Basel32019Compliance.java
package org.drip.sample.bcbs;
import org.drip.capital.bcbs.BalanceSheet;
import org.drip.capital.bcbs.BalanceSheetCapital;
import org.drip.capital.bcbs.BalanceSheetFunding;
import org.drip.capital.bcbs.BalanceSheetLiquidity;
import org.drip.capital.bcbs.CapitalMetricsStandard;
import org.drip.capital.bcbs.HighQualityLiquidAsset;
import org.drip.capital.bcbs.HighQualityLiquidAssetSettings;
import org.drip.capital.bcbs.LiquidityMetrics;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
/*
* -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
*/
/*!
* Copyright (C) 2020 Lakshmi Krishnamurthy
* Copyright (C) 2019 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>Basel32019Compliance</i> illustrates the Basel III 2019 Capital Metrics Compliance Checks along with
* Liquidity Compliance Checks for several Liquidity Metrics Standards. Liquidity Criteria correspond to
* Large BHC's. The References are:
*
* <br><br>
* <ul>
* <li>
* Basel Committee on Banking Supervision (2017): Basel III Leverage Ratio Framework and Disclosure
* Requirements https://www.bis.org/publ/bcbs270.pdf
* </li>
* <li>
* Central Banking (2013): Fed and FDIC agree 6% Leverage Ratio for US SIFIs
* https://www.centralbanking.com/central-banking/news/2280726/fed-and-fdic-agree-6-leverage-ratio-for-us-sifis
* </li>
* <li>
* European Banking Agency (2013): Implementing Basel III in Europe: CRD IV Package
* https://eba.europa.eu/regulation-and-policy/implementing-basel-iii-europe
* </li>
* <li>
* Federal Reserve (2013): Liquidity Coverage Ratio – Liquidity Risk Measurements, Standards, and
* Monitoring
* https://web.archive.org/web/20131102074614/http:/www.federalreserve.gov/FR_notice_lcr_20131024.pdf
* </li>
* <li>
* Wikipedia (2018): Basel III https://en.wikipedia.org/wiki/Basel_III
* </li>
* </ul>
*
* <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/CapitalAnalyticsLibrary.md">Capital Analytics</a></li>
* <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>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/bcbs/README.md">BCBS/Jurisdictional Capital/Leverage Compliance Checks</a></li>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class Basel32019Compliance
{
public static final void main (
final String[] argumentArray)
throws Exception
{
EnvManager.InitEnv ("");
HighQualityLiquidAssetSettings hqlaSettings =
HighQualityLiquidAssetSettings.FederalReserveStandard();
/*
* Capital Parameters
*/
double cet1 = 450.;
double at1 = 150.;
double additionalCapital = 200.;
double rwa = 5000.;
double totalExposure = 4000.;
/*
* HQLA Parameters
*/
double level1 = 60.;
double level2A = 25.;
double level2B = 15.;
/*
* Liquidity Parameters
*/
double netCashOutflowAmount = 75.;
/*
* Stable Funding Parameters
*/
double stableFundingAmount = 500.;
double extendedStressFundingAmount = 400.;
CapitalMetricsStandard capitalMetricsStandard = CapitalMetricsStandard.Basel_III_2019();
BalanceSheet balanceSheet = new BalanceSheet (
new BalanceSheetCapital (
cet1,
at1,
additionalCapital,
rwa,
totalExposure
),
BalanceSheetLiquidity.LargeBHC (
new HighQualityLiquidAsset (
level1,
level2A,
level2B
),
netCashOutflowAmount
),
new BalanceSheetFunding (
stableFundingAmount,
extendedStressFundingAmount,
"1Y"
)
);
System.out.println ("\t|-------------------------------------------------------------------||");
System.out.println ("\t| Basel III 2019 Liquidity Standards Compliance ||");
System.out.println ("\t|-------------------------------------------------------------------||");
System.out.println (
"\t| CET1 Ratio (vs. Standard) => " +
FormatUtil.FormatDouble (balanceSheet.cet1Ratio(), 3, 2, 100.) + "% | " +
FormatUtil.FormatDouble (capitalMetricsStandard.commonEquityRatio(), 3, 2, 100.) + "%"
);
System.out.println (
"\t| Tier 1 Ratio (vs. Standard) => " +
FormatUtil.FormatDouble (balanceSheet.tier1Ratio(), 3, 2, 100.) + "% | " +
FormatUtil.FormatDouble (capitalMetricsStandard.tier1Ratio(), 3, 2, 100.) + "%"
);
System.out.println (
"\t| Total Capital Ratio (vs. Standard) => " +
FormatUtil.FormatDouble (balanceSheet.totalCapitalRatio(), 3, 2, 100.) + "% | " +
FormatUtil.FormatDouble (capitalMetricsStandard.totalRatio(), 3, 2, 100.) + "%"
);
System.out.println (
"\t| Leverage Ratio => " +
FormatUtil.FormatDouble (balanceSheet.leverageRatio(), 3, 2, 100.) + "% | " +
FormatUtil.FormatDouble (capitalMetricsStandard.leverageRatio(), 3, 2, 100.) + "%"
);
System.out.println (
"\t| Liquidity Coverage Ratio => " +
FormatUtil.FormatDouble (balanceSheet.liquidityCoverageRatio (hqlaSettings), 3, 2, 100.) + "%"
);
System.out.println (
"\t| Net Stable Funding Ratio => " +
FormatUtil.FormatDouble (balanceSheet.netStableFundingRatio(), 3, 2, 100.) + "%"
);
System.out.println (
"\t| Capital Metrics Compliance => " +
balanceSheet.capitalMetrics().isCompliant (capitalMetricsStandard)
);
System.out.println ("\t|-------------------------------------------------------------------||");
System.out.println();
System.out.println ("\t|-------------------------------------------------------------------||");
System.out.println ("\t| Cross Vintage Liquidity Standard ||");
System.out.println ("\t|-------------------------------------------------------------------||");
System.out.println ("\t| Year => 2015 | 2016 | 2017 | 2018 | 2019 ||");
System.out.println ("\t|-------------------------------------------------------------------||");
String liquidityMetricsCompliance = "\t| Liquidity Metrics Compliance => ";
liquidityMetricsCompliance = liquidityMetricsCompliance +
balanceSheet.liquidityMetrics (hqlaSettings).isCompliant (LiquidityMetrics.Basel_III_2015()) + " | ";
liquidityMetricsCompliance = liquidityMetricsCompliance +
balanceSheet.liquidityMetrics (hqlaSettings).isCompliant (LiquidityMetrics.Basel_III_2016()) + " | ";
liquidityMetricsCompliance = liquidityMetricsCompliance +
balanceSheet.liquidityMetrics (hqlaSettings).isCompliant (LiquidityMetrics.Basel_III_2017()) + " | ";
liquidityMetricsCompliance = liquidityMetricsCompliance +
balanceSheet.liquidityMetrics (hqlaSettings).isCompliant (LiquidityMetrics.Basel_III_2018()) + " | ";
liquidityMetricsCompliance = liquidityMetricsCompliance +
balanceSheet.liquidityMetrics (hqlaSettings).isCompliant (LiquidityMetrics.Basel_III_2019()) + " ||";
System.out.println (liquidityMetricsCompliance);
System.out.println ("\t|-------------------------------------------------------------------||");
System.out.println();
EnvManager.TerminateEnv();
}
}