CIRFutureValueDistribution.java

  1. package org.drip.sample.ckls;

  3. import org.drip.dynamics.meanreverting.R1CIRStochasticEvolver;
  4. import org.drip.measure.chisquare.R1NonCentral;
  5. import org.drip.numerical.common.FormatUtil;
  6. import org.drip.service.env.EnvManager;

  8. /*
  9.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  10.  */

  12. /*!
  13.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  14.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  15.  * 
  16.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  17.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  18.  *      credit, commodity, equity, FX, and structured products.
  19.  *  
  20.  *      https://lakshmidrip.github.io/DROP/
  21.  *  
  22.  *  DROP is composed of three modules:
  23.  *  
  24.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  25.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  26.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  27.  * 
  28.  *  DROP Analytics Core implements libraries for the following:
  29.  *  - Fixed Income Analytics
  30.  *  - Asset Backed Analytics
  31.  *  - XVA Analytics
  32.  *  - Exposure and Margin Analytics
  33.  * 
  34.  *  DROP Portfolio Core implements libraries for the following:
  35.  *  - Asset Allocation Analytics
  36.  *  - Transaction Cost Analytics
  37.  * 
  38.  *  DROP Numerical Core implements libraries for the following:
  39.  *  - Statistical Learning Library
  40.  *  - Numerical Optimizer Library
  41.  *  - Machine Learning Library
  42.  *  - Spline Builder Library
  43.  * 
  44.  *  Documentation for DROP is Spread Over:
  45.  * 
  46.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  47.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  48.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  49.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  50.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  51.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  52.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  53.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  54.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  55.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  56.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  57.  * 
  58.  *  Licensed under the Apache License, Version 2.0 (the "License");
  59.  *      you may not use this file except in compliance with the License.
  60.  *   
  61.  *  You may obtain a copy of the License at
  62.  *      http://www.apache.org/licenses/LICENSE-2.0
  63.  *  
  64.  *  Unless required by applicable law or agreed to in writing, software
  65.  *      distributed under the License is distributed on an "AS IS" BASIS,
  66.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  67.  *  
  68.  *  See the License for the specific language governing permissions and
  69.  *      limitations under the License.
  70.  */

  72. /**
  73.  * <i>CIRFutureValueDistribution</i> demonstrates the Computation of the Future Value Distribution from an
  74.  *  Evolving R<sup>1</sup> Cox-Ingersoll-Ross Process. The References are:
  75.  *  
  76.  *  <br><br>
  77.  *  <ul>
  78.  *      <li>
  79.  *          Bogoliubov, N. N., and D. P. Sankevich (1994): N. N. Bogoliubov and Statistical Mechanics
  80.  *              <i>Russian Mathematical Surveys</i> <b>49 (5)</b> 19-49
  81.  *      </li>
  82.  *      <li>
  83.  *          Holubec, V., K. Kroy, and S. Steffenoni (2019): Physically Consistent Numerical Solver for
  84.  *              Time-dependent Fokker-Planck Equations <i>Physical Review E</i> <b>99 (4)</b> 032117
  85.  *      </li>
  86.  *      <li>
  87.  *          Kadanoff, L. P. (2000): <i>Statistical Physics: Statics, Dynamics, and Re-normalization</i>
  88.  *              <b>World Scientific</b>
  89.  *      </li>
  90.  *      <li>
  91.  *          Ottinger, H. C. (1996): <i>Stochastic Processes in Polymeric Fluids</i> <b>Springer-Verlag</b>
  92.  *              Berlin-Heidelberg
  93.  *      </li>
  94.  *      <li>
  95.  *          Wikipedia (2019): Fokker-Planck Equation
  96.  *              https://en.wikipedia.org/wiki/Fokker%E2%80%93Planck_equation
  97.  *      </li>
  98.  *  </ul>
  99.  *
  100.  *  <br><br>
  101.  *  <ul>
  102.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  103.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  104.  *      <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>
  105.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/ckls/README.md">Analysis of CKLS Process Variants</a></li>
  106.  *  </ul>
  107.  *
  108.  * @author Lakshmi Krishnamurthy
  109.  */

  111. public class CIRFutureValueDistribution
  112. {

  114.     private static final void NonCentralChiSquareParameters (
  115.         final double r0,
  116.         final double meanReversionSpeed,
  117.         final double meanReversionLevel,
  118.         final double[] tArray)
  119.         throws Exception
  120.     {
  121.         R1CIRStochasticEvolver r1CIRStochasticEvolver = R1CIRStochasticEvolver.Wiener (
  122.             meanReversionSpeed,
  123.             meanReversionLevel,
  124.             0.05,
  125.             0.01
  126.         );

  128.         java.lang.String dump = "\t| [" +
  129.             FormatUtil.FormatDouble (meanReversionSpeed, 1, 1, 1.) + "," +
  130.             FormatUtil.FormatDouble (meanReversionLevel, 1, 1, 1.) + "] =>";

  132.         for (double t : tArray)
  133.         {
  134.             R1NonCentral r1NonCentral = r1CIRStochasticEvolver.futureValueDistribution (
  135.                 r0,
  136.                 t
  137.             );

  139.             dump = dump + " {" + FormatUtil.FormatDouble (
  140.                 r1NonCentral.parameters().degreesOfFreedom(), 1, 4, 1.
  141.             ) + " |" + FormatUtil.FormatDouble (
  142.                 r1NonCentral.parameters().nonCentralityParameter(), 1, 4, 1.
  143.             ) + "}";
  144.         }

  146.         System.out.println (dump);
  147.     }

  149.     private static final void NonCentralChiSquareStatistics (
  150.         final double r0,
  151.         final double meanReversionSpeed,
  152.         final double meanReversionLevel,
  153.         final double[] tArray)
  154.         throws Exception
  155.     {
  156.         R1CIRStochasticEvolver r1CIRStochasticEvolver = R1CIRStochasticEvolver.Wiener (
  157.             meanReversionSpeed,
  158.             meanReversionLevel,
  159.             0.05,
  160.             0.01
  161.         );

  163.         java.lang.String dump = "\t| [" +
  164.             FormatUtil.FormatDouble (meanReversionSpeed, 1, 1, 1.) + "," +
  165.             FormatUtil.FormatDouble (meanReversionLevel, 1, 1, 1.) + "] =>";

  167.         for (double t : tArray)
  168.         {
  169.             R1NonCentral r1NonCentral = r1CIRStochasticEvolver.futureValueDistribution (
  170.                 r0,
  171.                 t
  172.             );

  174.             dump = dump + " {" + FormatUtil.FormatDouble (
  175.                 r1NonCentral.mean(), 1, 4, 1.
  176.             ) + " |" + FormatUtil.FormatDouble (
  177.                 r1NonCentral.variance(), 1, 4, 1.
  178.             ) + "}";
  179.         }

  181.         System.out.println (dump);
  182.     }

  184.     public static final void main (
  185.         final String[] argumentArray)
  186.         throws Exception
  187.     {
  188.         EnvManager.InitEnv (
  189.             ""
  190.         );

  192.         double r0 = 3.0;
  193.         double[] tArray =
  194.         {
  195.              1.0,
  196.              2.0,
  197.              3.0,
  198.              4.0,
  199.              5.0,
  200.              6.0,
  201.              7.0,
  202.         };
  203.         double[] meanReversionLevelArray =
  204.         {
  205.              2.0,
  206.              3.0,
  207.              4.0,
  208.         };
  209.         double[] meanReversionSpeedArray =
  210.         {
  211.              0.5,
  212.              1.0,
  213.              1.5,
  214.              2.0,
  215.              2.5,
  216.         };

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

  220.         System.out.println ("\t|                                                          CIR FUTURE VALUE DISTRIBUTION                                                            ||");

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

  224.         System.out.println ("\t|        L -> R:                                                                                                                                    ||");

  226.         System.out.println ("\t|                - Mean Reversion Speed                                                                                                             ||");

  228.         System.out.println ("\t|                - Mean Reversion Level                                                                                                             ||");

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

  232.         System.out.println ("\t|                - Chi-Square Degrees of Freedom and Non-Centrality Parameter over t                                                                ||");

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

  236.         for (double meanReversionSpeed : meanReversionSpeedArray)
  237.         {
  238.             for (double meanReversionLevel : meanReversionLevelArray)
  239.             {
  240.                 NonCentralChiSquareParameters (
  241.                     r0,
  242.                     meanReversionSpeed,
  243.                     meanReversionLevel,
  244.                     tArray
  245.                 );
  246.             }
  247.         }

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

  251.         System.out.println();

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

  255.         System.out.println ("\t|                                                          CIR FUTURE VALUE DISTRIBUTION                                                            ||");

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

  259.         System.out.println ("\t|        L -> R:                                                                                                                                    ||");

  261.         System.out.println ("\t|                - Mean Reversion Speed                                                                                                             ||");

  263.         System.out.println ("\t|                - Mean Reversion Level                                                                                                             ||");

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

  267.         System.out.println ("\t|                - Chi-Square Mean and Variance over t                                                                                              ||");

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

  271.         for (double meanReversionSpeed : meanReversionSpeedArray)
  272.         {
  273.             for (double meanReversionLevel : meanReversionLevelArray)
  274.             {
  275.                 NonCentralChiSquareStatistics (
  276.                     r0,
  277.                     meanReversionSpeed,
  278.                     meanReversionLevel,
  279.                     tArray
  280.                 );
  281.             }
  282.         }

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

  286.         System.out.println();

  288.         EnvManager.TerminateEnv();
  289.     }
  290. }
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