JurisdictionOTCIndexSwaps.java

  1. package org.drip.sample.fixfloat;

  3. import java.util.Map;

  5. import org.drip.analytics.date.*;
  6. import org.drip.analytics.support.*;
  7. import org.drip.function.r1tor1.QuadraticRationalShapeControl;
  8. import org.drip.market.otc.*;
  9. import org.drip.numerical.common.FormatUtil;
  10. import org.drip.param.creator.*;
  11. import org.drip.param.market.CurveSurfaceQuoteContainer;
  12. import org.drip.param.period.*;
  13. import org.drip.param.valuation.*;
  14. import org.drip.product.creator.*;
  15. import org.drip.product.rates.*;
  16. import org.drip.service.env.EnvManager;
  17. import org.drip.spline.basis.PolynomialFunctionSetParams;
  18. import org.drip.spline.params.*;
  19. import org.drip.spline.stretch.*;
  20. import org.drip.state.creator.ScenarioDiscountCurveBuilder;
  21. import org.drip.state.discount.*;
  22. import org.drip.state.estimator.LatentStateStretchBuilder;
  23. import org.drip.state.identifier.*;
  24. import org.drip.state.inference.*;

  26. /*
  27.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  28.  */

  30. /*!
  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.  * 
  37.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  38.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  39.  *      credit, commodity, equity, FX, and structured products.
  40.  *  
  41.  *      https://lakshmidrip.github.io/DROP/
  42.  *  
  43.  *  DROP is composed of three modules:
  44.  *  
  45.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  46.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  47.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  48.  * 
  49.  *  DROP Analytics Core implements libraries for the following:
  50.  *  - Fixed Income Analytics
  51.  *  - Asset Backed Analytics
  52.  *  - XVA Analytics
  53.  *  - Exposure and Margin Analytics
  54.  * 
  55.  *  DROP Portfolio Core implements libraries for the following:
  56.  *  - Asset Allocation Analytics
  57.  *  - Transaction Cost Analytics
  58.  * 
  59.  *  DROP Numerical Core implements libraries for the following:
  60.  *  - Statistical Learning
  61.  *  - Numerical Optimizer
  62.  *  - Spline Builder
  63.  *  - Algorithm Support
  64.  * 
  65.  *  Documentation for DROP is Spread Over:
  66.  * 
  67.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  68.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  69.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  70.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  71.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  72.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  73.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  74.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  75.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  76.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  77.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  78.  * 
  79.  *  Licensed under the Apache License, Version 2.0 (the "License");
  80.  *      you may not use this file except in compliance with the License.
  81.  *   
  82.  *  You may obtain a copy of the License at
  83.  *      http://www.apache.org/licenses/LICENSE-2.0
  84.  *  
  85.  *  Unless required by applicable law or agreed to in writing, software
  86.  *      distributed under the License is distributed on an "AS IS" BASIS,
  87.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  88.  *  
  89.  *  See the License for the specific language governing permissions and
  90.  *      limitations under the License.
  91.  */

  93. /**
  94.  * <i>JurisdictionOTCIndexSwaps</i> contains curve construction and valuation of the common
  95.  * Jurisdiction-specific OTC IRS.
  96.  *  
  97.  * <br><br>
  98.  *  <ul>
  99.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  100.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  101.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  102.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/fixfloat/README.md">Fix Float Swap Analytics</a></li>
  103.  *  </ul>
  104.  * <br><br>
  105.  * 
  106.  * @author Lakshmi Krishnamurthy
  107.  */

  109. public class JurisdictionOTCIndexSwaps {

  111.     private static final FixFloatComponent OTCIRS (
  112.         final JulianDate dtSpot,
  113.         final String strCurrency,
  114.         final String strLocation,
  115.         final String strMaturityTenor,
  116.         final String strIndex,
  117.         final double dblCoupon)
  118.     {
  119.         FixedFloatSwapConvention ffConv = IBORFixedFloatContainer.ConventionFromJurisdiction (
  120.             strCurrency,
  121.             strLocation,
  122.             strMaturityTenor,
  123.             strIndex
  124.         );

  126.         return ffConv.createFixFloatComponent (
  127.             dtSpot,
  128.             strMaturityTenor,
  129.             dblCoupon,
  130.             0.,
  131.             1.
  132.         );
  133.     }

  135.     /*
  136.      * Construct the Array of Deposit Instruments from the given set of parameters
  137.      * 
  138.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  139.      */

  141.     private static final SingleStreamComponent[] DepositInstrumentsFromMaturityDays (
  142.         final JulianDate dtEffective,
  143.         final String strCurrency,
  144.         final int[] aiDay)
  145.         throws Exception
  146.     {
  147.         SingleStreamComponent[] aDeposit = new SingleStreamComponent[aiDay.length];

  149.         ComposableFloatingUnitSetting cfus = new ComposableFloatingUnitSetting (
  150.             "3M",
  151.             CompositePeriodBuilder.EDGE_DATE_SEQUENCE_SINGLE,
  152.             null,
  153.             ForwardLabel.Create (
  154.                 strCurrency,
  155.                 "3M"
  156.             ),
  157.             CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
  158.             0.
  159.         );

  161.         CompositePeriodSetting cps = new CompositePeriodSetting (
  162.             4,
  163.             "3M",
  164.             strCurrency,
  165.             null,
  166.             1.,
  167.             null,
  168.             null,
  169.             null,
  170.             null
  171.         );

  173.         CashSettleParams csp = new CashSettleParams (
  174.             0,
  175.             strCurrency,
  176.             0
  177.         );

  179.         for (int i = 0; i < aiDay.length; ++i) {
  180.             aDeposit[i] = new SingleStreamComponent (
  181.                 "DEPOSIT_" + aiDay[i],
  182.                 new Stream (
  183.                     CompositePeriodBuilder.FloatingCompositeUnit (
  184.                         CompositePeriodBuilder.EdgePair (
  185.                             dtEffective,
  186.                             dtEffective.addBusDays (
  187.                                 aiDay[i],
  188.                                 strCurrency
  189.                             )
  190.                         ),
  191.                         cps,
  192.                         cfus
  193.                     )
  194.                 ),
  195.                 csp
  196.             );

  198.             aDeposit[i].setPrimaryCode (aiDay[i] + "D");
  199.         }

  201.         return aDeposit;
  202.     }

  204.     /*
  205.      * Construct the Array of Swap Instruments from the given set of parameters
  206.      * 
  207.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  208.      */

  210.     private static final FixFloatComponent[] SwapInstrumentsFromMaturityTenor (
  211.         final JulianDate dtSpot,
  212.         final String strCurrency,
  213.         final String strLocation,
  214.         final String strIndex,
  215.         final String[] astrMaturityTenor)
  216.         throws Exception
  217.     {
  218.         FixFloatComponent[] aIRS = new FixFloatComponent[astrMaturityTenor.length];

  220.         for (int i = 0; i < astrMaturityTenor.length; ++i)
  221.             aIRS[i] = OTCIRS (
  222.                 dtSpot,
  223.                 strCurrency,
  224.                 strLocation,
  225.                 astrMaturityTenor[i],
  226.                 strIndex,
  227.                 0.
  228.             );

  230.         return aIRS;
  231.     }

  233.     /*
  234.      * This sample demonstrates discount curve calibration and input instrument calibration quote recovery.
  235.      *  It shows the following:
  236.      *  - Construct the Array of Cash/Swap Instruments and their Quotes from the given set of parameters.
  237.      *  - Construct the Cash/Swap Instrument Set Stretch Builder.
  238.      *  - Set up the Linear Curve Calibrator using the following parameters:
  239.      *      - Cubic Exponential Mixture Basis Spline Set
  240.      *      - Ck = 2, Segment Curvature Penalty = 2
  241.      *      - Quadratic Rational Shape Controller
  242.      *      - Natural Boundary Setting
  243.      *  - Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
  244.      *      of Cash and Swap Stretches.
  245.      *  - Cross-Comparison of the Cash/Swap Calibration Instrument "Rate" metric across the different curve
  246.      *      construction methodologies.
  247.      * 
  248.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  249.      */

  251.     private static final void OTCRun (
  252.         final JulianDate dtToday,
  253.         final String strCurrency,
  254.         final String strLocation,
  255.         final String[] astrOTCMaturityTenor,
  256.         final String strIndex)
  257.         throws Exception
  258.     {
  259.         JulianDate dtSpot = dtToday.addTenorAndAdjust (
  260.             "0D",
  261.             strCurrency
  262.         );

  264.         /*
  265.          * Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
  266.          */

  268.         SingleStreamComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
  269.             dtSpot,
  270.             strCurrency,
  271.             new int[] {
  272.                 1, 7, 14, 30, 60
  273.             }
  274.         );

  276.         double[] adblDepositQuote = new double[] {
  277.             0.0013, 0.0017, 0.0018, 0.0020, 0.0023
  278.         };

  280.         /*
  281.          * Construct the Deposit Instrument Set Stretch Builder
  282.          */

  284.         LatentStateStretchSpec depositStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
  285.             "DEPOSIT",
  286.             aDepositComp,
  287.             "ForwardRate",
  288.             adblDepositQuote
  289.         );

  291.         /*
  292.          * Construct the Array of EDF Instruments and their Quotes from the given set of parameters
  293.          */

  295.         SingleStreamComponent[] aEDFComp = SingleStreamComponentBuilder.ForwardRateFuturesPack (
  296.             dtSpot,
  297.             4,
  298.             strCurrency
  299.         );

  301.         double[] adblEDFQuote = new double[] {
  302.             0.0027, 0.0032, 0.0041, 0.0054, 0.0077, 0.0104, 0.0134, 0.0160
  303.         };

  305.         /*
  306.          * Construct the EDF Instrument Set Stretch Builder
  307.          */

  309.         LatentStateStretchSpec edfStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
  310.             "EDF",
  311.             aEDFComp,
  312.             "ForwardRate",
  313.             adblEDFQuote
  314.         );

  316.         /*
  317.          * Construct the Array of Swap Instruments and their Quotes from the given set of parameters
  318.          */

  320.         FixFloatComponent[] aSwapComp = SwapInstrumentsFromMaturityTenor (
  321.             dtSpot,
  322.             strCurrency,
  323.             strLocation,
  324.             strIndex,
  325.             new java.lang.String[] {
  326.                 "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y", "40Y", "50Y"
  327.             }
  328.         );

  330.         double[] adblSwapQuote = new double[] {
  331.             0.0166, 0.0206, 0.0241, 0.0269, 0.0292, 0.0311, 0.0326, 0.0340, 0.0351, 0.0375, 0.0393, 0.0402, 0.0407, 0.0409, 0.0409
  332.         };

  334.         /*
  335.          * Construct the Swap Instrument Set Stretch Builder
  336.          */

  338.         LatentStateStretchSpec swapStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
  339.             "SWAP",
  340.             aSwapComp,
  341.             "SwapRate",
  342.             adblSwapQuote
  343.         );

  345.         LatentStateStretchSpec[] aStretchSpec = new LatentStateStretchSpec[] {
  346.             depositStretch,
  347.             edfStretch,
  348.             swapStretch
  349.         };

  351.         /*
  352.          * Set up the Linear Curve Calibrator using the following parameters:
  353.          *  - Cubic Exponential Mixture Basis Spline Set
  354.          *  - Ck = 2, Segment Curvature Penalty = 2
  355.          *  - Quadratic Rational Shape Controller
  356.          *  - Natural Boundary Setting
  357.          */

  359.         LinearLatentStateCalibrator lcc = new LinearLatentStateCalibrator (
  360.             new SegmentCustomBuilderControl (
  361.                 MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
  362.                 new PolynomialFunctionSetParams (4),
  363.                 SegmentInelasticDesignControl.Create (
  364.                     2,
  365.                     2
  366.                 ),
  367.                 new ResponseScalingShapeControl (
  368.                     true,
  369.                     new QuadraticRationalShapeControl (0.)
  370.                 ),
  371.                 null
  372.             ),
  373.             BoundarySettings.NaturalStandard(),
  374.             MultiSegmentSequence.CALIBRATE,
  375.             null,
  376.             null
  377.         );

  379.         ValuationParams valParams = new ValuationParams (
  380.             dtSpot,
  381.             dtSpot,
  382.             strCurrency
  383.         );

  385.         /*
  386.          * Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
  387.          *  of Deposit, Futures, and Swap Stretches.
  388.          */

  390.         MergedDiscountForwardCurve dc = ScenarioDiscountCurveBuilder.ShapePreservingDFBuild (
  391.             strCurrency,
  392.             lcc,
  393.             aStretchSpec,
  394.             valParams,
  395.             null,
  396.             null,
  397.             null,
  398.             1.
  399.         );

  401.         CurveSurfaceQuoteContainer csqs = MarketParamsBuilder.Create (
  402.             dc,
  403.             null,
  404.             null,
  405.             null,
  406.             null,
  407.             null,
  408.             null
  409.         );

  411.         System.out.print ("\t[" + strCurrency + " | " + strLocation + "] = ");

  413.         for (int i = 0; i < astrOTCMaturityTenor.length; ++i) {
  414.             FixFloatComponent swap = OTCIRS (
  415.                 dtSpot,
  416.                 strCurrency,
  417.                 strLocation,
  418.                 astrOTCMaturityTenor[i],
  419.                 strIndex,
  420.                 0.
  421.             );

  423.             Map<String, Double> mapOutput = swap.value (
  424.                 valParams,
  425.                 null,
  426.                 csqs,
  427.                 null
  428.             );

  430.             System.out.print (
  431.                 FormatUtil.FormatDouble (mapOutput.get ("CalibSwapRate"), 1, 4, 100.) + "% (" +
  432.                 FormatUtil.FormatDouble (mapOutput.get ("FairPremium"), 1, 4, 100.) + "%) || "
  433.             );
  434.         }

  436.         System.out.println();
  437.     }

  439.     public static final void main (
  440.         final String[] astrArgs)
  441.         throws Exception
  442.     {
  443.         /*
  444.          * Initialize the Credit Analytics Library
  445.          */

  447.         EnvManager.InitEnv ("");

  449.         JulianDate dtToday = DateUtil.Today();

  451.         String[] astrOTCMaturityTenor = new String[] {
  452.             "1Y",
  453.             "3Y",
  454.             "5Y",
  455.             "7Y",
  456.             "10Y"
  457.         };

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

  461.         System.out.println ("\t JURISDICTION             1Y      ||          3Y         ||          5Y         ||          7Y         ||         10Y         ||");

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

  465.         OTCRun (dtToday, "AUD", "ALL", astrOTCMaturityTenor, "MAIN");

  467.         OTCRun (dtToday, "CAD", "ALL", astrOTCMaturityTenor, "MAIN");

  469.         OTCRun (dtToday, "CHF", "ALL", astrOTCMaturityTenor, "MAIN");

  471.         OTCRun (dtToday, "CNY", "ALL", astrOTCMaturityTenor, "MAIN");

  473.         OTCRun (dtToday, "DKK", "ALL", astrOTCMaturityTenor, "MAIN");

  475.         OTCRun (dtToday, "EUR", "ALL", astrOTCMaturityTenor, "MAIN");

  477.         OTCRun (dtToday, "GBP", "ALL", astrOTCMaturityTenor, "MAIN");

  479.         OTCRun (dtToday, "HKD", "ALL", astrOTCMaturityTenor, "MAIN");

  481.         OTCRun (dtToday, "INR", "ALL", astrOTCMaturityTenor, "MAIN");

  483.         OTCRun (dtToday, "JPY", "ALL", astrOTCMaturityTenor, "MAIN");

  485.         OTCRun (dtToday, "JPY", "ALL", astrOTCMaturityTenor, "TIBOR");

  487.         OTCRun (dtToday, "KRW", "ALL", astrOTCMaturityTenor, "MAIN");

  489.         OTCRun (dtToday, "MYR", "ALL", astrOTCMaturityTenor, "MAIN");

  491.         OTCRun (dtToday, "NOK", "ALL", astrOTCMaturityTenor, "MAIN");

  493.         OTCRun (dtToday, "NZD", "ALL", astrOTCMaturityTenor, "MAIN");

  495.         OTCRun (dtToday, "PLN", "ALL", astrOTCMaturityTenor, "MAIN");

  497.         OTCRun (dtToday, "SEK", "ALL", astrOTCMaturityTenor, "MAIN");

  499.         OTCRun (dtToday, "SGD", "ALL", astrOTCMaturityTenor, "MAIN");

  501.         OTCRun (dtToday, "THB", "ALL", astrOTCMaturityTenor, "MAIN");

  503.         OTCRun (dtToday, "TWD", "ALL", astrOTCMaturityTenor, "MAIN");

  505.         OTCRun (dtToday, "USD", "LON", astrOTCMaturityTenor, "MAIN");

  507.         OTCRun (dtToday, "USD", "NYC", astrOTCMaturityTenor, "MAIN");

  509.         OTCRun (dtToday, "ZAR", "ALL", astrOTCMaturityTenor, "MAIN");

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

  513.         EnvManager.TerminateEnv();
  514.     }
  515. }
Created with JaCoCo 0.7.9.201702052155