ExponentialAffineZeroPricer.java
package org.drip.sample.ckls;
import org.drip.dynamics.meanreverting.R1CIRStochasticEvolver;
import org.drip.dynamics.physical.ExponentialAffineZeroCoefficients;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
/*
* -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
*/
/*!
* Copyright (C) 2020 Lakshmi Krishnamurthy
* Copyright (C) 2019 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>ExponentialAffineZeroPricer</i> illustrates the Pricing of a Zero Coupon Bond using the R<sup>1</sup>
* Cox-Ingersoll-Ross Process. The References are:
*
* <br><br>
* <ul>
* <li>
* Bogoliubov, N. N., and D. P. Sankevich (1994): N. N. Bogoliubov and Statistical Mechanics
* <i>Russian Mathematical Surveys</i> <b>49 (5)</b> 19-49
* </li>
* <li>
* Holubec, V., K. Kroy, and S. Steffenoni (2019): Physically Consistent Numerical Solver for
* Time-dependent Fokker-Planck Equations <i>Physical Review E</i> <b>99 (4)</b> 032117
* </li>
* <li>
* Kadanoff, L. P. (2000): <i>Statistical Physics: Statics, Dynamics, and Re-normalization</i>
* <b>World Scientific</b>
* </li>
* <li>
* Ottinger, H. C. (1996): <i>Stochastic Processes in Polymeric Fluids</i> <b>Springer-Verlag</b>
* Berlin-Heidelberg
* </li>
* <li>
* Wikipedia (2019): Fokker-Planck Equation
* https://en.wikipedia.org/wiki/Fokker%E2%80%93Planck_equation
* </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/ckls/README.md">Analysis of CKLS Process Variants</a></li>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class ExponentialAffineZeroPricer
{
private static final void Price (
final R1CIRStochasticEvolver r1CIRStochasticEvolver,
final double[] ttmArray,
final double[] rateArray)
throws Exception
{
System.out.println (
"\t|--------------------------------------------------------------------------------------------------||"
);
System.out.println (
"\t| Mean Reversion Speed => " + r1CIRStochasticEvolver.cklsParameters().meanReversionSpeed()
);
System.out.println (
"\t| Mean Reversion Level => " + r1CIRStochasticEvolver.cklsParameters().meanReversionLevel()
);
System.out.println (
"\t| Volatility => " + r1CIRStochasticEvolver.cklsParameters().volatilityCoefficient()
);
System.out.println (
"\t|--------------------------------------------------------------------------------------------------||"
);
for (double ttm : ttmArray)
{
ExponentialAffineZeroCoefficients exponentialAffineZeroCoefficients =
ExponentialAffineZeroCoefficients.FromCIR (
r1CIRStochasticEvolver,
ttm
);
String dump = "\t|" + FormatUtil.FormatDouble (ttm, 1, 1, 1.) + " => {" +
FormatUtil.FormatDouble (exponentialAffineZeroCoefficients.a(), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (exponentialAffineZeroCoefficients.b(), 2, 2, 1.) + "} ";
for (double rate : rateArray)
{
dump = dump + " " + FormatUtil.FormatDouble (
exponentialAffineZeroCoefficients.price (
rate
), 2, 3, 100., false
) + " |";
}
System.out.println (dump + "|");
}
System.out.println (
"\t|--------------------------------------------------------------------------------------------------||"
);
System.out.println();
}
public static final void main (
final String[] argumentArray)
throws Exception
{
EnvManager.InitEnv (
""
);
double[] ttmArray =
{
5.0,
4.5,
4.0,
3.5,
3.0,
2.5,
2.0,
1.5,
1.0,
0.5,
};
double[] rateArray =
{
0.08,
0.07,
0.06,
0.05,
0.04,
0.03,
0.02,
0.01,
};
double[] meanReversionSpeedArray =
{
0.030,
0.025,
0.020,
0.015,
0.010,
};
double[] meanReversionLevelArray =
{
0.045,
0.035,
0.035,
0.015,
0.005,
};
double[] volatilityArray =
{
0.020,
0.015,
0.010,
0.005,
};
for (double meanReversionLevel : meanReversionLevelArray)
{
for (double meanReversionSpeed : meanReversionSpeedArray)
{
for (double volatility : volatilityArray)
{
Price (
R1CIRStochasticEvolver.Wiener (
meanReversionSpeed,
meanReversionLevel,
volatility,
0.01
),
ttmArray,
rateArray
);
}
}
}
EnvManager.TerminateEnv();
}
}