CDSBasketMeasures.java

  1. package org.drip.sample.credit;

  3. /*
  4.  * Credit Product Imports
  5.  */

  7. import org.drip.analytics.date.*;
  8. import org.drip.analytics.daycount.Convention;
  9. import org.drip.analytics.support.*;
  10. import org.drip.market.otc.*;
  11. import org.drip.numerical.common.FormatUtil;
  12. import org.drip.param.market.CurveSurfaceQuoteContainer;
  13. import org.drip.param.pricer.CreditPricerParams;
  14. import org.drip.param.valuation.*;
  15. import org.drip.product.creator.*;
  16. import org.drip.product.credit.*;
  17. import org.drip.product.definition.*;
  18. import org.drip.product.rates.*;
  19. import org.drip.service.env.EnvManager;
  20. import org.drip.state.creator.*;
  21. import org.drip.state.credit.CreditCurve;
  22. import org.drip.state.discount.MergedDiscountForwardCurve;
  23. import org.drip.state.identifier.ForwardLabel;

  25. /*
  26.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  27.  */

  29. /*!
  30.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  31.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  32.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  33.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  34.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  35.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  36.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  37.  * Copyright (C) 2013 Lakshmi Krishnamurthy
  38.  * 
  39.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  40.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  41.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  42.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  43.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  44.  *      and computational support.
  45.  *  
  46.  *      https://lakshmidrip.github.io/DROP/
  47.  *  
  48.  *  DROP is composed of three modules:
  49.  *  
  50.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  51.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  52.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  53.  * 
  54.  *  DROP Product Core implements libraries for the following:
  55.  *  - Fixed Income Analytics
  56.  *  - Loan Analytics
  57.  *  - Transaction Cost Analytics
  58.  * 
  59.  *  DROP Portfolio Core implements libraries for the following:
  60.  *  - Asset Allocation Analytics
  61.  *  - Asset Liability Management Analytics
  62.  *  - Capital Estimation Analytics
  63.  *  - Exposure Analytics
  64.  *  - Margin Analytics
  65.  *  - XVA Analytics
  66.  * 
  67.  *  DROP Computational Core implements libraries for the following:
  68.  *  - Algorithm Support
  69.  *  - Computation Support
  70.  *  - Function Analysis
  71.  *  - Model Validation
  72.  *  - Numerical Analysis
  73.  *  - Numerical Optimizer
  74.  *  - Spline Builder
  75.  *  - Statistical Learning
  76.  * 
  77.  *  Documentation for DROP is Spread Over:
  78.  * 
  79.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  80.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  81.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  82.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  83.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  84.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  85.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  86.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  87.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  88.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  89.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  90.  * 
  91.  *  Licensed under the Apache License, Version 2.0 (the "License");
  92.  *      you may not use this file except in compliance with the License.
  93.  *   
  94.  *  You may obtain a copy of the License at
  95.  *      http://www.apache.org/licenses/LICENSE-2.0
  96.  *  
  97.  *  Unless required by applicable law or agreed to in writing, software
  98.  *      distributed under the License is distributed on an "AS IS" BASIS,
  99.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  100.  *  
  101.  *  See the License for the specific language governing permissions and
  102.  *      limitations under the License.
  103.  */

  105. /**
  106.  * <i>CDSBasketMeasures</i> contains a demo of the CDS Basket Measures Generation Sample. It shows the
  107.  * following:
  108.  * 
  109.  * <br><br>
  110.  *  <ul>
  111.  *      <li>
  112.  *          Build the IR Curve from the Rates' instruments.
  113.  *      </li>
  114.  *      <li>
  115.  *          Build the Component Credit Curve from the CDS instruments.
  116.  *      </li>
  117.  *      <li>
  118.  *          Create the basket market parameters and add the named discount curve and the credit curves to it.
  119.  *      </li>
  120.  *      <li>
  121.  *          Create the CDS basket from the component CDS and their weights.
  122.  *      </li>
  123.  *      <li>
  124.  *          Construct the Valuation and the Pricing Parameters.
  125.  *      </li>
  126.  *      <li>
  127.  *          Generate the CDS basket measures from the valuation, the pricer, and the market parameters.
  128.  *      </li>
  129.  *  </ul>
  130.  *  
  131.  * <br><br>
  132.  *  <ul>
  133.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  134.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  135.  *      <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>
  136.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/cashflow/README.md">Single Name Portfolio CDS Analytics</a></li>
  137.  *  </ul>
  138.  * <br><br>
  139.  * 
  140.  * @author Lakshmi Krishnamurthy
  141.  */

  143. public class CDSBasketMeasures {

  145.     private static final FixFloatComponent OTCIRS (
  146.         final JulianDate dtSpot,
  147.         final String strCurrency,
  148.         final String strMaturityTenor,
  149.         final double dblCoupon)
  150.     {
  151.         FixedFloatSwapConvention ffConv = IBORFixedFloatContainer.ConventionFromJurisdiction (
  152.             strCurrency,
  153.             "ALL",
  154.             strMaturityTenor,
  155.             "MAIN"
  156.         );

  158.         return ffConv.createFixFloatComponent (
  159.             dtSpot,
  160.             strMaturityTenor,
  161.             dblCoupon,
  162.             0.,
  163.             1.
  164.         );
  165.     }

  167.     /*
  168.      * Sample demonstrating creation of a rates curve from instruments
  169.      * 
  170.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  171.      */

  173.     private static MergedDiscountForwardCurve BuildRatesCurveFromInstruments (
  174.         final JulianDate dtStart,
  175.         final String[] astrCashTenor,
  176.         final double[] adblCashRate,
  177.         final String[] astrIRSTenor,
  178.         final double[] adblIRSRate,
  179.         final double dblBump,
  180.         final String strCurrency)
  181.         throws Exception
  182.     {
  183.         int iNumDCInstruments = astrCashTenor.length + adblIRSRate.length;
  184.         int aiDate[] = new int[iNumDCInstruments];
  185.         double adblRate[] = new double[iNumDCInstruments];
  186.         String astrCalibMeasure[] = new String[iNumDCInstruments];
  187.         double adblCompCalibValue[] = new double[iNumDCInstruments];
  188.         CalibratableComponent aCompCalib[] = new CalibratableComponent[iNumDCInstruments];

  190.         // Cash Calibration

  192.         JulianDate dtCashEffective = dtStart.addBusDays (1, strCurrency);

  194.         for (int i = 0; i < astrCashTenor.length; ++i) {
  195.             astrCalibMeasure[i] = "Rate";
  196.             adblRate[i] = java.lang.Double.NaN;
  197.             adblCompCalibValue[i] = adblCashRate[i] + dblBump;

  199.             aCompCalib[i] = SingleStreamComponentBuilder.Deposit (
  200.                 dtCashEffective,
  201.                 new JulianDate (aiDate[i] = dtCashEffective.addTenor (astrCashTenor[i]).julian()),
  202.                 ForwardLabel.Create (
  203.                     strCurrency,
  204.                     astrCashTenor[i]
  205.                 )
  206.             );
  207.         }

  209.         // IRS Calibration

  211.         JulianDate dtIRSEffective = dtStart.addBusDays (
  212.             2,
  213.             strCurrency
  214.         );

  216.         for (int i = 0; i < astrIRSTenor.length; ++i) {
  217.             astrCalibMeasure[i + astrCashTenor.length] = "Rate";
  218.             adblRate[i + astrCashTenor.length] = java.lang.Double.NaN;
  219.             adblCompCalibValue[i + astrCashTenor.length] = adblIRSRate[i] + dblBump;

  221.             aiDate[i + astrCashTenor.length] = dtIRSEffective.addTenor (astrIRSTenor[i]).julian();

  223.             aCompCalib[i + astrCashTenor.length] = OTCIRS (
  224.                 dtIRSEffective,
  225.                 strCurrency,
  226.                 astrIRSTenor[i],
  227.                 0.
  228.             );
  229.         }

  231.         /*
  232.          * Build the IR curve from the components, their calibration measures, and their calibration quotes.
  233.          */

  235.         return ScenarioDiscountCurveBuilder.NonlinearBuild (
  236.             dtStart,
  237.             strCurrency,
  238.             aCompCalib,
  239.             adblCompCalibValue,
  240.             astrCalibMeasure,
  241.             null
  242.         );
  243.     }

  245.     /*
  246.      * Sample demonstrating the creation/usage of the Credit Curve from CDS Instruments
  247.      * 
  248.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  249.      */

  251.     private static CreditCurve CreateCreditCurveFromCDS (
  252.         final JulianDate dtStart,
  253.         final double[] adblQuote,
  254.         final String[] astrTenor,
  255.         final MergedDiscountForwardCurve dc,
  256.         final double dblRecovery,
  257.         final String strCCName)
  258.         throws Exception
  259.     {
  260.         String[] astrCalibMeasure = new String[adblQuote.length];
  261.         CreditDefaultSwap[] aCDS = new CreditDefaultSwap[adblQuote.length];

  263.         for (int i = 0; i < astrTenor.length; ++i) {
  264.             aCDS[i] = CDSBuilder.CreateSNAC (
  265.                 dtStart,
  266.                 astrTenor[i],
  267.                 0.01,
  268.                 strCCName
  269.             );

  271.             astrCalibMeasure[i] = "FairPremium";
  272.         }

  274.         /*
  275.          * Build the credit curve from the CDS instruments and the fair premium
  276.          */

  278.         return ScenarioCreditCurveBuilder.Custom (
  279.             strCCName,
  280.             dtStart,
  281.             aCDS,
  282.             dc,
  283.             adblQuote,
  284.             astrCalibMeasure,
  285.             dblRecovery,
  286.             false
  287.         );
  288.     }

  290.     /*
  291.      * Sample demonstrating the creation/usage of the bond basket API
  292.      * 
  293.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  294.      */

  296.     public static final void BasketBondAPISample()
  297.         throws Exception
  298.     {
  299.         JulianDate dtCurve = DateUtil.CreateFromYMD (
  300.             2013,
  301.             6,
  302.             27
  303.         );

  305.         JulianDate dtSettle = DateUtil.CreateFromYMD (
  306.             2013,
  307.             7,
  308.             1
  309.         );

  311.         /*
  312.          * Build the IR Curve from the Rates' instruments
  313.          */

  315.         String[] astrCashTenor = new String[] {
  316.             "3M"
  317.         };
  318.         double[] adblCashRate = new double[] {
  319.             0.00276
  320.         };
  321.         String[] astrIRSTenor = new String[] {   "1Y",    "2Y",    "3Y",    "4Y",    "5Y",    "6Y",    "7Y",
  322.                "8Y",    "9Y",   "10Y",   "11Y",   "12Y",   "15Y",   "20Y",   "25Y",   "30Y",   "40Y",   "50Y"};
  323.         double[] adblIRSRate = new double[]  {0.00367, 0.00533, 0.00843, 0.01238, 0.01609, 0.01926, 0.02191,
  324.             0.02406, 0.02588, 0.02741, 0.02870, 0.02982, 0.03208, 0.03372, 0.03445, 0.03484, 0.03501, 0.03484};

  326.         MergedDiscountForwardCurve dc = BuildRatesCurveFromInstruments (
  327.             dtCurve,
  328.             astrCashTenor,
  329.             adblCashRate,
  330.             astrIRSTenor,
  331.             adblIRSRate,
  332.             0.,
  333.             "USD"
  334.         );

  336.         /*
  337.          * Build the Component Credit Curve from the CDS instruments
  338.          */

  340.         CreditCurve ccCHN = CreateCreditCurveFromCDS (dtCurve,
  341.             new double[] {100., 100., 100., 100., 100., 100., 100., 100.},
  342.             new String[] {"6M", "1Y", "2Y", "3Y", "4Y", "5Y", "7Y", "10Y"}, dc, 0.4, "CHN");

  344.         CreditCurve ccIND = CreateCreditCurveFromCDS (dtCurve,
  345.             new double[] {100., 100., 100., 100., 100., 100., 100., 100.},
  346.             new String[] {"6M", "1Y", "2Y", "3Y", "4Y", "5Y", "7Y", "10Y"}, dc, 0.4, "IND");

  348.         CreditCurve ccBRA = CreateCreditCurveFromCDS (dtCurve,
  349.             new double[] {100., 100., 100., 100., 100., 100., 100., 100.},
  350.             new String[] {"6M", "1Y", "2Y", "3Y", "4Y", "5Y", "7Y", "10Y"}, dc, 0.4, "BRA");

  352.         CreditCurve ccRUS = CreateCreditCurveFromCDS (dtCurve,
  353.             new double[] {100., 100., 100., 100., 100., 100., 100., 100.},
  354.             new String[] {"6M", "1Y", "2Y", "3Y", "4Y", "5Y", "7Y", "10Y"}, dc, 0.4, "RUS");

  356.         CreditCurve ccKOR = CreateCreditCurveFromCDS (dtCurve,
  357.             new double[] {100., 100., 100., 100., 100., 100., 100., 100.},
  358.             new String[] {"6M", "1Y", "2Y", "3Y", "4Y", "5Y", "7Y", "10Y"}, dc, 0.4, "KOR");

  360.         CreditCurve ccTUR = CreateCreditCurveFromCDS (dtCurve,
  361.             new double[] {100., 100., 100., 100., 100., 100., 100., 100.},
  362.             new String[] {"6M", "1Y", "2Y", "3Y", "4Y", "5Y", "7Y", "10Y"}, dc, 0.4, "TUR");

  364.         /*
  365.          * Create the basket market parameters and add the named discount curve and the credit curves to it.
  366.          */

  368.         CurveSurfaceQuoteContainer mktParams =  new CurveSurfaceQuoteContainer();

  370.         mktParams.setFundingState (dc);

  372.         mktParams.setCreditState (ccCHN);

  374.         mktParams.setCreditState (ccIND);

  376.         mktParams.setCreditState (ccBRA);

  378.         mktParams.setCreditState (ccRUS);

  380.         mktParams.setCreditState (ccKOR);

  382.         mktParams.setCreditState (ccTUR);

  384.         /*
  385.          * Create the CDS basket from the component CDS and their weights
  386.          */

  388.         CreditDefaultSwap aCDS[] = new CreditDefaultSwap[6];

  390.         aCDS[0] = CDSBuilder.CreateSNAC (dtCurve, "5Y", 0.01, "CHN");

  392.         aCDS[1] = CDSBuilder.CreateSNAC (dtCurve, "5Y", 0.01, "IND");

  394.         aCDS[2] = CDSBuilder.CreateSNAC (dtCurve, "5Y", 0.01, "BRA");

  396.         aCDS[3] = CDSBuilder.CreateSNAC (dtCurve, "5Y", 0.01, "RUS");

  398.         aCDS[4] = CDSBuilder.CreateSNAC (dtCurve, "5Y", 0.01, "KOR");

  400.         aCDS[5] = CDSBuilder.CreateSNAC (dtCurve, "5Y", 0.01, "TUR");

  402.         BasketProduct bds = new CDSBasket (aCDS, new double[] {1., 2., 3., 4., 5., 6.}, "BRIC");

  404.         /*
  405.          * Construct the Valuation and the Pricing Parameters
  406.          */

  408.         ValuationParams valParams = ValuationParams.Spot (
  409.             dtSettle,
  410.             0,
  411.             "USD",
  412.             Convention.DATE_ROLL_ACTUAL
  413.         );

  415.         CreditPricerParams pricerParams = new CreditPricerParams (
  416.             7,
  417.             null,
  418.             false,
  419.             CreditPricerParams.PERIOD_DISCRETIZATION_FULL_COUPON
  420.         );

  422.         /*
  423.          * Generate the CDS basket measures from the valuation, the pricer, and the market parameters
  424.          */

  426.         CaseInsensitiveTreeMap<Double> mapResult = bds.value (
  427.             valParams,
  428.             pricerParams,
  429.             mktParams,
  430.             null
  431.         );

  433.         System.out.println ("Accrued:      " + FormatUtil.FormatDouble (mapResult.get ("Accrued"), 0, 2, 100.));

  435.         System.out.println ("Clean PV:     " + FormatUtil.FormatDouble (mapResult.get ("CleanPV"), 0, 2, 1.));

  437.         System.out.println ("Fair Premium: " + FormatUtil.FormatDouble (mapResult.get ("FairPremium"), 0, 2, 1.));

  439.         System.out.println ("Fair Upfront: " + FormatUtil.FormatDouble (mapResult.get ("FairUpfront"), 0, 2, 1.));
  440.     }

  442.     public static final void main (
  443.         final String astrArgs[])
  444.         throws Exception
  445.     {
  446.         // String strConfig = "c:\\Lakshmi\\BondAnal\\Config.xml";

  448.         String strConfig = "";

  450.         EnvManager.InitEnv (strConfig);

  452.         BasketBondAPISample();

  454.         EnvManager.TerminateEnv();
  455.     }
  456. }
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