.  *          Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Credit Exposure in the Presence of Initial
  136.  *              Margin https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2806156 <b>eSSRN</b>
  137.  *      </li>
  138.  *      <li>
  139.  *          Burgard, C., and M. Kjaer (2017): Derivatives Funding, Netting, and Accounting
  140.  *              https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2534011 <b>eSSRN</b>
  141.  *      </li>
  142.  *      <li>
  143.  *          Pykhtin, M. (2009): Modeling Counter-party Credit Exposure in the Presence of Margin Agreements
  144.  *              http://www.risk-europe.com/protected/michael-pykhtin.pdf
  145.  *      </li>
  146.  *  </ul>
  147.  * <br><br>
  148.  *  <ul>
  149.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  150.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ExposureAnalyticsLibrary.md">Exposure Analytics</a></li>
  151.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">DROP API Construction and Usage</a></li>
  152.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/andersen2017vm/README.md">Andersen Pykhtin Sokol Regression VM</a></li>
  153.  *  </ul>
  154.  * <br><br>
  155.  * 
  156.  * @author Lakshmi Krishnamurthy
  157.  */

  159. public class EnsembleVariationMarginEstimate
  160. {

  162.     private static final FixFloatComponent OTCIRS (
  163.         final JulianDate spotDate,
  164.         final String currency,
  165.         final String maturityTenor,
  166.         final double coupon)
  167.     {
  168.         FixedFloatSwapConvention ffConv = IBORFixedFloatContainer.ConventionFromJurisdiction (
  169.             currency,
  170.             "ALL",
  171.             maturityTenor,
  172.             "MAIN"
  173.         );

  175.         return ffConv.createFixFloatComponent (
  176.             spotDate,
  177.             maturityTenor,
  178.             coupon,
  179.             0.,
  180.             1.
  181.         );
  182.     }

  184.     private static final PrimarySecurity OvernightReplicator (
  185.         final String currency,
  186.         final List<LatentStateLabel> latentStateLabelList)
  187.         throws Exception
  188.     {
  189.         double overnightReplicatorDrift = 0.0025;
  190.         double overnightReplicatorVolatility = 0.001;
  191.         double overnightReplicatorRepo = 0.0;

  193.         LatentStateLabel overnightLabel = OvernightLabel.Create (currency);

  195.         latentStateLabelList.add (overnightLabel);

  197.         return new PrimarySecurity (
  198.             currency + "_OVERNIGHT",
  199.             overnightLabel,
  200.             new DiffusionEvolver (
  201.                 DiffusionEvaluatorLogarithmic.Standard (
  202.                     overnightReplicatorDrift,
  203.                     overnightReplicatorVolatility
  204.                 )
  205.             ),
  206.             overnightReplicatorRepo
  207.         );
  208.     }

  210.     private static final PrimarySecurity CSAReplicator (
  211.         final String currency,
  212.         final List<LatentStateLabel> latentStateLabelList)
  213.         throws Exception
  214.     {
  215.         double csaReplicatorDrift = 0.01;
  216.         double csaReplicatorVolatility = 0.002;
  217.         double csaReplicatorRepo = 0.005;

  219.         LatentStateLabel csaLabel = CSALabel.ISDA (currency);

  221.         latentStateLabelList.add (csaLabel);

  223.         return new PrimarySecurity (
  224.             currency + "_CSA",
  225.             csaLabel,
  226.             new DiffusionEvolver (
  227.                 DiffusionEvaluatorLogarithmic.Standard (
  228.                     csaReplicatorDrift,
  229.                     csaReplicatorVolatility
  230.                 )
  231.             ),
  232.             csaReplicatorRepo
  233.         );
  234.     }

  236.     private static final PrimarySecurity DealerSeniorFundingReplicator (
  237.         final String currency,
  238.         final String dealer,
  239.         final List<LatentStateLabel> latentStateLabelList)
  240.         throws Exception
  241.     {
  242.         double dealerSeniorFundingReplicatorDrift = 0.03;
  243.         double dealerSeniorFundingReplicatorVolatility = 0.002;
  244.         double dealerSeniorFundingReplicatorRepo = 0.028;

  246.         LatentStateLabel dealerSeniorFundingLabel = EntityFundingLabel.Senior (
  247.             dealer,
  248.             currency
  249.         );

  251.         latentStateLabelList.add (dealerSeniorFundingLabel);

  253.         return new PrimarySecurity (
  254.             dealer + "_" + currency + "_SENIOR_ZERO",
  255.             dealerSeniorFundingLabel,
  256.             new JumpDiffusionEvolver (
  257.                 DiffusionEvaluatorLogarithmic.Standard (
  258.                     dealerSeniorFundingReplicatorDrift,
  259.                     dealerSeniorFundingReplicatorVolatility
  260.                 ),
  261.                 HazardJumpEvaluator.Standard (
  262.                     0.3,
  263.                     0.45
  264.                 )
  265.             ),
  266.             dealerSeniorFundingReplicatorRepo
  267.         );
  268.     }

  270.     private static final PrimarySecurity DealerSubordinateFundingReplicator (
  271.         final String currency,
  272.         final String dealer,
  273.         final List<LatentStateLabel> latentStateLabelList)
  274.         throws Exception
  275.     {
  276.         double dealerSubordinateFundingReplicatorDrift = 0.045;
  277.         double dealerSubordinateFundingReplicatorVolatility = 0.002;
  278.         double dealerSubordinateFundingReplicatorRepo = 0.028;

  280.         LatentStateLabel dealerSubordinateFundingLabel = EntityFundingLabel.Subordinate (
  281.             dealer,
  282.             currency
  283.         );

  285.         latentStateLabelList.add (dealerSubordinateFundingLabel);

  287.         return new PrimarySecurity (
  288.             dealer + "_" + currency + "_SUBORDINATE_ZERO",
  289.             dealerSubordinateFundingLabel,
  290.             new JumpDiffusionEvolver (
  291.                 DiffusionEvaluatorLogarithmic.Standard (
  292.                     dealerSubordinateFundingReplicatorDrift,
  293.                     dealerSubordinateFundingReplicatorVolatility
  294.                 ),
  295.                 HazardJumpEvaluator.Standard (
  296.                     0.3,
  297.                     0.25
  298.                 )
  299.             ),
  300.             dealerSubordinateFundingReplicatorRepo
  301.         );
  302.     }

  304.     private static final PrimarySecurity ClientFundingReplicator (
  305.         final String currency,
  306.         final String client,
  307.         final List<LatentStateLabel> latentStateLabelList)
  308.         throws Exception
  309.     {
  310.         double clientFundingReplicatorDrift = 0.03;
  311.         double clientFundingReplicatorVolatility = 0.003;
  312.         double clientFundingReplicatorRepo = 0.028;

  314.         LatentStateLabel clientFundingLabel = EntityFundingLabel.Senior (
  315.             client,
  316.             currency
  317.         );

  319.         latentStateLabelList.add (clientFundingLabel);

  321.         return new PrimarySecurity (
  322.             client + "_" + currency + "_SENIOR_ZERO",
  323.             clientFundingLabel,
  324.             new JumpDiffusionEvolver (
  325.                 DiffusionEvaluatorLogarithmic.Standard (
  326.                     clientFundingReplicatorDrift,
  327.                     clientFundingReplicatorVolatility
  328.                 ),
  329.                 HazardJumpEvaluator.Standard (
  330.                     0.5,
  331.                     0.30
  332.                 )
  333.             ),
  334.             clientFundingReplicatorRepo
  335.         );
  336.     }

  338.     private static final TerminalLatentState DealerHazard (
  339.         final String currency,
  340.         final String dealer,
  341.         final List<LatentStateLabel> latentStateLabelList)
  342.         throws Exception
  343.     {
  344.         double dealerHazardDrift = 0.0002;
  345.         double dealerHazardVolatility = 0.02;

  347.         LatentStateLabel dealerHazardLabel = EntityHazardLabel.Standard (
  348.             dealer,
  349.             currency
  350.         );

  352.         latentStateLabelList.add (dealerHazardLabel);

  354.         return new TerminalLatentState (
  355.             dealerHazardLabel,
  356.             new DiffusionEvolver (
  357.                 DiffusionEvaluatorLogarithmic.Standard (
  358.                     dealerHazardDrift,
  359.                     dealerHazardVolatility
  360.                 )
  361.             )
  362.         );
  363.     }

  365.     private static final TerminalLatentState DealerRecovery (
  366.         final String currency,
  367.         final String dealer,
  368.         final List<LatentStateLabel> latentStateLabelList)
  369.         throws Exception
  370.     {
  371.         double dealerRecoveryDrift = 0.0002;
  372.         double dealerRecoveryVolatility = 0.02;

  374.         LatentStateLabel dealerRecoveryLabel = EntityRecoveryLabel.Senior (
  375.             dealer,
  376.             currency
  377.         );

  379.         latentStateLabelList.add (dealerRecoveryLabel);

  381.         return new TerminalLatentState (
  382.             dealerRecoveryLabel,
  383.             new DiffusionEvolver (
  384.                 DiffusionEvaluatorLogarithmic.Standard (
  385.                     dealerRecoveryDrift,
  386.                     dealerRecoveryVolatility
  387.                 )
  388.             )
  389.         );
  390.     }

  392.     private static final TerminalLatentState ClientHazard (
  393.         final String currency,
  394.         final String client,
  395.         final List<LatentStateLabel> latentStateLabelList)
  396.         throws Exception
  397.     {
  398.         double clientHazardDrift = 0.0002;
  399.         double clientHazardVolatility = 0.02;

  401.         LatentStateLabel clientHazardLabel = EntityHazardLabel.Standard (
  402.             client,
  403.             currency
  404.         );

  406.         latentStateLabelList.add (clientHazardLabel);

  408.         return new TerminalLatentState (
  409.             clientHazardLabel,
  410.             new DiffusionEvolver (
  411.                 DiffusionEvaluatorLogarithmic.Standard (
  412.                     clientHazardDrift,
  413.                     clientHazardVolatility
  414.                 )
  415.             )
  416.         );
  417.     }

  419.     private static final TerminalLatentState ClientRecovery (
  420.         final String currency,
  421.         final String client,
  422.         final List<LatentStateLabel> latentStateLabelList)
  423.         throws Exception
  424.     {
  425.         double clientRecoveryDrift = 0.0002;
  426.         double clientRecoveryVolatility = 0.02;

  428.         LatentStateLabel clientRecoveryLabel = EntityRecoveryLabel.Senior (
  429.             client,
  430.             currency
  431.         );

  433.         latentStateLabelList.add (clientRecoveryLabel);

  435.         return new TerminalLatentState (
  436.             clientRecoveryLabel,
  437.             new DiffusionEvolver (
  438.                 DiffusionEvaluatorLogarithmic.Standard (
  439.                     clientRecoveryDrift,
  440.                     clientRecoveryVolatility
  441.                 )
  442.             )
  443.         );
  444.     }

  446.     private static final EntityDynamicsContainer EntityEvolver (
  447.         final String currency,
  448.         final String dealer,
  449.         final String client,
  450.         final List<LatentStateLabel> latentStateLabelList)
  451.         throws Exception
  452.     {
  453.         return new EntityDynamicsContainer (
  454.             DealerHazard (
  455.                 currency,
  456.                 dealer,
  457.                 latentStateLabelList
  458.             ),
  459.             DealerRecovery (
  460.                 currency,
  461.                 dealer,
  462.                 latentStateLabelList
  463.             ),
  464.             null,
  465.             ClientHazard (
  466.                 currency,
  467.                 client,
  468.                 latentStateLabelList
  469.             ),
  470.             ClientRecovery (
  471.                 currency,
  472.                 client,
  473.                 latentStateLabelList
  474.             )
  475.         );
  476.     }

  478.     private static final PrimarySecurityDynamicsContainer PrimarySecurityEvolver (
  479.         final String currency,
  480.         final String dealer,
  481.         final String client,
  482.         final List<LatentStateLabel> latentStateLabelList)
  483.         throws Exception
  484.     {
  485.         return new PrimarySecurityDynamicsContainer (
  486.             null,
  487.             OvernightReplicator (
  488.                 currency,
  489.                 latentStateLabelList
  490.             ),
  491.             CSAReplicator (
  492.                 currency,
  493.                 latentStateLabelList
  494.             ),
  495.             DealerSeniorFundingReplicator (
  496.                 currency,
  497.                 dealer,
  498.                 latentStateLabelList
  499.             ),
  500.             DealerSubordinateFundingReplicator (
  501.                 currency,
  502.                 dealer,
  503.                 latentStateLabelList
  504.             ),
  505.             ClientFundingReplicator (
  506.                 currency,
  507.                 client,
  508.                 latentStateLabelList
  509.             )
  510.         );
  511.     }

  513.     private static final LatentStateDynamicsContainer LatentStateEvolver (
  514.         final ForwardLabel forwardLabel,
  515.         final List<LatentStateLabel> latentStateLabelList)
  516.         throws Exception
  517.     {
  518.         double otcFixFloatNumeraireDrift = 0.0;
  519.         double otcFixFloatNumeraireVolatility = 0.10;

  521.         latentStateLabelList.add (forwardLabel);

  523.         LatentStateDynamicsContainer latentStateDynamicsContainer = new LatentStateDynamicsContainer();

  525.         latentStateDynamicsContainer.addForward (
  526.             new TerminalLatentState (
  527.                 forwardLabel,
  528.                 new DiffusionEvolver (
  529.                     DiffusionEvaluatorLinear.Standard (
  530.                         otcFixFloatNumeraireDrift,
  531.                         otcFixFloatNumeraireVolatility
  532.                     )
  533.                 )
  534.             )
  535.         );

  537.         return latentStateDynamicsContainer;
  538.     }

  540.     private static final MarketVertexGenerator ConstructMarketVertexGenerator (
  541.         final JulianDate spotDate,
  542.         final String exposureSamplingTenor,
  543.         final int exposureSamplingNodeCount,
  544.         final String currency,
  545.         final String dealer,
  546.         final String client,
  547.         final ForwardLabel forwardLabel,
  548.         final List<LatentStateLabel> latentStateLabelList)
  549.         throws Exception
  550.     {
  551.         JulianDate terminationDate = spotDate;
  552.         int[] eventVertexArray = new int[exposureSamplingNodeCount];

  554.         for (int i = 0; i < exposureSamplingNodeCount; ++i)
  555.         {
  556.             terminationDate = terminationDate.addTenor (exposureSamplingTenor);

  558.             eventVertexArray[i] = terminationDate.julian();
  559.         }

  561.         return new MarketVertexGenerator (
  562.             spotDate.julian(),
  563.             eventVertexArray,
  564.             EntityEvolver (
  565.                 currency,
  566.                 dealer,
  567.                 client,
  568.                 latentStateLabelList
  569.             ),
  570.             PrimarySecurityEvolver (
  571.                 currency,
  572.                 dealer,
  573.                 client,
  574.                 latentStateLabelList
  575.             ),
  576.             LatentStateEvolver (
  577.                 forwardLabel,
  578.                 latentStateLabelList
  579.             )
  580.         );
  581.     }

  583.     public static final void main (
  584.         final String[] args)
  585.         throws Exception
  586.     {
  587.         EnvManager.InitEnv ("");

  589.         JulianDate spotDate = DateUtil.CreateFromYMD (
  590.             2018,
  591.             DateUtil.APRIL,
  592.             19
  593.         );

  595.         int pathCount = 100;
  596.         String latentStateGenerationTenor = "1D";
  597.         int latentStateGenerationCount = 390;
  598.         int latentStateVertexCount = latentStateGenerationCount + 10;
  599.         String currency = "USD";
  600.         String dealer = "NOM";
  601.         String client = "SSGA";
  602.         double[][] correlationMatrix = new double[][]
  603.         {
  604.             {1.00, 0.00, 0.20, 0.15, 0.05, 0.00, 0.00, 0.00, 0.00, 0.00}, // #0  DEALER HAZARD
  605.             {0.00, 1.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00}, // #1  DEALER SENIOR RECOVERY
  606.             {0.20, 0.00, 1.00, 0.13, 0.25, 0.00, 0.00, 0.00, 0.00, 0.00}, // #2  CLIENT HAZARD
  607.             {0.15, 0.00, 0.13, 1.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00}, // #3  CLIENT RECOVERY
  608.             {0.05, 0.00, 0.25, 0.00, 1.00, 0.00, 0.00, 0.00, 0.00, 0.00}, // #4  OVERNIGHT REPLICATOR
  609.             {0.00, 0.00, 0.00, 0.00, 0.00, 1.00, 0.00, 0.00, 0.00, 0.00}, // #5  CSA REPLICATOR
  610.             {0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 1.00, 0.00, 0.00, 0.00}, // #6  DEALER SENIOR FUNDING REPLICATOR
  611.             {0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 1.00, 0.00, 0.00}, // #7  DEALER SUBORDINATE FUNDING REPLICATOR
  612.             {0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 1.00, 0.00}, // #8  CLIENT FUNDING REPLICATOR
  613.             {0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 1.00}, // #9  FORWARD NUMERAIRE
  614.         };
  615.         String sparseFixFloatExposureTenor = "3M";
  616.         int sparseFixFloatExposureDateCount = 4;
  617.         String fixFloatMaturityTenor = "1Y";
  618.         double fixFloatCoupon = 0.02;
  619.         double fixFloatNotional = -1.e+06;

  621.         LocalVolatilityGenerationControl localVolatilityGenerationControl =
  622.             LocalVolatilityGenerationControl.Standard (pathCount);

  624.         LatentStateVertexContainer latentStateVertexContainer = new LatentStateVertexContainer();

  626.         latentStateVertexContainer.add (
  627.             ForwardLabel.Create (
  628.                 currency,
  629.                 "3M"
  630.             ),
  631.             0.02
  632.         );

  634.         MarketVertex initialMarketVertex = MarketVertex.Epochal (
  635.             spotDate,
  636.             1.000,              // dblOvernightNumeraireInitial
  637.             1.000,              // dblCSANumeraire
  638.             0.015,              // dblBankHazardRate
  639.             0.400,              // dblBankRecoveryRate
  640.             0.015 / (1 - 0.40), // dblBankFundingSpread
  641.             0.030,              // dblCounterPartyHazardRate
  642.             0.300,              // dblCounterPartyRecoveryRate
  643.             0.030 / (1 - 0.30), // dblCounterPartyFundingSpread
  644.             latentStateVertexContainer
  645.         );

  647.         ForwardLabel forwardLabel = ForwardLabel.Create (
  648.             currency,
  649.             "3M"
  650.         );

  652.         List<LatentStateLabel> latentStateLabelList = new ArrayList<LatentStateLabel>();

  654.         MarketVertexGenerator marketVertexGenerator = ConstructMarketVertexGenerator (
  655.             spotDate,
  656.             latentStateGenerationTenor,
  657.             latentStateVertexCount,
  658.             currency,
  659.             dealer,
  660.             client,
  661.             forwardLabel,
  662.             latentStateLabelList
  663.         );

  665.         FixFloatComponent fixFloatComponent = OTCIRS (
  666.             spotDate,
  667.             currency,
  668.             fixFloatMaturityTenor,
  669.             fixFloatCoupon
  670.         );

  672.         FixFloatMPoR fixFloatMPoR = new FixFloatMPoR (
  673.             fixFloatComponent,
  674.             fixFloatNotional
  675.         );

  677.         CorrelatedPathVertexDimension correlatedPathVertexDimension = new CorrelatedPathVertexDimension (
  678.             new RandomNumberGenerator(),
  679.             correlationMatrix,
  680.             latentStateVertexCount,
  681.             1,
  682.             true,
  683.             null
  684.         );

  686.         JulianDate sparseFixFloatExposureDate = spotDate;
  687.         int[] sparseFixFloatExposureDateArray = new int[sparseFixFloatExposureDateCount + 1];
  688.         MarketPath[] marketPathArray = new MarketPath[pathCount];

  690.         for (int sparseFixFloatExposureDateIndex = 0;
  691.             sparseFixFloatExposureDateIndex <= sparseFixFloatExposureDateCount;
  692.             ++sparseFixFloatExposureDateIndex)
  693.         {
  694.             sparseFixFloatExposureDateArray[sparseFixFloatExposureDateIndex] =
  695.                 sparseFixFloatExposureDate.julian();

  697.             sparseFixFloatExposureDate = sparseFixFloatExposureDate.addTenor (sparseFixFloatExposureTenor);
  698.         }

  700.         int denseExposureDateCount = sparseFixFloatExposureDateArray[sparseFixFloatExposureDateCount] -
  701.             sparseFixFloatExposureDateArray[0] + 1;
  702.         double[][] wanderEnsemble = new double[pathCount][denseExposureDateCount];

  704.         for (int pathIndex = 0; pathIndex < pathCount; ++pathIndex)
  705.         {
  706.             marketPathArray[pathIndex] = new MarketPath (
  707.                 marketVertexGenerator.marketVertex (
  708.                     initialMarketVertex,
  709.                     LatentStateWeiner.FromUnitRandom (
  710.                         latentStateLabelList,
  711.                         Matrix.Transpose (correlatedPathVertexDimension.straightPathVertexRd().flatform())
  712.                     )
  713.                 )
  714.             );

  716.             for (int denseExposureDate = 0; denseExposureDate < denseExposureDateCount; ++denseExposureDate)
  717.             {
  718.                 wanderEnsemble[pathIndex][denseExposureDate] = NormalQuadrature.Random();
  719.             }
  720.         }

  722.         AndersenPykhtinSokolEnsemble andersenPykhtinSokolEnsemble = new AndersenPykhtinSokolEnsemble (
  723.             fixFloatMPoR,
  724.             marketPathArray,
  725.             sparseFixFloatExposureDateArray
  726.         );

  728.         double[][] denseVariationMargin = andersenPykhtinSokolEnsemble.denseVariationMargin (
  729.             localVolatilityGenerationControl,
  730.             wanderEnsemble
  731.         );

  733.         double[][] denseVariationMarginTranspose = Matrix.Transpose (denseVariationMargin);

  735.         System.out.println ("\t||--------------------------------------------------||");

  737.         System.out.println ("\t||        ENSEMBLE VARIATION MARGIN ESTIMATE        ||");

  739.         System.out.println ("\t||--------------------------------------------------||");

  741.         System.out.println ("\t||                                                  ||");

  743.         System.out.println ("\t||    L -> R:                                       ||");

  745.         System.out.println ("\t||          - Exposure Date                         ||");

  747.         System.out.println ("\t||          - Variation Margin Average              ||");

  749.         System.out.println ("\t||          - Variation Margin Minimum              ||");

  751.         System.out.println ("\t||          - Variation Margin Maximum              ||");

  753.         System.out.println ("\t||          - Variation Margin Error                ||");

  755.         System.out.println ("\t||--------------------------------------------------||");

  757.         for (int denseExposureDateIndex = 0;
  758.             denseExposureDateIndex < denseExposureDateCount;
  759.             ++denseExposureDateIndex)
  760.         {
  761.             UnivariateDiscreteThin denseVMThinStatistics = new UnivariateDiscreteThin
  762.                 (denseVariationMarginTranspose[denseExposureDateIndex]);

  764.             System.out.println (
  765.                 "\t|| " +
  766.                 new JulianDate (spotDate.julian() + denseExposureDateIndex) + " => " +
  767.                 FormatUtil.FormatDouble (denseVMThinStatistics.average(), 5, 0, 1.) + " | " +
  768.                 FormatUtil.FormatDouble (denseVMThinStatistics.minimum(), 5, 0, 1.) + " | " +
  769.                 FormatUtil.FormatDouble (denseVMThinStatistics.maximum(), 5, 0, 1.) + " | " +
  770.                 FormatUtil.FormatDouble (denseVMThinStatistics.error(), 5, 0, 1.) + " ||"
  771.             );
  772.         }

  774.         System.out.println ("\t||--------------------------------------------------||");

  776.         EnvManager.TerminateEnv();
  777.     }
  778. }
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