RegressionSplineCashCurve.java
package org.drip.sample.bond;
import java.util.*;
import org.drip.analytics.cashflow.CompositePeriod;
import org.drip.analytics.date.*;
import org.drip.analytics.daycount.Convention;
import org.drip.analytics.support.Helper;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.creator.MarketParamsBuilder;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.valuation.ValuationParams;
import org.drip.product.creator.BondBuilder;
import org.drip.product.definition.Bond;
import org.drip.service.env.EnvManager;
import org.drip.spline.basis.PolynomialFunctionSetParams;
import org.drip.spline.grid.OverlappingStretchSpan;
import org.drip.spline.params.*;
import org.drip.spline.stretch.*;
import org.drip.state.curve.DiscountFactorDiscountCurve;
import org.drip.state.discount.MergedDiscountForwardCurve;
/*
* -*- 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
*
* 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>RegressionSplineCashCurve</i> demonstrates the Functionality behind the Regression Spline based OLS
* best-fit Construction of a Cash Bond Discount Curve Based on Input Price/Yield.
*
* <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 RegressionSplineCashCurve {
static class CashFlowYieldDF {
double _dblCumulativeCashFlow = java.lang.Double.NaN;
double _dblDiscountedCumulativeCashFlow = java.lang.Double.NaN;
CashFlowYieldDF (
final double dblCashFlow,
final double dblYieldDF)
{
_dblDiscountedCumulativeCashFlow = (_dblCumulativeCashFlow = dblCashFlow) * dblYieldDF;
}
void accumulate (
final double dblCashFlow,
final double dblYieldDF)
{
_dblCumulativeCashFlow += dblCashFlow;
_dblDiscountedCumulativeCashFlow += dblCashFlow * dblYieldDF;
}
double cumulativeCashFlow()
{
return _dblCumulativeCashFlow;
}
double discountedCumulativeCashFlow()
{
return _dblDiscountedCumulativeCashFlow;
}
double weightedDF()
{
return _dblDiscountedCumulativeCashFlow / _dblCumulativeCashFlow;
}
}
private static final SegmentCustomBuilderControl PolynomialSplineSegmentBuilder()
throws Exception
{
int iCk = 2;
int iNumPolyBasis = 4;
SegmentInelasticDesignControl sdic = new SegmentInelasticDesignControl (
iCk,
null, // SegmentFlexurePenaltyControl (iLengthPenaltyDerivativeOrder, dblLengthPenaltyAmplitude)
null // SegmentFlexurePenaltyControl (iCurvaturePenaltyDerivativeOrder, dblCurvaturePenaltyAmplitude)
);
return new SegmentCustomBuilderControl (
MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
new PolynomialFunctionSetParams (iNumPolyBasis),
sdic,
null,
null
);
}
private static final Bond FixedCouponBond (
final String strName,
final JulianDate dtEffective,
final JulianDate dtMaturity,
final double dblCoupon,
final String strCurrency,
final String strDayCount,
final int iFreq)
throws Exception
{
return BondBuilder.CreateSimpleFixed (
strName,
strCurrency,
"",
dblCoupon,
iFreq,
strDayCount,
dtEffective,
dtMaturity,
null,
null
);
}
private static final Bond[] CalibBondSet (
final String strCurrency,
final String strDayCount)
throws Exception
{
Bond bond1 = FixedCouponBond (
"MBONO 8.00 12/17/2015",
DateUtil.CreateFromYMD (
2006,
DateUtil.JANUARY,
5
),
DateUtil.CreateFromYMD (
2015,
DateUtil.DECEMBER,
17
),
0.08,
strCurrency,
strDayCount,
2
);
Bond bond2 = FixedCouponBond (
"MBONO 6.25 06/16/2016",
DateUtil.CreateFromYMD (
2011,
DateUtil.JULY,
22
),
DateUtil.CreateFromYMD (
2016,
DateUtil.JUNE,
16
),
0.08,
strCurrency,
strDayCount,
2
);
Bond bond3 = FixedCouponBond (
"MBONO 7.25 12/15/2016",
DateUtil.CreateFromYMD (
2007,
DateUtil.FEBRUARY,
1
),
DateUtil.CreateFromYMD (
2016,
DateUtil.DECEMBER,
15
),
0.0725,
strCurrency,
strDayCount,
2
);
Bond bond4 = FixedCouponBond (
"MBONO 5.00 06/15/2017",
DateUtil.CreateFromYMD (
2012,
DateUtil.JULY,
19
),
DateUtil.CreateFromYMD (
2017,
DateUtil.JUNE,
15
),
0.0500,
strCurrency,
strDayCount,
2
);
Bond bond5 = FixedCouponBond (
"MBONO 7.75 12/14/2017",
DateUtil.CreateFromYMD (
2008,
DateUtil.JANUARY,
31
),
DateUtil.CreateFromYMD (
2017,
DateUtil.DECEMBER,
14
),
0.0775,
strCurrency,
strDayCount,
2
);
Bond bond6 = FixedCouponBond (
"MBONO 4.75 06/14/2018",
DateUtil.CreateFromYMD (
2013,
DateUtil.AUGUST,
30
),
DateUtil.CreateFromYMD (
2018,
DateUtil.JUNE,
14
),
0.0475,
strCurrency,
strDayCount,
2
);
Bond bond7 = FixedCouponBond (
"MBONO 8.50 12/13/2018",
DateUtil.CreateFromYMD (
2009,
DateUtil.FEBRUARY,
12
),
DateUtil.CreateFromYMD (
2018,
DateUtil.DECEMBER,
13
),
0.085,
strCurrency,
strDayCount,
2
);
Bond bond8 = FixedCouponBond (
"MBONO 5.00 12/11/2019",
DateUtil.CreateFromYMD (
2014,
DateUtil.NOVEMBER,
7
),
DateUtil.CreateFromYMD (
2019,
DateUtil.DECEMBER,
11
),
0.05,
strCurrency,
strDayCount,
2
);
Bond bond9 = FixedCouponBond (
"MBONO 8.00 06/11/2020",
DateUtil.CreateFromYMD (
2010,
DateUtil.FEBRUARY,
25
),
DateUtil.CreateFromYMD (
2020,
DateUtil.JUNE,
11
),
0.08,
strCurrency,
strDayCount,
2
);
Bond bond10 = FixedCouponBond (
"MBONO 6.50 06/10/2021",
DateUtil.CreateFromYMD (
2011,
DateUtil.FEBRUARY,
3
),
DateUtil.CreateFromYMD (
2021,
DateUtil.JUNE,
10
),
0.065,
strCurrency,
strDayCount,
2
);
Bond bond11 = FixedCouponBond (
"MBONO 6.50 06/09/2022",
DateUtil.CreateFromYMD (
2012,
DateUtil.FEBRUARY,
15
),
DateUtil.CreateFromYMD (
2022,
DateUtil.JUNE,
9
),
0.065,
strCurrency,
strDayCount,
2
);
Bond bond12 = FixedCouponBond (
"MBONO 8.00 12/07/2023",
DateUtil.CreateFromYMD (
2003,
DateUtil.OCTOBER,
30
),
DateUtil.CreateFromYMD (
2023,
DateUtil.DECEMBER,
7
),
0.065,
strCurrency,
strDayCount,
2
);
Bond bond13 = FixedCouponBond (
"MBONO 10.00 12/05/2024",
DateUtil.CreateFromYMD (
2005,
DateUtil.JANUARY,
20
),
DateUtil.CreateFromYMD (
2024,
DateUtil.DECEMBER,
5
),
0.1,
strCurrency,
strDayCount,
2
);
Bond bond14 = FixedCouponBond (
"MBONO 7.50 06/03/2027",
DateUtil.CreateFromYMD (
2007,
DateUtil.JANUARY,
18
),
DateUtil.CreateFromYMD (
2027,
DateUtil.JUNE,
3
),
0.075,
strCurrency,
strDayCount,
2
);
Bond bond15 = FixedCouponBond (
"MBONO 8.50 05/31/2029",
DateUtil.CreateFromYMD (
2009,
DateUtil.JANUARY,
15
),
DateUtil.CreateFromYMD (
2029,
DateUtil.MAY,
31
),
0.085,
strCurrency,
strDayCount,
2
);
Bond bond16 = FixedCouponBond (
"MBONO 7.75 05/29/2031",
DateUtil.CreateFromYMD (
2009,
DateUtil.SEPTEMBER,
11
),
DateUtil.CreateFromYMD (
2031,
DateUtil.MAY,
29
),
0.0775,
strCurrency,
strDayCount,
2
);
Bond bond17 = FixedCouponBond (
"MBONO 7.75 11/23/2034",
DateUtil.CreateFromYMD (
2014,
DateUtil.APRIL,
11
),
DateUtil.CreateFromYMD (
2034,
DateUtil.NOVEMBER,
23
),
0.0775,
strCurrency,
strDayCount,
2
);
Bond bond18 = FixedCouponBond (
"MBONO 10.00 11/20/2036",
DateUtil.CreateFromYMD (
2006,
DateUtil.OCTOBER,
26
),
DateUtil.CreateFromYMD (
2036,
DateUtil.NOVEMBER,
20
),
0.1,
strCurrency,
strDayCount,
2
);
Bond bond19 = FixedCouponBond (
"MBONO 8.50 11/18/2038",
DateUtil.CreateFromYMD (
2009,
DateUtil.JANUARY,
29
),
DateUtil.CreateFromYMD (
2038,
DateUtil.NOVEMBER,
18
),
0.085,
strCurrency,
strDayCount,
2
);
Bond bond20 = FixedCouponBond (
"MBONO 7.75 11/13/2042",
DateUtil.CreateFromYMD (
2012,
DateUtil.APRIL,
20
),
DateUtil.CreateFromYMD (
2042,
DateUtil.NOVEMBER,
13
),
0.0775,
strCurrency,
strDayCount,
2
);
return new Bond[] {
bond1,
bond2,
bond3,
bond4,
bond5,
bond6,
bond7,
bond8,
bond9,
bond10,
bond11,
bond12,
bond13,
bond14,
bond15,
bond16,
bond17,
bond18,
bond19,
bond20
};
}
private static final Map<JulianDate, CashFlowYieldDF> BondYieldFlows (
final Bond[] aBond,
final double[] adblYield,
final int iValueDate)
throws Exception
{
Map<JulianDate, CashFlowYieldDF> mapDateYieldDF = new TreeMap<JulianDate, CashFlowYieldDF>();
ValuationParams valParams = new ValuationParams (
new JulianDate (iValueDate),
new JulianDate (iValueDate),
""
);
for (int i = 0; i < aBond.length; ++i) {
for (CompositePeriod cp : aBond[i].couponPeriods()) {
if (cp.payDate() <= iValueDate) continue;
double dblCashFlow = aBond[i].couponMetrics (
cp.endDate(),
valParams,
null
).rate() / aBond[i].freq();
double dblYieldDF = Helper.Yield2DF (
aBond[i].freq(),
adblYield[i],
Convention.YearFraction (
iValueDate,
cp.payDate(),
aBond[i].couponDC(),
false,
null,
aBond[i].currency()
)
);
JulianDate dtPay = new JulianDate (cp.payDate());
if (mapDateYieldDF.containsKey (dtPay))
mapDateYieldDF.get (dtPay).accumulate (
dblCashFlow,
dblYieldDF
);
else
mapDateYieldDF.put (
dtPay,
new CashFlowYieldDF (
dblCashFlow,
dblYieldDF
)
);
}
JulianDate dtMaturity = aBond[i].maturityDate();
double dblYieldDF = Helper.Yield2DF (
aBond[i].freq(),
adblYield[i],
Convention.YearFraction (
iValueDate,
dtMaturity.julian(),
aBond[i].couponDC(),
false,
null,
aBond[i].currency()
)
);
if (mapDateYieldDF.containsKey (dtMaturity))
mapDateYieldDF.get (dtMaturity).accumulate (
1.,
dblYieldDF
);
else
mapDateYieldDF.put (
dtMaturity,
new CashFlowYieldDF (
1.,
dblYieldDF
)
);
}
return mapDateYieldDF;
}
private static final StretchBestFitResponse SBFR (
final Map<JulianDate, CashFlowYieldDF> mapDateYieldDF)
throws Exception
{
int iMapSize = mapDateYieldDF.size();
int i = 0;
int[] aiDate = new int[iMapSize];
double[] adblYieldDF = new double[iMapSize];
double[] adblWeight = new double[iMapSize];
for (Map.Entry<JulianDate, CashFlowYieldDF> me : mapDateYieldDF.entrySet()) {
aiDate[i] = me.getKey().julian();
adblYieldDF[i] = me.getValue().weightedDF();
adblWeight[i] = me.getValue().cumulativeCashFlow();
++i;
}
return StretchBestFitResponse.Create (
aiDate,
adblYieldDF,
adblWeight
);
}
private static final MultiSegmentSequence BondRegressionSplineStretch (
final JulianDate dtSpot,
final Bond[] aBondSet,
final int iNumKnots,
final Map<JulianDate, CashFlowYieldDF> mapDateDF)
throws Exception
{
SegmentCustomBuilderControl scbc = PolynomialSplineSegmentBuilder();
double dblXStart = dtSpot.julian();
double dblXFinish = aBondSet[aBondSet.length - 1].maturityDate().julian();
double adblX[] = new double[iNumKnots + 2];
adblX[0] = dblXStart;
for (int i = 1; i < adblX.length; ++i)
adblX[i] = adblX[i - 1] + (dblXFinish - dblXStart) / (iNumKnots + 1);
SegmentCustomBuilderControl[] aSCBC = new SegmentCustomBuilderControl[adblX.length - 1];
for (int i = 0; i < adblX.length - 1; ++i)
aSCBC[i] = scbc;
return MultiSegmentSequenceBuilder.CreateCalibratedStretchEstimator (
"SPLINE_STRETCH",
adblX,
1.,
null,
aSCBC,
SBFR (mapDateDF),
BoundarySettings.NaturalStandard(),
MultiSegmentSequence.CALIBRATE
);
}
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv (
"",
true
);
int iNumKnots = 10;
String strCurrency = "MXN";
String strDayCount = "30/360";
JulianDate dtSpot = DateUtil.CreateFromYMD (
2015,
DateUtil.JUNE,
13
);
double[] aCalibYield = new double[] {
0.0315960,
0.0354184,
0.0389543,
0.0412860,
0.0435245,
0.0464521,
0.0486307,
0.0524561,
0.0532168,
0.0562230,
0.0585227,
0.0606205,
0.0611038,
0.0637935,
0.0648727,
0.0661705,
0.0673744,
0.0675774,
0.0683684,
0.0684978
};
Bond[] aBondSet = CalibBondSet (
strCurrency,
strDayCount
);
Map<JulianDate, CashFlowYieldDF> mapDateDF = BondYieldFlows (
aBondSet,
aCalibYield,
dtSpot.julian()
);
MultiSegmentSequence mss = BondRegressionSplineStretch (
dtSpot,
aBondSet,
iNumKnots,
mapDateDF
);
MergedDiscountForwardCurve dfdc = new DiscountFactorDiscountCurve (
strCurrency,
new OverlappingStretchSpan (mss)
);
System.out.println ("\n\n\t|--------------------------------------------|");
System.out.println ("\t| Curve Stretch [" +
new JulianDate ((int) mss.getLeftPredictorOrdinateEdge()) + " -> " +
new JulianDate ((int) mss.getRightPredictorOrdinateEdge()) + "] |"
);
System.out.println ("\t|--------------------------------------------|");
for (Map.Entry<JulianDate, CashFlowYieldDF> me : mapDateDF.entrySet()) {
System.out.println (
"\t|\t " + me.getKey() + " => " +
FormatUtil.FormatDouble (me.getValue().weightedDF(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (dfdc.df (me.getKey().julian()), 1, 4, 1.) + " |"
);
}
System.out.println ("\t|--------------------------------------------|\n\n");
System.out.println ("\t|---------------------------------------------------------------||");
System.out.println ("\t| Market Yield vs. Regression Curve ||");
System.out.println ("\t|---------------------------------------------------------------||");
System.out.println ("\t| L -> R ||");
System.out.println ("\t| Bond Name ||");
System.out.println ("\t| Market Yield ||");
System.out.println ("\t| Regressed Yield (Bond Basis) ||");
System.out.println ("\t| Regressed Yield (Yield Spread) ||");
System.out.println ("\t| Continuous Zero To Maturity ||");
System.out.println ("\t|---------------------------------------------------------------||");
ValuationParams valParams = new ValuationParams (
dtSpot,
dtSpot,
""
);
CurveSurfaceQuoteContainer mktParams = MarketParamsBuilder.Discount (dfdc);
for (int i = 0; i < aBondSet.length; ++i) {
System.out.println (
"\t| " + aBondSet[i].name() + " ==> " +
FormatUtil.FormatDouble (aCalibYield[i], 1, 2, 100.) + "% | " +
FormatUtil.FormatDouble (aBondSet[i].yieldFromBondBasis (
valParams,
mktParams,
null,
0.
), 1, 2, 100.) + "% | " +
FormatUtil.FormatDouble (aBondSet[i].yieldFromYieldSpread (
valParams,
mktParams,
null,
0.
), 1, 2, 100.) + "% | " +
FormatUtil.FormatDouble (dfdc.zero (
aBondSet[i].maturityDate().julian()
), 1, 2, 100.) + "% || "
);
}
System.out.println ("\t|---------------------------------------------------------------||\n\n");
EnvManager.TerminateEnv();
}
}