IBOR12MQuarticPolyVanilla.java

  1. package org.drip.sample.forward;

  3. import org.drip.analytics.date.*;
  4. import org.drip.function.r1tor1.QuadraticRationalShapeControl;
  5. import org.drip.service.env.EnvManager;
  6. import org.drip.spline.basis.PolynomialFunctionSetParams;
  7. import org.drip.spline.params.*;
  8. import org.drip.spline.stretch.MultiSegmentSequenceBuilder;
  9. import org.drip.state.discount.*;
  10. import org.drip.state.forward.ForwardCurve;
  11. import org.drip.state.identifier.ForwardLabel;

  13. /*
  14.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  15.  */

  17. /*!
  18.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  19.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  20.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  21.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  22.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  23.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  24.  * 
  25.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  26.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  27.  *      credit, commodity, equity, FX, and structured products.
  28.  *  
  29.  *      https://lakshmidrip.github.io/DROP/
  30.  *  
  31.  *  DROP is composed of three modules:
  32.  *  
  33.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  34.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  35.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  36.  * 
  37.  *  DROP Analytics Core implements libraries for the following:
  38.  *  - Fixed Income Analytics
  39.  *  - Asset Backed Analytics
  40.  *  - XVA Analytics
  41.  *  - Exposure and Margin Analytics
  42.  * 
  43.  *  DROP Portfolio Core implements libraries for the following:
  44.  *  - Asset Allocation Analytics
  45.  *  - Transaction Cost Analytics
  46.  * 
  47.  *  DROP Numerical Core implements libraries for the following:
  48.  *  - Statistical Learning
  49.  *  - Numerical Optimizer
  50.  *  - Spline Builder
  51.  *  - Algorithm Support
  52.  * 
  53.  *  Documentation for DROP is Spread Over:
  54.  * 
  55.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  56.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  57.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  58.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  59.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  60.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  61.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  62.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  63.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  64.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  65.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  66.  * 
  67.  *  Licensed under the Apache License, Version 2.0 (the "License");
  68.  *      you may not use this file except in compliance with the License.
  69.  *   
  70.  *  You may obtain a copy of the License at
  71.  *      http://www.apache.org/licenses/LICENSE-2.0
  72.  *  
  73.  *  Unless required by applicable law or agreed to in writing, software
  74.  *      distributed under the License is distributed on an "AS IS" BASIS,
  75.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  76.  *  
  77.  *  See the License for the specific language governing permissions and
  78.  *      limitations under the License.
  79.  */

  81. /**
  82.  * <i>IBOR12MQuarticPolyVanilla</i> illustrates the Construction and Usage of the IBOR 12M Forward Curve
  83.  * Using Vanilla Quartic Polynomial.
  84.  *  
  85.  * <br><br>
  86.  *  <ul>
  87.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  88.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  89.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  90.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/forward/README.md">Forward Rate Curve Construction</a></li>
  91.  *  </ul>
  92.  * <br><br>
  93.  * 
  94.  * @author Lakshmi Krishnamurthy
  95.  */

  97. public class IBOR12MQuarticPolyVanilla {
  98.     public static final void main (
  99.         final String[] astrArgs)
  100.         throws Exception
  101.     {
  102.         /*
  103.          * Initialize the Credit Analytics Library
  104.          */

  106.         EnvManager.InitEnv ("");

  108.         JulianDate dtValue = DateUtil.CreateFromYMD (
  109.             2012,
  110.             DateUtil.DECEMBER,
  111.             11
  112.         );

  114.         String strTenor = "12M";
  115.         String strCurrency = "USD";

  117.         ForwardLabel fri = ForwardLabel.Create (
  118.             strCurrency,
  119.             strTenor
  120.         );

  122.         MergedDiscountForwardCurve dcEONIA = OvernightIndexCurve.MakeDC (
  123.             dtValue,
  124.             strCurrency
  125.         );

  127.         SegmentCustomBuilderControl scbcQuartic = new SegmentCustomBuilderControl (
  128.             MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
  129.             new PolynomialFunctionSetParams (5),
  130.             SegmentInelasticDesignControl.Create (
  131.                 2,
  132.                 2
  133.             ),
  134.             new ResponseScalingShapeControl (
  135.                 true,
  136.                 new QuadraticRationalShapeControl (0.)
  137.             ),
  138.             null
  139.         );

  141.         /*
  142.          * Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
  143.          */

  145.         double[] adblDepositQuote = new double[] {
  146.             0.006537,
  147.             0.006187,
  148.             0.005772,
  149.             0.005563,
  150.             0.005400
  151.         };

  153.         String[] astrDepositTenor = new String[] {
  154.              "1M",
  155.              "3M",
  156.              "6M",
  157.              "9M",
  158.             "12M"
  159.         };

  161.         /*
  162.          * Construct the Array of Fix-Float Component and their Quotes from the given set of parameters
  163.          */

  165.         double[] adblFRAQuote = new double[] {
  166.             0.004974,
  167.             0.004783,
  168.             0.004822,
  169.             0.005070,
  170.             0.005481,
  171.             0.006025
  172.         };

  174.         String[] astrFRATenor = new String[] {
  175.              "3M",
  176.              "6M",
  177.              "9M",
  178.             "12M",
  179.             "15M",
  180.             "18M",
  181.         };

  183.         /*
  184.          * Construct the Array of Float-Float Component and their Quotes from the given set of parameters
  185.          */

  187.         double[] adblFloatFloatQuote = new double[] {
  188.             -0.002070,  //  3Y
  189.             -0.001640,  //  4Y
  190.             -0.001510,  //  5Y
  191.             -0.001390,  //  6Y
  192.             -0.001300,  //  7Y
  193.             -0.001230,  //  8Y
  194.             -0.001180,  //  9Y
  195.             -0.001130,  // 10Y
  196.             -0.001090,  // 11Y
  197.             -0.001060,  // 12Y
  198.             -0.000930,  // 15Y
  199.             -0.000800,  // 20Y
  200.             -0.000720,  // 25Y
  201.             -0.000660   // 30Y
  202.         };

  204.         String[] astrFloatFloatTenor = new String[] {
  205.               "3Y",
  206.               "4Y",
  207.               "5Y",
  208.               "6Y",
  209.               "7Y",
  210.               "8Y",
  211.               "9Y",
  212.              "10Y",
  213.              "11Y",
  214.              "12Y",
  215.              "15Y",
  216.              "20Y",
  217.              "25Y",
  218.              "30Y"
  219.         };

  221.         /*
  222.          * Construct the Array of Terminal Synthetic Float-Float Components and their Quotes from the given set of parameters
  223.          */

  225.         String[] astrSyntheticFloatFloatTenor = new String[] {
  226.             "35Y",
  227.             "40Y",
  228.             "50Y",
  229.             "60Y"
  230.         };

  232.         double[] adblSyntheticFloatFloatQuote = new double[] {
  233.             -0.000660,
  234.             -0.000660,
  235.             -0.000660,
  236.             -0.000660
  237.         };

  239.         ForwardCurve fc6M = IBOR6MCubicPolyVanilla.Make6MForward (
  240.             dtValue,
  241.             strCurrency,
  242.             "6M",
  243.             true
  244.         );

  246.         ForwardCurve fc12M = IBORCurve.CustomIBORBuilderSample (
  247.             dcEONIA,
  248.             fc6M,
  249.             fri,
  250.             scbcQuartic,
  251.             astrDepositTenor,
  252.             adblDepositQuote,
  253.             "ForwardRate",
  254.             astrFRATenor,
  255.             adblFRAQuote,
  256.             "ParForwardRate",
  257.             null,
  258.             null,
  259.             "SwapRate",
  260.             astrFloatFloatTenor,
  261.             adblFloatFloatQuote,
  262.             "ReferenceParBasisSpread",
  263.             astrSyntheticFloatFloatTenor,
  264.             adblSyntheticFloatFloatQuote,
  265.             "ReferenceParBasisSpread",
  266.             "---- VANILLA QUARTIC POLYNOMIAL FORWARD CURVE ---",
  267.             true
  268.         );

  270.         IBORCurve.ForwardJack (
  271.             dtValue,
  272.             "---- VANILLA QUARTIC POLYNOMIAL FORWARD CURVE SENSITIVITY ---",
  273.             fc12M,
  274.             "DerivedParBasisSpread"
  275.         );

  277.         EnvManager.TerminateEnv();
  278.     }
  279. }
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