RelativeValueMeasuresGeneration.java
package org.drip.sample.bond;
/*
* Credit Product imports
*/
import org.drip.analytics.date.*;
import org.drip.analytics.daycount.Convention;
import org.drip.analytics.support.*;
import org.drip.market.otc.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.definition.*;
import org.drip.param.market.*;
import org.drip.param.quote.*;
import org.drip.param.valuation.*;
import org.drip.product.definition.*;
import org.drip.product.govvie.TreasuryComponent;
import org.drip.product.rates.*;
import org.drip.analytics.output.BondRVMeasures;
import org.drip.param.creator.*;
import org.drip.product.creator.*;
import org.drip.product.credit.BondComponent;
import org.drip.service.env.EnvManager;
import org.drip.service.template.TreasuryBuilder;
import org.drip.state.creator.*;
import org.drip.state.discount.MergedDiscountForwardCurve;
import org.drip.state.govvie.GovvieCurve;
import org.drip.state.identifier.ForwardLabel;
/*!
* 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>RelativeValueMeasuresGeneration</i> is a Bond RV Measures Generation Sample demonstrating the
* invocation and usage of Bond RV Measures functionality. It shows the following:
*
* <ul>
* <li>
* Create the discount/treasury curve from rates/treasury instruments.
* </li>
* <li>
* Compute the work-out date given the price.
* </li>
* <li>
* Compute and display the base RV measures to the work-out date.
* </li>
* <li>
* Compute and display the bumped RV measures to the work-out date.
* </li>
* </ul>
*
* <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 RelativeValueMeasuresGeneration {
private static final FixFloatComponent OTCIRS (
final JulianDate dtSpot,
final String strCurrency,
final String strMaturityTenor,
final double dblCoupon)
{
FixedFloatSwapConvention ffConv = IBORFixedFloatContainer.ConventionFromJurisdiction (
strCurrency,
"ALL",
strMaturityTenor,
"MAIN"
);
return ffConv.createFixFloatComponent (
dtSpot,
strMaturityTenor,
dblCoupon,
0.,
1.
);
}
/*
* 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] = "SwapRate";
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] = OTCIRS (
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 a set of the on-the-run treasury bonds
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final TreasuryComponent[] OTRTreasurySet (
final JulianDate dt,
final String[] astrTenor,
final double[] adblCoupon)
throws Exception
{
TreasuryComponent aTreasury[] = new TreasuryComponent[astrTenor.length];
for (int i = 0; i < astrTenor.length; ++i)
aTreasury[i] = TreasuryBuilder.FromCode (
"UST",
dt,
dt.addTenor (astrTenor[i]),
adblCoupon[i]
);
return aTreasury;
}
/*
* 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 GovvieCurve BuildOnTheRunGovvieCurve (
final JulianDate dt,
final Bond[] aTreasury,
final double[] adblYield)
throws Exception
{
return ScenarioGovvieCurveBuilder.CubicPolyShapePreserver (
"UST",
"UST",
aTreasury[0].currency(),
dt.julian(),
aTreasury,
adblYield,
"Yield"
);
}
/*
* Put together a named map of treasury quotes
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final CaseInsensitiveTreeMap<ProductQuote> MakeTSYQuotes (
final String[] astrTSYTenor,
final double[] adblTSYYield)
throws Exception
{
CaseInsensitiveTreeMap<ProductQuote> mTSYQuotes = new CaseInsensitiveTreeMap<ProductQuote>();
for (int i = 0; i < astrTSYTenor.length; ++i) {
ProductMultiMeasure cmmq = new ProductMultiMeasure();
cmmq.addQuote (
"Yield",
new MultiSided (
"mid",
adblTSYYield[i],
Double.NaN
),
true
);
mTSYQuotes.put (
astrTSYTenor[i] + "ON",
cmmq
);
}
return mTSYQuotes;
}
/*
* Print the Bond RV Measures
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final boolean PrintRVMeasures (
final String strPrefix,
final BondRVMeasures rv)
{
if (null == rv) return false;
System.out.println (strPrefix + "ASW: " + FormatUtil.FormatDouble (rv.asw(), 0, 0, 10000.));
System.out.println (strPrefix + "Bond Basis: " + FormatUtil.FormatDouble (rv.bondBasis(), 0, 0, 10000.));
System.out.println (strPrefix + "Convexity: " + FormatUtil.FormatDouble (rv.convexity(), 0, 2, 1000000.));
System.out.println (strPrefix + "Credit Basis: " + FormatUtil.FormatDouble (rv.creditBasis(), 0, 0, 10000.));
System.out.println (strPrefix + "Discount Margin: " + FormatUtil.FormatDouble (rv.discountMargin(), 0, 0, 10000.));
System.out.println (strPrefix + "G Spread: " + FormatUtil.FormatDouble (rv.gSpread(), 0, 0, 10000.));
System.out.println (strPrefix + "I Spread: " + FormatUtil.FormatDouble (rv.iSpread(), 0, 0, 10000.));
System.out.println (strPrefix + "Macaulay Duration: " + FormatUtil.FormatDouble (rv.macaulayDuration(), 0, 2, 1.));
System.out.println (strPrefix + "Modified Duration: " + FormatUtil.FormatDouble (rv.modifiedDuration(), 0, 2, 10000.));
System.out.println (strPrefix + "OAS: " + FormatUtil.FormatDouble (rv.oas(), 0, 0, 10000.));
System.out.println (strPrefix + "PECS: " + FormatUtil.FormatDouble (rv.pecs(), 0, 0, 10000.));
System.out.println (strPrefix + "Price: " + FormatUtil.FormatDouble (rv.price(), 0, 3, 100.));
System.out.println (strPrefix + "TSY Spread: " + FormatUtil.FormatDouble (rv.tsySpread(), 0, 0, 10000.));
try {
System.out.println (strPrefix + "Workout Date: " + new JulianDate (rv.wi().date()));
} catch (Exception e) {
e.printStackTrace();
}
System.out.println (strPrefix + "Workout Factor: " + rv.wi().factor());
System.out.println (strPrefix + "Workout Type: " + rv.wi().type());
System.out.println (strPrefix + "Workout Yield: " + FormatUtil.FormatDouble (rv.wi().yield(), 0, 3, 100.));
System.out.println (strPrefix + "Yield01: " + FormatUtil.FormatDouble (rv.yield01(), 0, 2, 10000.));
System.out.println (strPrefix + "Yield Basis: " + FormatUtil.FormatDouble (rv.bondBasis(), 0, 0, 10000.));
System.out.println (strPrefix + "Yield Spread: " + FormatUtil.FormatDouble (rv.bondBasis(), 0, 0, 10000.));
System.out.println (strPrefix + "Z Spread: " + FormatUtil.FormatDouble (rv.zSpread(), 0, 0, 10000.));
return true;
}
/*
* Sample demonstrating invocation and extraction of RV Measures from a bond
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final void BondRVMeasuresSample()
throws Exception
{
JulianDate dtCurve = DateUtil.CreateFromYMD (
2013,
6,
27
);
JulianDate dtSettle = DateUtil.CreateFromYMD (
2013,
7,
1
);
/*
* Create the discount curve from 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};
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
};
double[] adblTSYYield = new double[] {
0.00160, 0.00397, 0.00696, 0.01421, 0.01955, 0.02529, 0.03568
};
MergedDiscountForwardCurve dc = BuildRatesCurveFromInstruments (
dtCurve,
astrCashTenor,
adblCashRate,
astrIRSTenor,
adblIRSRate,
0.,
"USD"
);
TreasuryComponent[] aTSYBond = OTRTreasurySet (
dtCurve,
astrTSYTenor,
adblTSYCoupon
);
/*
* Create the on-the-run treasury discount curve.
*/
GovvieCurve gc = BuildOnTheRunGovvieCurve (
dtCurve,
aTSYBond,
adblTSYYield
);
BondComponent bond = BondBuilder.CreateSimpleFixed ( // Simple Fixed Rate Bond
"TEST", // Name
"USD", // Currency
"", // Credit Curve - Empty for now
0.0875, // Bond Coupon
2, // Frequency
"30/360", // Day Count
DateUtil.CreateFromYMD (
2010,
3,
17
), // Effective
DateUtil.CreateFromYMD (
2015,
4,
1
), // Maturity
null, // Principal Schedule
null
);
CurveSurfaceQuoteContainer mktParams = MarketParamsBuilder.Create (
dc,
gc,
null,
null,
null,
MakeTSYQuotes (
astrTSYTenor,
adblTSYYield
),
null
);
ValuationParams valParams = ValuationParams.Spot (
dtSettle,
0,
"",
Convention.DATE_ROLL_ACTUAL
);
double dblPrice = 1.1025;
/*
* Compute the work-out date given the price.
*/
WorkoutInfo wi = bond.exerciseYieldFromPrice (
valParams,
mktParams,
null,
dblPrice
);
/*
* Compute the base RV measures to the work-out date.
*/
BondRVMeasures rvm = bond.standardMeasures (
valParams,
null,
mktParams,
null,
wi,
dblPrice
);
PrintRVMeasures ("\tBase: ", rvm);
MergedDiscountForwardCurve dcBumped = BuildRatesCurveFromInstruments (
dtCurve,
astrCashTenor,
adblCashRate,
astrIRSTenor,
adblIRSRate,
0.0001,
"USD"
);
mktParams.setFundingState (dcBumped);
/*
* Compute the bumped RV measures to the work-out date.
*/
org.drip.analytics.output.BondRVMeasures rvmBumped = bond.standardMeasures (
valParams,
null,
mktParams,
null,
wi,
dblPrice
);
PrintRVMeasures ("\tBumped: ", rvmBumped);
}
public static final void main (
final String astrArgs[])
throws Exception
{
// String strConfig = "c:\\Lakshmi\\BondAnal\\Config.xml";
EnvManager.InitEnv (
"",
true
);
BondRVMeasuresSample();
EnvManager.TerminateEnv();
}
}