BasketAggregateMeasuresGeneration.java

package org.drip.sample.bond;

/*
 * Credit Product Imports
 */

import java.util.List;

import org.drip.analytics.date.*;
import org.drip.analytics.daycount.Convention;
import org.drip.analytics.support.*;
import org.drip.numerical.common.*;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.period.*;
import org.drip.param.pricer.CreditPricerParams;
import org.drip.param.valuation.*;
import org.drip.product.creator.*;
import org.drip.product.credit.*;
import org.drip.product.definition.*;
import org.drip.product.rates.*;
import org.drip.service.env.EnvManager;
import org.drip.state.creator.ScenarioDiscountCurveBuilder;
import org.drip.state.discount.MergedDiscountForwardCurve;
import org.drip.state.identifier.ForwardLabel;

/*
 * -*- 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
 * Copyright (C) 2013 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>BasketAggregateMeasuresGeneration</i> contains a demo of the bond basket Measure generation Sample. It
 * shows the following:
 *  
 * <br><br>
 *  <ul>
 *      <li>
 *          Build the IR Curve from the Rates' instruments.
 *      </li>
 *      <li>
 *          Build the Component Credit Curve from the CDS instruments.
 *      </li>
 *      <li>
 *          Create the basket market parameters and add the named discount curve and the credit curves to it.
 *      </li>
 *      <li>
 *          Create the bond basket from the component bonds and their weights.
 *      </li>
 *      <li>
 *          Construct the Valuation and the Pricing Parameters.
 *      </li>
 *      <li>
 *          Generate the bond basket measures from the valuation, the pricer, and the market parameters.
 *      </li>
 *  </ul>
 * <br><br>
 *  
 * <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/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/bond/README.md">Bullet, EOS Bond Metrics + Curve</a></li>
 *  </ul>
 * <br><br>
 * 
 * @author Lakshmi Krishnamurthy
 */

public class BasketAggregateMeasuresGeneration {

    private static final FixFloatComponent IRS (
        final JulianDate dtEffective,
        final String strCurrency,
        final String strMaturityTenor,
        final double dblCoupon)
        throws Exception
    {
        UnitCouponAccrualSetting ucasFixed = new UnitCouponAccrualSetting (
            2,
            "Act/360",
            false,
            "Act/360",
            false,
            strCurrency,
            true,
            CompositePeriodBuilder.ACCRUAL_COMPOUNDING_RULE_GEOMETRIC
        );

        ComposableFloatingUnitSetting cfusFloating = new ComposableFloatingUnitSetting (
            "3M",
            CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
            null,
            ForwardLabel.Create (
                strCurrency,
                "3M"
            ),
            CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
            0.
        );

        ComposableFixedUnitSetting cfusFixed = new ComposableFixedUnitSetting (
            "6M",
            CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
            null,
            dblCoupon,
            0.,
            strCurrency
        );

        CompositePeriodSetting cpsFloating = new CompositePeriodSetting (
            4,
            "3M",
            strCurrency,
            null,
            -1.,
            null,
            null,
            null,
            null
        );

        CompositePeriodSetting cpsFixed = new CompositePeriodSetting (
            2,
            "6M",
            strCurrency,
            null,
            1.,
            null,
            null,
            null,
            null
        );

        CashSettleParams csp = new CashSettleParams (
            0,
            strCurrency,
            0
        );

        List<Integer> lsFixedStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
            dtEffective,
            "6M",
            strMaturityTenor,
            null
        );

        List<Integer> lsFloatingStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
            dtEffective,
            "3M",
            strMaturityTenor,
            null
        );

        Stream floatingStream = new Stream (
            CompositePeriodBuilder.FloatingCompositeUnit (
                lsFloatingStreamEdgeDate,
                cpsFloating,
                cfusFloating
            )
        );

        Stream fixedStream = new Stream (
            CompositePeriodBuilder.FixedCompositeUnit (
                lsFixedStreamEdgeDate,
                cpsFixed,
                ucasFixed,
                cfusFixed
            )
        );

        FixFloatComponent irs = new FixFloatComponent (
            fixedStream,
            floatingStream,
            csp
        );

        irs.setPrimaryCode ("IRS." + strMaturityTenor + "." + strCurrency);

        return irs;
    }

    /*
     * Sample demonstrating creation of a rates curve from instruments
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static MergedDiscountForwardCurve BuildRatesCurveFromInstruments (
        final JulianDate dtStart,
        final String[] astrCashTenor,
        final double[] adblCashRate,
        final String[] astrIRSTenor,
        final double[] adblIRSRate,
        final double dblBump,
        final String strCurrency)
        throws Exception
    {
        int iNumDCInstruments = astrCashTenor.length + adblIRSRate.length;
        int aiDate[] = new int[iNumDCInstruments];
        double adblRate[] = new double[iNumDCInstruments];
        String astrCalibMeasure[] = new String[iNumDCInstruments];
        double adblCompCalibValue[] = new double[iNumDCInstruments];
        CalibratableComponent aCompCalib[] = new CalibratableComponent[iNumDCInstruments];

        // Cash Calibration

        JulianDate dtCashEffective = dtStart.addBusDays (1, strCurrency);

        for (int i = 0; i < astrCashTenor.length; ++i) {
            astrCalibMeasure[i] = "Rate";
            adblRate[i] = java.lang.Double.NaN;
            adblCompCalibValue[i] = adblCashRate[i] + dblBump;

            aCompCalib[i] = SingleStreamComponentBuilder.Deposit (
                dtCashEffective,
                new JulianDate (aiDate[i] = dtCashEffective.addTenor (astrCashTenor[i]).julian()),
                ForwardLabel.Create (
                    strCurrency,
                    astrCashTenor[i]
                )
            );
        }

        // IRS Calibration

        JulianDate dtIRSEffective = dtStart.addBusDays (
            2,
            strCurrency
        );

        for (int i = 0; i < astrIRSTenor.length; ++i) {
            astrCalibMeasure[i + astrCashTenor.length] = "Rate";
            adblRate[i + astrCashTenor.length] = java.lang.Double.NaN;
            adblCompCalibValue[i + astrCashTenor.length] = adblIRSRate[i] + dblBump;

            aiDate[i + astrCashTenor.length] = dtIRSEffective.addTenor (astrIRSTenor[i]).julian();

            aCompCalib[i + astrCashTenor.length] = IRS (
                dtIRSEffective,
                strCurrency,
                astrIRSTenor[i],
                0.
            );
        }

        /*
         * Build the IR curve from the components, their calibration measures, and their calibration quotes.
         */

        return ScenarioDiscountCurveBuilder.NonlinearBuild (
            dtStart,
            strCurrency,
            aCompCalib,
            adblCompCalibValue,
            astrCalibMeasure,
            null
        );
    }

    /*
     * Sample demonstrating creation of simple fixed coupon treasury bond
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final Bond CreateTSYBond (
        final String strName,
        final double dblCoupon,
        final JulianDate dt,
        final String strTenor)
        throws Exception
    {
        return BondBuilder.CreateSimpleFixed (  // Simple Fixed Rate Bond
            strName,                    // Name
            "USD",                  // Fictitious Treasury Curve Name
            "",                         // Credit Curve - Empty for now
            dblCoupon,                  // Bond Coupon
            2,                          // Frequency
            "Act/Act",                  // Day Count
            dt,                         // Effective
            dt.addTenor (strTenor),     // Maturity
            null,                       // Principal Schedule
            null
        );
    }

    /*
     * Sample demonstrating creation of a set of the on-the-run treasury bonds
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final Bond[] CreateOnTheRunTSYBondSet (
        final JulianDate dt,
        final String[] astrTenor,
        final double[] adblCoupon)
        throws Exception
    {
        Bond aTSYBond[] = new Bond[astrTenor.length];

        for (int i = 0; i < astrTenor.length; ++i)
            aTSYBond[i] = CreateTSYBond (
                "TSY" + astrTenor[i] + "ON",
                adblCoupon[i],
                dt,
                astrTenor[i]
            );

        return aTSYBond;
    }

    /*
     * Sample demonstrating building of the treasury discount curve based off the on-the run instruments and their yields
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final MergedDiscountForwardCurve BuildOnTheRunTSYDiscountCurve (
        final JulianDate dt,
        final Bond[] aTSYBond,
        final double[] adblTSYYield)
        throws Exception
    {
        String astrCalibMeasure[] = new String[aTSYBond.length];

        for (int i = 0; i < aTSYBond.length; ++i)
            astrCalibMeasure[i] = "Yield";

        return ScenarioDiscountCurveBuilder.NonlinearBuild (
            dt,
            "USD", // Fake curve name to indicate it is a USD TSY curve, not the usual USD curve
            aTSYBond,
            adblTSYYield,
            astrCalibMeasure,
            null
        );
    }

    /*
     * Sample demonstrating creation of the principal factor schedule from date and factor array
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final Array2D MakeFSPrincipal()
        throws Exception
    {
        double[] aiDate = new double[5];
        double[] adblFactor = new double[] {1., 1.0, 1.0, 1.0, 1.0};
        // double[] adblFactor = new double[] {1., 0.9, 0.8, 0.7, 0.6};

        JulianDate dtEOSStart = DateUtil.Today().addDays (2);

        for (int i = 0; i < 5; ++i)
            aiDate[i] = dtEOSStart.addYears (i + 2).julian();

        return Array2D.FromArray (
            aiDate,
            adblFactor
        );
    }

    /*
     * Sample demonstrating creation of the coupon factor schedule from date and factor array
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final Array2D MakeFSCoupon()
        throws Exception
    {
        double[] aiDate = new double[5];
        double[] adblFactor = new double[] {1., 1.0, 1.0, 1.0, 1.0};
        // double[] adblFactor = new double[] {1., 0.9, 0.8, 0.7, 0.6};

        JulianDate dtEOSStart = DateUtil.Today().addDays (2);

        for (int i = 0; i < 5; ++i)
            aiDate[i] = dtEOSStart.addYears (i + 2).julian();

        return Array2D.FromArray (
            aiDate,
            adblFactor
        );
    }

    /*
     * Sample demonstrating the creation/usage of the bond basket API
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final void BasketBondAPISample()
        throws Exception
    {
        JulianDate dtCurve = DateUtil.CreateFromYMD (
            2013,
            6,
            27
        );

        JulianDate dtSettle = DateUtil.CreateFromYMD (
            2013,
            7,
            1
        );

        /*
         * Build the IR Curve from the Rates' instruments
         */

        String[] astrCashTenor = new String[] {"3M"};
        double[] adblCashRate = new double[] {0.00276};
        String[] astrIRSTenor = new String[] {   "1Y",    "2Y",    "3Y",    "4Y",    "5Y",    "6Y",    "7Y",
               "8Y",    "9Y",   "10Y",   "11Y",   "12Y",   "15Y",   "20Y",   "25Y",   "30Y",   "40Y",   "50Y"};
        double[] adblIRSRate = new double[]  {0.00367, 0.00533, 0.00843, 0.01238, 0.01609, 0.01926, 0.02191,
            0.02406, 0.02588, 0.02741, 0.02870, 0.02982, 0.03208, 0.03372, 0.03445, 0.03484, 0.03501, 0.03484};

        MergedDiscountForwardCurve dc = BuildRatesCurveFromInstruments (dtCurve, astrCashTenor, adblCashRate, astrIRSTenor, adblIRSRate, 0., "USD");

        /*
         * Construct the set of Treasury instruments (in the case on-the-run set)
         */

        String[] astrTSYTenor = new String[] {
            "1Y", "2Y", "3Y", "5Y", "7Y", "10Y", "30Y"
        };
        final double[] adblTSYCoupon = new double[] {
            0.0000, 0.00375, 0.00500, 0.0100, 0.01375, 0.01375, 0.02875
        };

        Bond[] aTSYBond = CreateOnTheRunTSYBondSet (
            dtCurve,
            astrTSYTenor,
            adblTSYCoupon
        );

        /*
         * Build the Treasury Curve from the Treasury instruments and their yields
         */

        double[] adblTSYYield = new double[] {
            0.00160, 0.00397, 0.00696, 0.01421, 0.01955, 0.02529, 0.03568
        };

        MergedDiscountForwardCurve dcTSY = BuildOnTheRunTSYDiscountCurve (
            dtCurve,
            aTSYBond,
            adblTSYYield
        );

        /*
         * Construct the set of bonds and load them onto the basket
         */

        BondComponent bond1 = BondBuilder.CreateSimpleFixed (
            "TEST1",                                               // Name
            "USD",                                  // Currency
            "",                                     // Credit Curve - Empty for now
            0.09,                                      // Bond Coupon
            2,                                                            // Frequency
            "30/360",                             // Day Count
            DateUtil.CreateFromYMD (
                2011,
                2,
                23
            ), // Effective
            DateUtil.CreateFromYMD (
                2021,
                3,
                1
            ),               // Maturity
            null,                       // Principal Schedule
            null
        );

        BondComponent bond2 = BondBuilder.CreateSimpleFixed (    // Simple Fixed Rate Bond
            "TEST2",                                               // Name
            "USD",                                  // Currency
            "",                                     // Credit Curve - Empty for now
            0.09,                                      // Bond Coupon
            2,                                                            // Frequency
            "30/360",                             // Day Count
            DateUtil.CreateFromYMD (
                2011,
                2,
                23
            ), // Effective
            DateUtil.CreateFromYMD (
                2021,
                3,
                1
            ),               // Maturity
            null,                       // Principal Schedule
            null
        );

        BondComponent bond3 = BondBuilder.CreateSimpleFixed (    // Simple Fixed Rate Bond
            "TEST3",                                               // Name
            "USD",                                  // Currency
            "",                                     // Credit Curve - Empty for now
            0.09,                                      // Bond Coupon
            2,                                                            // Frequency
            "30/360",                             // Day Count
            DateUtil.CreateFromYMD (
                2011,
                2,
                23
            ), // Effective
            DateUtil.CreateFromYMD (
                2021,
                3,
                1
            ),               // Maturity
            null,                       // Principal Schedule
            null
        );

        BondComponent bond4 = BondBuilder.CreateSimpleFloater ( // Simple Floating Rate Bond
            "FLOATER1",     // Name
            "USD",          // Currency
            "USD-6M",   // Rate Index
            "",             // Credit Curve - Empty for now
            0.01,           // Floating Spread
            2,              // Coupon Frequency
            "30/360",       // Day Count
            DateUtil.CreateFromYMD (
                2008,
                9,
                21
            ), // Effective
            DateUtil.CreateFromYMD (
                2023,
                9,
                20
            ),  // Maturity
            MakeFSPrincipal(),      // Principal Schedule
            MakeFSCoupon()      // Coupon Schedule
        );

        BasketProduct bb = new BondBasket (
            "TurtlePower",
            new Bond[] {
                bond1, bond2, bond3, bond4
            },
            new double[] {
                0.1, 0.2, 0.3, 0.4
            }
        );

        /*
         * Create the basket market parameters and add the named discount curve and the treasury curves to it.
         */

        CurveSurfaceQuoteContainer mktParams = new CurveSurfaceQuoteContainer();

        mktParams.setFundingState (dc);

        mktParams.setFundingState (dcTSY);

        /*
         * Construct the Valuation and the Pricing Parameters
         */

        ValuationParams valParams = ValuationParams.Spot (
            dtSettle,
            0,
            "USD",
            Convention.DATE_ROLL_ACTUAL
        );

        CreditPricerParams pricerParams = new CreditPricerParams (
            7,
            null,
            false,
            CreditPricerParams.PERIOD_DISCRETIZATION_FULL_COUPON
        );

        /*
         * Generate the bond basket measures from the valuation, the pricer, and the market parameters
         */

        CaseInsensitiveTreeMap<Double> mapResult = bb.value (
            valParams,
            pricerParams,
            mktParams,
            null
        );

        System.out.println ("Clean Price:      " + FormatUtil.FormatDouble (mapResult.get ("CleanPrice"), 0, 2, 100.));

        System.out.println ("Fair Clean Price: " + FormatUtil.FormatDouble (mapResult.get ("FairCleanPrice"), 0, 2, 100.));

        System.out.println ("Fair Yield:       " + FormatUtil.FormatDouble (mapResult.get ("FairYield"), 0, 2, 100.));

        System.out.println ("Fair GSpread:     " + FormatUtil.FormatDouble (mapResult.get ("FairGSpread"), 0, 0, 10000.));

        System.out.println ("Fair ZSpread:     " + FormatUtil.FormatDouble (mapResult.get ("FairZSpread"), 0, 0, 10000.));

        System.out.println ("Fair ISpread:     " + FormatUtil.FormatDouble (mapResult.get ("FairISpread"), 0, 0, 10000.));

        System.out.println ("Fair Duration:    " + FormatUtil.FormatDouble (mapResult.get ("FairDuration"), 0, 2, 10000.));

        System.out.println ("Accrued:          " + FormatUtil.FormatDouble (mapResult.get ("Accrued"), 1, 2, 100.));
    }

    public static final void main (
        final String astrArgs[])
        throws Exception
    {
        // String strConfig = "c:\\Lakshmi\\BondAnal\\Config.xml";

        EnvManager.InitEnv (
            "",
            true
        );

        BasketBondAPISample();

        EnvManager.TerminateEnv();
    }
}