MultiCallMonteCarlo.java

  1. package org.drip.sample.bond;

  3. import org.drip.analytics.date.*;
  4. import org.drip.analytics.output.BondEOSMetrics;
  5. import org.drip.measure.dynamics.DiffusionEvaluatorLogarithmic;
  6. import org.drip.measure.process.DiffusionEvolver;
  7. import org.drip.numerical.common.FormatUtil;
  8. import org.drip.param.creator.MarketParamsBuilder;
  9. import org.drip.param.valuation.ValuationParams;
  10. import org.drip.product.creator.BondBuilder;
  11. import org.drip.product.credit.BondComponent;
  12. import org.drip.product.params.EmbeddedOptionSchedule;
  13. import org.drip.service.env.EnvManager;
  14. import org.drip.service.template.LatentMarketStateBuilder;
  15. import org.drip.state.discount.MergedDiscountForwardCurve;
  16. import org.drip.state.sequence.GovvieBuilderSettings;

  18. /*
  19.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  20.  */

  22. /*!
  23.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  24.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  25.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  26.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  27.  * 
  28.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  29.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  30.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  31.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  32.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  33.  *      and computational support.
  34.  *  
  35.  *      https://lakshmidrip.github.io/DROP/
  36.  *  
  37.  *  DROP is composed of three modules:
  38.  *  
  39.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  40.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  41.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  42.  * 
  43.  *  DROP Product Core implements libraries for the following:
  44.  *  - Fixed Income Analytics
  45.  *  - Loan Analytics
  46.  *  - Transaction Cost Analytics
  47.  * 
  48.  *  DROP Portfolio Core implements libraries for the following:
  49.  *  - Asset Allocation Analytics
  50.  *  - Asset Liability Management Analytics
  51.  *  - Capital Estimation Analytics
  52.  *  - Exposure Analytics
  53.  *  - Margin Analytics
  54.  *  - XVA Analytics
  55.  * 
  56.  *  DROP Computational Core implements libraries for the following:
  57.  *  - Algorithm Support
  58.  *  - Computation Support
  59.  *  - Function Analysis
  60.  *  - Model Validation
  61.  *  - Numerical Analysis
  62.  *  - Numerical Optimizer
  63.  *  - Spline Builder
  64.  *  - Statistical Learning
  65.  * 
  66.  *  Documentation for DROP is Spread Over:
  67.  * 
  68.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  69.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  70.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  71.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  72.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  73.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  74.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  75.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  76.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  77.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  78.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  79.  * 
  80.  *  Licensed under the Apache License, Version 2.0 (the "License");
  81.  *      you may not use this file except in compliance with the License.
  82.  *   
  83.  *  You may obtain a copy of the License at
  84.  *      http://www.apache.org/licenses/LICENSE-2.0
  85.  *  
  86.  *  Unless required by applicable law or agreed to in writing, software
  87.  *      distributed under the License is distributed on an "AS IS" BASIS,
  88.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  89.  *  
  90.  *  See the License for the specific language governing permissions and
  91.  *      limitations under the License.
  92.  */

  94. /**
  95.  * <i>MultiCallMonteCarlo</i> demonstrates the Simulations of the Path/Vertex EOS Bond Metrics.
  96.  *  
  97.  * <br><br>
  98.  *  <ul>
  99.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  100.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  101.  *      <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>
  102.  *      <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>
  103.  *  </ul>
  104.  * <br><br>
  105.  * 
  106.  * @author Lakshmi Krishnamurthy
  107.  */

  109. public class MultiCallMonteCarlo {

  111.     private static final MergedDiscountForwardCurve FundingCurve (
  112.         final JulianDate dtSpot,
  113.         final String strCurrency,
  114.         final double dblBump)
  115.         throws Exception
  116.     {
  117.         String[] astrDepositMaturityTenor = new String[] {
  118.             "2D"
  119.         };

  121.         double[] adblDepositQuote = new double[] {
  122.             0.0111956 + dblBump // 2D
  123.         };

  125.         double[] adblFuturesQuote = new double[] {
  126.             0.011375 + dblBump, // 98.8625
  127.             0.013350 + dblBump, // 98.6650
  128.             0.014800 + dblBump, // 98.5200
  129.             0.016450 + dblBump, // 98.3550
  130.             0.017850 + dblBump, // 98.2150
  131.             0.019300 + dblBump  // 98.0700
  132.         };

  134.         String[] astrFixFloatMaturityTenor = new String[] {
  135.             "02Y",
  136.             "03Y",
  137.             "04Y",
  138.             "05Y",
  139.             "06Y",
  140.             "07Y",
  141.             "08Y",
  142.             "09Y",
  143.             "10Y",
  144.             "11Y",
  145.             "12Y",
  146.             "15Y",
  147.             "20Y",
  148.             "25Y",
  149.             "30Y",
  150.             "40Y",
  151.             "50Y"
  152.         };

  154.         double[] adblFixFloatQuote = new double[] {
  155.             0.017029 + dblBump, //  2Y
  156.             0.019354 + dblBump, //  3Y
  157.             0.021044 + dblBump, //  4Y
  158.             0.022291 + dblBump, //  5Y
  159.             0.023240 + dblBump, //  6Y
  160.             0.024025 + dblBump, //  7Y
  161.             0.024683 + dblBump, //  8Y
  162.             0.025243 + dblBump, //  9Y
  163.             0.025720 + dblBump, // 10Y
  164.             0.026130 + dblBump, // 11Y
  165.             0.026495 + dblBump, // 12Y
  166.             0.027230 + dblBump, // 15Y
  167.             0.027855 + dblBump, // 20Y
  168.             0.028025 + dblBump, // 25Y
  169.             0.028028 + dblBump, // 30Y
  170.             0.027902 + dblBump, // 40Y
  171.             0.027655 + dblBump  // 50Y
  172.         };

  174.         return LatentMarketStateBuilder.SmoothFundingCurve (
  175.             dtSpot,
  176.             strCurrency,
  177.             astrDepositMaturityTenor,
  178.             adblDepositQuote,
  179.             "ForwardRate",
  180.             adblFuturesQuote,
  181.             "ForwardRate",
  182.             astrFixFloatMaturityTenor,
  183.             adblFixFloatQuote,
  184.             "SwapRate"
  185.         );
  186.     }

  188.     public static final void main (
  189.         final String[] astrArgs)
  190.         throws Exception
  191.     {
  192.         EnvManager.InitEnv (
  193.             "",
  194.             true
  195.         );

  197.         JulianDate dtSpot = DateUtil.CreateFromYMD (
  198.             2017,
  199.             DateUtil.MARCH,
  200.             24
  201.         );

  203.         int iNumPath = 50;
  204.         double dblCleanPrice = 1.08641;
  205.         int[] aiExerciseDate = new int[] {
  206.             DateUtil.CreateFromYMD (2019, 12,  1).julian(),
  207.             DateUtil.CreateFromYMD (2020, 12,  1).julian(),
  208.             DateUtil.CreateFromYMD (2021, 12,  1).julian(),
  209.             DateUtil.CreateFromYMD (2022, 12,  1).julian(),
  210.             DateUtil.CreateFromYMD (2023, 12,  1).julian(),
  211.             DateUtil.CreateFromYMD (2024, 12,  1).julian(),
  212.             DateUtil.CreateFromYMD (2025, 12,  1).julian(),
  213.             DateUtil.CreateFromYMD (2026, 12,  1).julian(),
  214.             DateUtil.CreateFromYMD (2027, 12,  1).julian(),
  215.             DateUtil.CreateFromYMD (2028, 12,  1).julian(),
  216.             DateUtil.CreateFromYMD (2029, 12,  1).julian(),
  217.             DateUtil.CreateFromYMD (2030, 12,  1).julian(),
  218.             DateUtil.CreateFromYMD (2031, 12,  1).julian(),
  219.             DateUtil.CreateFromYMD (2032, 12,  1).julian(),
  220.             DateUtil.CreateFromYMD (2033, 12,  1).julian(),
  221.             DateUtil.CreateFromYMD (2034, 12,  1).julian(),
  222.             DateUtil.CreateFromYMD (2035, 12,  1).julian(),
  223.             DateUtil.CreateFromYMD (2036, 12,  1).julian(),
  224.             DateUtil.CreateFromYMD (2037, 12,  1).julian(),
  225.             DateUtil.CreateFromYMD (2038, 12,  1).julian(),
  226.         };
  227.         double[] adblExercisePrice = new double[] {
  228.             1.,
  229.             1.,
  230.             1.,
  231.             1.,
  232.             1.,
  233.             1.,
  234.             1.,
  235.             1.,
  236.             1.,
  237.             1.,
  238.             1.,
  239.             1.,
  240.             1.,
  241.             1.,
  242.             1.,
  243.             1.,
  244.             1.,
  245.             1.,
  246.             1.,
  247.             1.,
  248.         };
  249.         JulianDate dtEffective = DateUtil.CreateFromYMD (
  250.             2009,
  251.             12,
  252.             3
  253.         );

  255.         JulianDate dtMaturity  = DateUtil.CreateFromYMD (
  256.             2039,
  257.             12,
  258.             1
  259.         );

  261.         double dblCoupon = 0.06558;
  262.         int iFreq = 2;
  263.         String strCUSIP = "033177XV3";
  264.         String strDayCount = "30/360";
  265.         double dblVolatility = 0.10;
  266.         String strTreasuryCode = "UST";

  268.         String[] astrTenor = new String[] {
  269.             "01Y",
  270.             "02Y",
  271.             "03Y",
  272.             "05Y",
  273.             "07Y",
  274.             "10Y",
  275.             "20Y",
  276.             "30Y"
  277.         };

  279.         double[] adblTreasuryCoupon = new double[] {
  280.             0.0100,
  281.             0.0100,
  282.             0.0125,
  283.             0.0150,
  284.             0.0200,
  285.             0.0225,
  286.             0.0250,
  287.             0.0300
  288.         };

  290.         double[] adblTreasuryYield = new double[] {
  291.             0.0083, //  1Y
  292.             0.0122, //  2Y
  293.             0.0149, //  3Y
  294.             0.0193, //  5Y
  295.             0.0227, //  7Y
  296.             0.0248, // 10Y
  297.             0.0280, // 20Y
  298.             0.0308  // 30Y
  299.         };

  301.         BondComponent bond = BondBuilder.CreateSimpleFixed (
  302.             strCUSIP,
  303.             "USD",
  304.             "",
  305.             dblCoupon,
  306.             iFreq,
  307.             strDayCount,
  308.             dtEffective,
  309.             dtMaturity,
  310.             null,
  311.             null
  312.         );

  314.         bond.setEmbeddedCallSchedule (
  315.             new EmbeddedOptionSchedule (
  316.                 aiExerciseDate,
  317.                 adblExercisePrice,
  318.                 false,
  319.                 30,
  320.                 false,
  321.                 Double.NaN,
  322.                 "",
  323.                 Double.NaN
  324.             )
  325.         );

  327.         GovvieBuilderSettings gbs = new GovvieBuilderSettings (
  328.             dtSpot,
  329.             strTreasuryCode,
  330.             astrTenor,
  331.             adblTreasuryCoupon,
  332.             adblTreasuryYield
  333.         );

  335.         BondEOSMetrics bem = bond.callMetrics (
  336.             ValuationParams.Spot (dtSpot.julian()),
  337.             MarketParamsBuilder.Create (
  338.                 FundingCurve (
  339.                     dtSpot,
  340.                     "USD",
  341.                     0.
  342.                 ),
  343.                 gbs.groundState(),
  344.                 null,
  345.                 null,
  346.                 null,
  347.                 null,
  348.                 null
  349.             ),
  350.             null,
  351.             dblCleanPrice,
  352.             gbs,
  353.             new DiffusionEvolver (
  354.                 DiffusionEvaluatorLogarithmic.Standard (
  355.                     0.,
  356.                     dblVolatility
  357.                 )
  358.             ),
  359.             iNumPath
  360.         );

  362.         boolean[][] aabExerciseIndicator = bem.exerciseIndicator();

  364.         double[][] aadblForwardPrice = bem.forwardPrice();

  366.         int iNumVertex = aabExerciseIndicator[0].length;

  368.         System.out.println();

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

  372.         System.out.println ("\t||                          FORWARD EXERCISE INDICATOR                           ||");

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

  376.         for (int iPath = 0; iPath < iNumPath; ++iPath) {
  377.             String strDump = "\t||";

  379.             for (int iVertex = 0; iVertex < iNumVertex; ++iVertex)
  380.                 strDump = strDump + (aabExerciseIndicator[iPath][iVertex] ? " Y" : " N") + " |";

  382.             System.out.println (strDump + "|");
  383.         }

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

  387.         System.out.println();

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

  391.         System.out.println ("\t||                                                                                FORWARD BOND PRICE                                                                                 ||");

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

  395.         for (int iPath = 0; iPath < iNumPath; ++iPath) {
  396.             String strDump = "\t||";

  398.             for (int iVertex = 0; iVertex < iNumVertex; ++iVertex)
  399.                 strDump = strDump + FormatUtil.FormatDouble (aadblForwardPrice[iPath][iVertex], 3, 2, 100) + " |";

  401.             System.out.println (strDump + "|");
  402.         }

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

  406.         System.out.println();

  408.         EnvManager.TerminateEnv();
  409.     }
  410. }
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