CCBSDiscountCurve.java

package org.drip.sample.dual;

import java.util.List;

import org.drip.analytics.date.JulianDate;
import org.drip.analytics.support.*;
import org.drip.market.otc.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.numerical.differentiation.WengertJacobian;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.period.*;
import org.drip.param.valuation.*;
import org.drip.product.definition.CalibratableComponent;
import org.drip.product.fx.ComponentPair;
import org.drip.product.params.*;
import org.drip.product.rates.*;
import org.drip.spline.params.SegmentCustomBuilderControl;
import org.drip.spline.stretch.*;
import org.drip.state.creator.*;
import org.drip.state.discount.*;
import org.drip.state.estimator.*;
import org.drip.state.forward.ForwardCurve;
import org.drip.state.identifier.*;
import org.drip.state.inference.*;

/*
 * -*- 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
 * Copyright (C) 2014 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>CCBSDiscountCurve</i> demonstrates the setup and construction of the Forward Curve from the CCBS
 * Quotes.
 * 
 * <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/cross/README.md">G7 Standard Cross Currency Swap</a></li>
 *  </ul>
 * <br><br>
 * 
 * @author Lakshmi Krishnamurthy
 */

public class CCBSDiscountCurve {

    /*
     * Construct an array of float-float swaps from the corresponding reference (6M) and the derived legs.
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final FloatFloatComponent[] MakexM6MBasisSwap (
        final JulianDate dtEffective,
        final String strPayCurrency,
        final String strCouponCurrency,
        final double dblNotional,
        final String[] astrMaturityTenor,
        final int iTenorInMonths)
        throws Exception
    {
        FloatFloatComponent[] aFFC = new FloatFloatComponent[astrMaturityTenor.length];

        ComposableFloatingUnitSetting cfusReference = new ComposableFloatingUnitSetting (
            "6M",
            CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
            null,
            ForwardLabel.Create (
                strCouponCurrency,
                "6M"
            ),
            CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
            0.
        );

        ComposableFloatingUnitSetting cfusDerived = new ComposableFloatingUnitSetting (
            iTenorInMonths + "M",
            CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
            null,
            ForwardLabel.Create (
                strCouponCurrency,
                iTenorInMonths + "M"
            ),
            CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
            0.
        );

        CompositePeriodSetting cpsReference = new CompositePeriodSetting (
            2,
            "6M",
            strPayCurrency,
            null,
            -1. * dblNotional,
            null,
            null,
            strPayCurrency.equalsIgnoreCase (strCouponCurrency) ? null :
                new FixingSetting (
                    FixingSetting.FIXING_PRESET_STATIC,
                    null,
                    dtEffective.julian()
                ),
            null
        );

        CompositePeriodSetting cpsDerived = new CompositePeriodSetting (
            12 / iTenorInMonths,
            iTenorInMonths + "M",
            strPayCurrency,
            null,
            1. * dblNotional,
            null,
            null,
            strPayCurrency.equalsIgnoreCase (strCouponCurrency) ? null :
                new FixingSetting (
                    FixingSetting.FIXING_PRESET_STATIC,
                    null,
                    dtEffective.julian()
                ),
            null
        );

        CashSettleParams csp = new CashSettleParams (
            0,
            strPayCurrency,
            0
        );

        for (int i = 0; i < astrMaturityTenor.length; ++i) {
            List<Integer> lsReferenceStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
                dtEffective,
                "6M",
                astrMaturityTenor[i],
                null
            );

            List<Integer> lsDerivedStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
                dtEffective,
                iTenorInMonths + "M",
                astrMaturityTenor[i],
                null
            );

            Stream referenceStream = new Stream (
                CompositePeriodBuilder.FloatingCompositeUnit (
                    lsReferenceStreamEdgeDate,
                    cpsReference,
                    cfusReference
                )
            );

            Stream derivedStream = new Stream (
                CompositePeriodBuilder.FloatingCompositeUnit (
                    lsDerivedStreamEdgeDate,
                    cpsDerived,
                    cfusDerived
                )
            );

            aFFC[i] = new FloatFloatComponent (
                referenceStream,
                derivedStream,
                csp
            );

            aFFC[i].setPrimaryCode (referenceStream.name() + "||" + derivedStream.name());
        }

        return aFFC;
    }

    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.
        );
    }

    /*
     * Construct the Array of Swap Instruments from the given set of parameters
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final FixFloatComponent[] MakeIRS (
        final JulianDate dtEffective,
        final String strCurrency,
        final String[] astrTenor)
        throws Exception
    {
        FixFloatComponent[] aCalibComp = new FixFloatComponent[astrTenor.length];

        for (int i = 0; i < astrTenor.length; ++i)
            aCalibComp[i] = OTCIRS (
                dtEffective,
                strCurrency,
                astrTenor[i],
                0.
            );

        return aCalibComp;
    }

    private static final ComponentPair[] MakeCCSP (
        final JulianDate dtValue,
        final String strReferenceCurrency,
        final String strDerivedCurrency,
        final String[] astrTenor,
        final int iTenorInMonths)
        throws Exception
    {
        FloatFloatComponent[] aFFCReference = MakexM6MBasisSwap (
            dtValue,
            strReferenceCurrency,
            strReferenceCurrency,
            1.,
            astrTenor,
            3
        );

        FixFloatComponent[] aIRS = MakeIRS (
            dtValue,
            strDerivedCurrency,
            astrTenor
        );

        ComponentPair[] aCCSP = new ComponentPair[astrTenor.length];

        for (int i = 0; i < aCCSP.length; ++i)
            aCCSP[i] = new ComponentPair (
                "EURUSD_" + astrTenor[i],
                aFFCReference[i],
                aIRS[i],
                null
            );

        return aCCSP;
    }

    private static final void TenorJack (
        final JulianDate dtStart,
        final String strTenor,
        final String strManifestMeasure,
        final MergedDiscountForwardCurve dc)
        throws Exception
    {
        String strCurrency = dc.currency();

        CalibratableComponent irsBespoke = OTCIRS (
            dtStart,
            strCurrency,
            strTenor,
            0.
        );

        WengertJacobian wjDFQuoteBespokeMat = dc.jackDDFDManifestMeasure (
            irsBespoke.maturityDate(),
            strManifestMeasure
        );

        System.out.println ("\t" + strTenor + " => " + wjDFQuoteBespokeMat.displayString());
    }

    public static final void MakeDiscountCurve (
        final String strReferenceCurrency,
        final String strDerivedCurrency,
        final JulianDate dtValue,
        final MergedDiscountForwardCurve dcReference,
        final ForwardCurve fc6MReference,
        final ForwardCurve fc3MReference,
        final double dblRefDerFX,
        final SegmentCustomBuilderControl scbc,
        final String[] astrTenor,
        final double[] adblCrossCurrencyBasis,
        final double[] adblSwapRate,
        final boolean bBasisOnDerivedLeg)
        throws Exception
    {
        ComponentPair[] aCCSP = MakeCCSP (
            dtValue,
            strReferenceCurrency,
            strDerivedCurrency,
            astrTenor,
            3
        );

        CurveSurfaceQuoteContainer mktParams = new CurveSurfaceQuoteContainer();

        mktParams.setFundingState (dcReference);

        mktParams.setForwardState (fc3MReference);

        mktParams.setForwardState (fc6MReference);

        CurrencyPair cp = CurrencyPair.FromCode (strDerivedCurrency + "/" + strReferenceCurrency);

        FXLabel fxLabel = FXLabel.Standard (cp);

        mktParams.setFXState (
            ScenarioFXCurveBuilder.CubicPolynomialCurve (
                fxLabel.fullyQualifiedName(),
                dtValue,
                cp,
                new String[] {"10Y"},
                new double[] {dblRefDerFX},
                dblRefDerFX
            )
        );

        mktParams.setFixing (
            aCCSP[0].effective(),
            fxLabel,
            dblRefDerFX
        );

        ValuationParams valParams = new ValuationParams (
            dtValue,
            dtValue,
            strReferenceCurrency
        );

        LinearLatentStateCalibrator llsc = new LinearLatentStateCalibrator (
            scbc,
            BoundarySettings.NaturalStandard(),
            MultiSegmentSequence.CALIBRATE,
            null,
            null
        );

        LatentStateStretchSpec stretchSpec = LatentStateStretchBuilder.ComponentPairDiscountStretch (
            "FIXFLOAT",
            aCCSP,
            valParams,
            mktParams,
            adblCrossCurrencyBasis,
            adblSwapRate,
            bBasisOnDerivedLeg
        );

        MergedDiscountForwardCurve dcDerived = ScenarioDiscountCurveBuilder.ShapePreservingDFBuild (
            strDerivedCurrency,
            llsc,
            new LatentStateStretchSpec[] {stretchSpec},
            valParams,
            null,
            null,
            null,
            1.
        );

        mktParams.setFundingState (dcDerived);

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

        if (bBasisOnDerivedLeg)
            System.out.println ("\t     IRS INSTRUMENTS QUOTE REVISION FROM CCBS DERIVED BASIS INPUTS");
        else
            System.out.println ("\t     IRS INSTRUMENTS QUOTE REVISION FROM CCBS REFERENCE BASIS INPUTS");

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

        for (int i = 0; i < aCCSP.length; ++i) {
            CalibratableComponent rcDerived = aCCSP[i].derivedComponent();

            CaseInsensitiveTreeMap<Double> mapOP = aCCSP[i].value (
                valParams,
                null, 
                mktParams,
                null
            );

            double dblCalibSwapRate = mapOP.get (rcDerived.name() + "[SwapRate]");

            System.out.println ("\t[" + rcDerived.effectiveDate() + " - " + rcDerived.maturityDate() + "] = " +
                FormatUtil.FormatDouble (dblCalibSwapRate, 1, 3, 100.) +
                    "% | " + FormatUtil.FormatDouble (adblSwapRate[i], 1, 3, 100.) + "% | " +
                        FormatUtil.FormatDouble (adblSwapRate[i] - dblCalibSwapRate, 2, 0, 10000.) + " | " +
                            FormatUtil.FormatDouble (dcDerived.df (rcDerived.maturityDate()), 1, 4, 1.));
        }

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

        if (bBasisOnDerivedLeg)
            System.out.println ("\t     CCBS DERIVED BASIS TENOR JACOBIAN");
        else
            System.out.println ("\t     CCBS REFERENCE BASIS TENOR JACOBIAN");

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

        for (int i = 0; i < aCCSP.length; ++i)
            TenorJack (
                dtValue,
                astrTenor[i],
                "PV",
                dcDerived
            );
    }
}