OvernightIndexCurve.java
package org.drip.sample.forward;
import java.util.List;
import org.drip.analytics.date.JulianDate;
import org.drip.analytics.support.*;
import org.drip.function.r1tor1.QuadraticRationalShapeControl;
import org.drip.market.definition.FloaterIndex;
import org.drip.market.otc.*;
import org.drip.param.period.*;
import org.drip.param.valuation.*;
import org.drip.product.creator.SingleStreamComponentBuilder;
import org.drip.product.definition.CalibratableComponent;
import org.drip.product.rates.*;
import org.drip.spline.basis.PolynomialFunctionSetParams;
import org.drip.spline.params.*;
import org.drip.spline.stretch.*;
import org.drip.state.creator.ScenarioDiscountCurveBuilder;
import org.drip.state.discount.*;
import org.drip.state.estimator.LatentStateStretchBuilder;
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) 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 risk, transaction costs, exposure, margin
* calculations, valuation adjustment, and portfolio construction within and across fixed income,
* credit, commodity, equity, FX, and structured products.
*
* https://lakshmidrip.github.io/DROP/
*
* DROP is composed of three modules:
*
* - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
* - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
* - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
*
* DROP Analytics Core implements libraries for the following:
* - Fixed Income Analytics
* - Asset Backed Analytics
* - XVA Analytics
* - Exposure and Margin Analytics
*
* DROP Portfolio Core implements libraries for the following:
* - Asset Allocation Analytics
* - Transaction Cost Analytics
*
* DROP Numerical Core implements libraries for the following:
* - Statistical Learning
* - Numerical Optimizer
* - Spline Builder
* - Algorithm Support
*
* 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>OvernightIndexCurve</i> illustrates the Construction and Usage of the Overnight Index Discount Curve.
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
* <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
* <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>
* </ul>
* <br><br>
*
* @author Lakshmi Krishnamurthy
*/
public class OvernightIndexCurve {
/*
* Construct the Array of Deposit Instruments from the given set of parameters
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final SingleStreamComponent[] DepositInstrumentsFromMaturityDays (
final JulianDate dtEffective,
final String strCurrency,
final int[] aiDay,
final FloaterIndex fi)
throws Exception
{
SingleStreamComponent[] aDeposit = new SingleStreamComponent[aiDay.length];
for (int i = 0; i < aiDay.length; ++i)
aDeposit[i] = SingleStreamComponentBuilder.Deposit (
dtEffective,
dtEffective.addBusDays (
aiDay[i],
strCurrency
),
null == fi ? OvernightLabel.Create (
strCurrency
) : ForwardLabel.Create (
fi,
"ON"
)
);
return aDeposit;
}
private static final FixFloatComponent OTCOISFixFloat (
final JulianDate dtSpot,
final String strCurrency,
final String strMaturityTenor,
final double dblCoupon)
{
FixedFloatSwapConvention ffConv = OvernightFixedFloatContainer.FundConventionFromJurisdiction (
strCurrency
);
return null == ffConv ? null : ffConv.createFixFloatComponent (
dtSpot,
strMaturityTenor,
dblCoupon,
0.,
1.
);
}
/*
* Construct the Array of Overnight Index Instruments from the given set of parameters
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final FixFloatComponent[] OISFromMaturityTenor (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrMaturityTenor,
final double[] adblCoupon)
throws Exception
{
FixFloatComponent[] aOIS = new FixFloatComponent[astrMaturityTenor.length];
for (int i = 0; i < astrMaturityTenor.length; ++i) {
if (null == (aOIS[i] = OTCOISFixFloat (
dtSpot,
strCurrency,
astrMaturityTenor[i],
adblCoupon[i]
)))
return null;
}
return aOIS;
}
private static final FixFloatComponent[] OvernightIndexFromMaturityTenor (
final JulianDate dtEffective,
final String strCurrency,
final String[] astrMaturityTenor,
final double[] adblCoupon,
final FloaterIndex fi)
throws Exception
{
FixFloatComponent[] aOIS = new FixFloatComponent[astrMaturityTenor.length];
UnitCouponAccrualSetting ucasFixed = new UnitCouponAccrualSetting (
2,
"Act/360",
false,
"Act/360",
false,
strCurrency,
false,
CompositePeriodBuilder.ACCRUAL_COMPOUNDING_RULE_GEOMETRIC
);
CashSettleParams csp = new CashSettleParams (
0,
strCurrency,
0
);
for (int i = 0; i < astrMaturityTenor.length; ++i) {
java.lang.String strFixedTenor = Helper.LEFT_TENOR_LESSER == Helper.TenorCompare (
astrMaturityTenor[i],
"6M"
) ? astrMaturityTenor[i] : "6M";
java.lang.String strFloatingTenor = Helper.LEFT_TENOR_LESSER == Helper.TenorCompare (
astrMaturityTenor[i],
"3M"
) ? astrMaturityTenor[i] : "3M";
ComposableFloatingUnitSetting cfusFloating = new ComposableFloatingUnitSetting (
"ON",
CompositePeriodBuilder.EDGE_DATE_SEQUENCE_OVERNIGHT,
null,
null == fi ? OvernightLabel.Create (
strCurrency
) : ForwardLabel.Create (
fi,
"ON"
),
CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
0.
);
ComposableFixedUnitSetting cfusFixed = new ComposableFixedUnitSetting (
strFixedTenor,
CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
null,
adblCoupon[i],
0.,
strCurrency
);
CompositePeriodSetting cpsFloating = new CompositePeriodSetting (
4,
strFloatingTenor,
strCurrency,
null,
-1.,
null,
null,
null,
null
);
CompositePeriodSetting cpsFixed = new CompositePeriodSetting (
2,
strFixedTenor,
strCurrency,
null,
1.,
null,
null,
null,
null
);
List<Integer> lsFixedStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
dtEffective,
strFixedTenor,
astrMaturityTenor[i],
null
);
List<Integer> lsFloatingStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
dtEffective,
strFloatingTenor,
astrMaturityTenor[i],
null
);
Stream floatingStream = new Stream (
CompositePeriodBuilder.FloatingCompositeUnit (
lsFloatingStreamEdgeDate,
cpsFloating,
cfusFloating
)
);
Stream fixedStream = new Stream (
CompositePeriodBuilder.FixedCompositeUnit (
lsFixedStreamEdgeDate,
cpsFixed,
ucasFixed,
cfusFixed
)
);
FixFloatComponent ois = new FixFloatComponent (
fixedStream,
floatingStream,
csp
);
ois.setPrimaryCode ("OIS." + astrMaturityTenor[i] + "." + strCurrency);
aOIS[i] = ois;
}
return aOIS;
}
/*
* Construct the Array of Overnight Index Future Instruments from the given set of parameters
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final FixFloatComponent[] OISFuturesFromMaturityTenor (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrStartTenor,
final String[] astrMaturityTenor,
final double[] adblCoupon)
throws Exception
{
FixFloatComponent[] aOISFutures = new FixFloatComponent[astrMaturityTenor.length];
for (int i = 0; i < astrMaturityTenor.length; ++i) {
if (null == (aOISFutures[i] = OTCOISFixFloat (
dtSpot.addTenor (astrStartTenor[i]),
strCurrency,
astrMaturityTenor[i],
adblCoupon[i]
)))
return null;
}
return aOISFutures;
}
private static final FixFloatComponent[] OvernightIndexFutureFromMaturityTenor (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrStartTenor,
final String[] astrMaturityTenor,
final double[] adblCoupon,
final FloaterIndex fi)
throws Exception
{
FixFloatComponent[] aOIS = new FixFloatComponent[astrStartTenor.length];
CashSettleParams csp = new CashSettleParams (
0,
strCurrency,
0
);
for (int i = 0; i < astrStartTenor.length; ++i) {
JulianDate dtEffective = dtSpot.addTenor (astrStartTenor[i]);
java.lang.String strFixedTenor = Helper.LEFT_TENOR_LESSER == Helper.TenorCompare (
astrMaturityTenor[i],
"6M"
) ? astrMaturityTenor[i] : "6M";
java.lang.String strFloatingTenor = Helper.LEFT_TENOR_LESSER == Helper.TenorCompare (
astrMaturityTenor[i],
"3M"
) ? astrMaturityTenor[i] : "3M";
ComposableFixedUnitSetting cfusFixed = new ComposableFixedUnitSetting (
strFixedTenor,
CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
null,
adblCoupon[i],
0.,
strCurrency
);
UnitCouponAccrualSetting ucasFixed = new UnitCouponAccrualSetting (
2,
"Act/360",
false,
"Act/360",
false,
strCurrency,
false,
CompositePeriodBuilder.ACCRUAL_COMPOUNDING_RULE_GEOMETRIC
);
ComposableFloatingUnitSetting cfusFloating = new ComposableFloatingUnitSetting (
"ON",
CompositePeriodBuilder.EDGE_DATE_SEQUENCE_OVERNIGHT,
null,
null == fi ? OvernightLabel.Create (
strCurrency
) : ForwardLabel.Create (
fi,
"ON"
),
CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
0.
);
CompositePeriodSetting cpsFloating = new CompositePeriodSetting (
4,
strFloatingTenor,
strCurrency,
null,
-1.,
null,
null,
null,
null
);
CompositePeriodSetting cpsFixed = new CompositePeriodSetting (
2,
strFixedTenor,
strCurrency,
null,
1.,
null,
null,
null,
null
);
List<Integer> lsFixedStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
dtEffective,
"6M",
astrMaturityTenor[i],
null
);
List<Integer> lsFloatingStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
dtEffective,
"3M",
astrMaturityTenor[i],
null
);
Stream floatingStream = new Stream (
CompositePeriodBuilder.FloatingCompositeUnit (
lsFloatingStreamEdgeDate,
cpsFloating,
cfusFloating
)
);
Stream fixedStream = new Stream (
CompositePeriodBuilder.FixedCompositeUnit (
lsFixedStreamEdgeDate,
cpsFixed,
ucasFixed,
cfusFixed
)
);
FixFloatComponent ois = new FixFloatComponent (
fixedStream,
floatingStream,
csp
);
ois.setPrimaryCode ("OIS." + astrMaturityTenor[i] + "." + strCurrency);
aOIS[i] = ois;
}
return aOIS;
}
public static final MergedDiscountForwardCurve MakeDC (
final String strCurrency,
final JulianDate dtSpot,
final int[] aiDepositMaturityDays,
final double[] adblDepositQuote,
final String[] astrShortEndOISMaturityTenor,
final double[] adblShortEndOISQuote,
final String[] astrOISFutureTenor,
final String[] astrOISFutureMaturityTenor,
final double[] adblOISFutureQuote,
final String[] astrLongEndOISMaturityTenor,
final double[] adblLongEndOISQuote,
final SegmentCustomBuilderControl scbc,
final FloaterIndex fi)
throws Exception
{
/*
* Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
*/
SingleStreamComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
dtSpot,
strCurrency,
aiDepositMaturityDays,
fi
);
/*
* Construct the Deposit Instrument Set Stretch Builder
*/
LatentStateStretchSpec depositStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
"DEPOSIT",
aDepositComp,
"ForwardRate",
adblDepositQuote
);
/*
* Construct the Array of Short End OIS Instruments and their Quotes from the given set of parameters
*/
CalibratableComponent[] aShortEndOISComp = OISFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"1W", "2W", "3W", "1M"
},
adblShortEndOISQuote
);
if (null == aShortEndOISComp)
aShortEndOISComp = OvernightIndexFromMaturityTenor (dtSpot,
strCurrency,
new java.lang.String[] {
"1W", "2W", "3W", "1M"
},
adblShortEndOISQuote,
fi
);
/*
* Construct the Short End OIS Instrument Set Stretch Builder
*/
LatentStateStretchSpec oisShortEndStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
"OIS_SHORT_END",
aShortEndOISComp,
"SwapRate",
adblShortEndOISQuote
);
/*
* Construct the Array of OIS Futures Instruments and their Quotes from the given set of parameters
*/
CalibratableComponent[] aOISFutureComp = OISFuturesFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"1M", "2M", "3M", "4M", "5M"
},
new java.lang.String[] {
"1M", "1M", "1M", "1M", "1M"
},
adblOISFutureQuote
);
if (null == aOISFutureComp)
aOISFutureComp = OvernightIndexFutureFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"1M", "2M", "3M", "4M", "5M"
},
new java.lang.String[] {
"1M", "1M", "1M", "1M", "1M"
},
adblOISFutureQuote,
fi
);
/*
* Construct the OIS Future Instrument Set Stretch Builder
*/
LatentStateStretchSpec oisFutureStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
"OIS_FUTURE",
aOISFutureComp,
"SwapRate",
adblOISFutureQuote
);
/*
* Construct the Array of Long End OIS Instruments and their Quotes from the given set of parameters
*/
CalibratableComponent[] aLongEndOISComp = OISFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"15M", "18M", "21M", "2Y", "3Y", "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y"
},
adblLongEndOISQuote
);
/*
* Construct the Long End OIS Instrument Set Stretch Builder
*/
LatentStateStretchSpec oisLongEndStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
"OIS_LONG_END",
aLongEndOISComp,
"SwapRate",
adblLongEndOISQuote
);
LatentStateStretchSpec[] aStretchSpec = new LatentStateStretchSpec[] {
depositStretch,
oisShortEndStretch,
oisFutureStretch,
oisLongEndStretch
};
/*
* Set up the Linear Curve Calibrator using the following parameters:
* - Cubic Exponential Mixture Basis Spline Set
* - Ck = 2, Segment Curvature Penalty = 2
* - Quadratic Rational Shape Controller
* - Natural Boundary Setting
*/
LinearLatentStateCalibrator lcc = new LinearLatentStateCalibrator (
scbc,
BoundarySettings.NaturalStandard(),
MultiSegmentSequence.CALIBRATE,
null,
null
);
/*
* Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
* of Deposit and Swap Stretches.
*/
return ScenarioDiscountCurveBuilder.ShapePreservingDFBuild (
strCurrency,
lcc,
aStretchSpec,
new ValuationParams (
dtSpot,
dtSpot,
strCurrency
),
null,
null,
null,
1.
);
}
/**
* Construct an elaborate EONIA Discount Curve
*
* @param dtSpot The Spot Date
* @param strCurrency The Currency
*
* @return Instance of the EONIA Discount Curve
*
* @throws Exception Thrown if the OIS Discount Curve Could not be created
*/
public static final MergedDiscountForwardCurve MakeDC (
final JulianDate dtSpot,
final String strCurrency)
throws Exception
{
/*
* Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
*/
int[] aiDepositMaturityDays = new int[] {
1,
2,
3
};
double[] adblDepositQuote = new double[] {
0.0004, // 1D
0.0004, // 2D
0.0004 // 3D
};
/*
* Construct the Array of Short End OIS Instruments and their Quotes from the given set of parameters
*/
String[] astrShortEndOISMaturityTenor = new java.lang.String[] {
"1W",
"2W",
"3W",
"1M"
};
double[] adblShortEndOISQuote = new double[] {
0.00070, // 1W
0.00069, // 2W
0.00078, // 3W
0.00074 // 1M
};
/*
* Construct the Array of OIS Futures Instruments and their Quotes from the given set of parameters
*/
final String[] astrOISFutureTenor = new java.lang.String[] {
"1M",
"1M",
"1M",
"1M",
"1M"
};
final String[] astrOISFutureMaturityTenor = new java.lang.String[] {
"1M",
"2M",
"3M",
"4M",
"5M"
};
double[] adblOISFutureQuote = new double[] {
0.00046, // 1M x 1M
0.00016, // 2M x 1M
-0.00007, // 3M x 1M
-0.00013, // 4M x 1M
-0.00014 // 5M x 1M
};
/*
* Construct the Array of Long End OIS Instruments and their Quotes from the given set of parameters
*/
String[] astrLongEndOISMaturityTenor = new java.lang.String[] {
"15M",
"18M",
"21M",
"2Y",
"3Y",
"4Y",
"5Y",
"6Y",
"7Y",
"8Y",
"9Y",
"10Y",
"11Y",
"12Y",
"15Y",
"20Y",
"25Y",
"30Y"
};
double[] adblLongEndOISQuote = new double[] {
0.00002, // 15M
0.00008, // 18M
0.00021, // 21M
0.00036, // 2Y
0.00127, // 3Y
0.00274, // 4Y
0.00456, // 5Y
0.00647, // 6Y
0.00827, // 7Y
0.00996, // 8Y
0.01147, // 9Y
0.01280, // 10Y
0.01404, // 11Y
0.01516, // 12Y
0.01764, // 15Y
0.01939, // 20Y
0.02003, // 25Y
0.02038 // 30Y
};
SegmentCustomBuilderControl scbcCubic = new SegmentCustomBuilderControl (
MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
new PolynomialFunctionSetParams (4),
SegmentInelasticDesignControl.Create (
2,
2
),
new ResponseScalingShapeControl (
true,
new QuadraticRationalShapeControl (0.)
),
null
);
return MakeDC (
strCurrency,
dtSpot,
aiDepositMaturityDays,
adblDepositQuote,
astrShortEndOISMaturityTenor,
adblShortEndOISQuote,
astrOISFutureTenor,
astrOISFutureMaturityTenor,
adblOISFutureQuote,
astrLongEndOISMaturityTenor,
adblLongEndOISQuote,
scbcCubic,
null
);
}
}