JurisdictionIRSFuturesValuation.java
- package org.drip.sample.forwardratefutures;
- import org.drip.analytics.date.*;
- import org.drip.analytics.support.CompositePeriodBuilder;
- import org.drip.function.r1tor1.QuadraticRationalShapeControl;
- import org.drip.market.exchange.*;
- import org.drip.market.otc.*;
- import org.drip.numerical.common.FormatUtil;
- import org.drip.param.creator.*;
- import org.drip.param.market.CurveSurfaceQuoteContainer;
- import org.drip.param.period.*;
- import org.drip.param.valuation.*;
- import org.drip.product.creator.SingleStreamComponentBuilder;
- import org.drip.product.rates.*;
- import org.drip.service.env.EnvManager;
- 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.MergedDiscountForwardCurve;
- 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>JurisdictionIRSFuturesValuation</i> contains the demonstration of the construction and the Valuation of
- * the Exchange-Traded IRS Futures Contract.
- *
- * <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/forwardratefutures/README.md">Forward Rate Futures Analytics</a></li>
- * </ul>
- * <br><br>
- *
- * @author Lakshmi Krishnamurthy
- */
- public class JurisdictionIRSFuturesValuation {
- 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 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)
- throws Exception
- {
- SingleStreamComponent[] aDeposit = new SingleStreamComponent[aiDay.length];
- ComposableFloatingUnitSetting cfus = new ComposableFloatingUnitSetting (
- "3M",
- CompositePeriodBuilder.EDGE_DATE_SEQUENCE_SINGLE,
- null,
- ForwardLabel.Create (
- strCurrency,
- "3M"
- ),
- CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
- 0.
- );
- CompositePeriodSetting cps = new CompositePeriodSetting (
- 4,
- "3M",
- strCurrency,
- null,
- 1.,
- null,
- null,
- null,
- null
- );
- CashSettleParams csp = new CashSettleParams (
- 0,
- strCurrency,
- 0
- );
- for (int i = 0; i < aiDay.length; ++i) {
- aDeposit[i] = new SingleStreamComponent (
- "DEPOSIT_" + aiDay[i],
- new Stream (
- CompositePeriodBuilder.FloatingCompositeUnit (
- CompositePeriodBuilder.EdgePair (
- dtEffective,
- dtEffective.addBusDays (
- aiDay[i],
- strCurrency
- )
- ),
- cps,
- cfus
- )
- ),
- csp
- );
- aDeposit[i].setPrimaryCode (aiDay[i] + "D");
- }
- return aDeposit;
- }
- /*
- * 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[] SwapInstrumentsFromMaturityTenor (
- final JulianDate dtSpot,
- final String strCurrency,
- final String[] astrMaturityTenor)
- throws Exception
- {
- FixFloatComponent[] aIRS = new FixFloatComponent[astrMaturityTenor.length];
- for (int i = 0; i < astrMaturityTenor.length; ++i)
- aIRS[i] = OTCIRS (
- dtSpot,
- strCurrency,
- astrMaturityTenor[i],
- 0.
- );
- return aIRS;
- }
- /*
- * This sample demonstrates discount curve calibration and input instrument calibration quote recovery.
- * It shows the following:
- * - Construct the Array of Cash/Swap Instruments and their Quotes from the given set of parameters.
- * - Construct the Cash/Swap Instrument Set Stretch Builder.
- * - 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
- * - Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
- * of Cash and Swap Stretches.
- * - Cross-Comparison of the Cash/Swap Calibration Instrument "Rate" metric across the different curve
- * construction methodologies.
- *
- * USE WITH CARE: This sample ignores errors and does not handle exceptions.
- */
- private static final void OTCInstrumentCurve (
- final JulianDate dtSpot,
- final String strCurrency)
- throws Exception
- {
- /*
- * Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
- */
- SingleStreamComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
- dtSpot,
- strCurrency,
- new int[] {
- 1, 2, 7, 14, 30, 60
- }
- );
- double[] adblDepositQuote = new double[] {
- 0.0013, 0.0017, 0.0017, 0.0018, 0.0020, 0.0023
- };
- /*
- * Construct the Deposit Instrument Set Stretch Builder
- */
- LatentStateStretchSpec depositStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
- "DEPOSIT",
- aDepositComp,
- "ForwardRate",
- adblDepositQuote
- );
- /*
- * Construct the Array of EDF Instruments and their Quotes from the given set of parameters
- */
- SingleStreamComponent[] aEDFComp = SingleStreamComponentBuilder.ForwardRateFuturesPack (
- dtSpot,
- 8,
- strCurrency
- );
- double[] adblEDFQuote = new double[] {
- 0.0027, 0.0032, 0.0041, 0.0054, 0.0077, 0.0104, 0.0134, 0.0160
- };
- /*
- * Construct the EDF Instrument Set Stretch Builder
- */
- LatentStateStretchSpec edfStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
- "EDF",
- aEDFComp,
- "ForwardRate",
- adblEDFQuote
- );
- /*
- * Construct the Array of Swap Instruments and their Quotes from the given set of parameters
- */
- FixFloatComponent[] aSwapComp = SwapInstrumentsFromMaturityTenor (
- dtSpot,
- strCurrency,
- new java.lang.String[] {
- "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y", "40Y", "50Y"
- }
- );
- double[] adblSwapQuote = new double[] {
- 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
- };
- /*
- * Construct the Swap Instrument Set Stretch Builder
- */
- LatentStateStretchSpec swapStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
- "SWAP",
- aSwapComp,
- "SwapRate",
- adblSwapQuote
- );
- LatentStateStretchSpec[] aStretchSpec = new LatentStateStretchSpec[] {depositStretch, edfStretch, swapStretch};
- /*
- * 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 (
- new SegmentCustomBuilderControl (
- MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
- new PolynomialFunctionSetParams (4),
- SegmentInelasticDesignControl.Create (
- 2,
- 2
- ),
- new ResponseScalingShapeControl (
- true,
- new QuadraticRationalShapeControl (0.)
- ),
- null
- ),
- BoundarySettings.NaturalStandard(),
- MultiSegmentSequence.CALIBRATE,
- null,
- null
- );
- ValuationParams valParams = new ValuationParams (
- dtSpot,
- dtSpot,
- strCurrency
- );
- /*
- * Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
- * of Deposit, Futures, and Swap Stretches.
- */
- MergedDiscountForwardCurve dc = ScenarioDiscountCurveBuilder.ShapePreservingDFBuild (
- strCurrency,
- lcc,
- aStretchSpec,
- valParams,
- null,
- null,
- null,
- 1.
- );
- CurveSurfaceQuoteContainer csqs = MarketParamsBuilder.Create (
- dc,
- null,
- null,
- null,
- null,
- null,
- null
- );
- /*
- * Cross-Comparison of the Deposit Calibration Instrument "Rate" metric across the different curve
- * construction methodologies.
- */
- System.out.println ("\n\t----------------------------------------------------------------");
- System.out.println ("\t DEPOSIT INSTRUMENTS CALIBRATION RECOVERY");
- System.out.println ("\t----------------------------------------------------------------");
- for (int i = 0; i < aDepositComp.length; ++i)
- System.out.println ("\t[" + aDepositComp[i].maturityDate() + "] = " +
- FormatUtil.FormatDouble (aDepositComp[i].measureValue (valParams, null, csqs,
- null, "Rate"), 1, 6, 1.) + " | " + FormatUtil.FormatDouble (adblDepositQuote[i], 1, 6, 1.));
- /*
- * Cross-Comparison of the EDF Calibration Instrument "Rate" metric across the different curve
- * construction methodologies.
- */
- System.out.println ("\n\t----------------------------------------------------------------");
- System.out.println ("\t EDF INSTRUMENTS CALIBRATION RECOVERY");
- System.out.println ("\t----------------------------------------------------------------");
- for (int i = 0; i < aEDFComp.length; ++i)
- System.out.println ("\t[" + aEDFComp[i].maturityDate() + "] = " +
- FormatUtil.FormatDouble (aEDFComp[i].measureValue (valParams, null, csqs, null, "Rate"), 1, 6, 1.)
- + " | " + FormatUtil.FormatDouble (adblEDFQuote[i], 1, 6, 1.));
- /*
- * Cross-Comparison of the Swap Calibration Instrument "Rate" metric across the different curve
- * construction methodologies.
- */
- System.out.println ("\n\t----------------------------------------------------------------");
- System.out.println ("\t SWAP INSTRUMENTS CALIBRATION RECOVERY");
- System.out.println ("\t----------------------------------------------------------------");
- for (int i = 0; i < aSwapComp.length; ++i)
- System.out.println ("\t[" + aSwapComp[i].maturityDate() + "] = " +
- FormatUtil.FormatDouble (aSwapComp[i].measureValue (valParams, null, csqs, null, "CalibSwapRate"), 1, 6, 1.)
- + " | " + FormatUtil.FormatDouble (adblSwapQuote[i], 1, 6, 1.) + " | " +
- FormatUtil.FormatDouble (aSwapComp[i].measureValue (valParams, null, csqs, null, "FairPremium"), 1, 6, 1.));
- System.out.println ("\t----------------------------------------------------------------");
- System.out.println ("\t EXCHANGE-TRADED SWAP INSTRUMENTS VALUATION");
- System.out.println ("\t----------------------------------------------------------------");
- String[] astrExchangeTenor = new String[] {"2Y", "5Y", "10Y", "30Y"};
- double[] adblCoupon = new double[] {0.0075, 0.0200, 0.0325, 0.0400};
- for (int i = 0; i < astrExchangeTenor.length; ++i) {
- DeliverableSwapFutures dsf = DeliverableSwapFuturesContainer.ProductInfo (
- strCurrency,
- astrExchangeTenor[i]
- );
- FixFloatComponent swapExchange = dsf.Create (
- dtSpot,
- adblCoupon[i]
- );
- System.out.println ("\t[" + swapExchange.maturityDate() + "] = " +
- FormatUtil.FormatDouble (swapExchange.measureValue (valParams, null, csqs, null, "CalibSwapRate"), 1, 6, 1.) + " | " +
- FormatUtil.FormatDouble (swapExchange.measureValue (valParams, null, csqs, null, "FairPremium"), 1, 6, 1.) + " | " +
- FormatUtil.FormatDouble (swapExchange.measureValue (valParams, null, csqs, null, "PV"), 4, 0, 1.) + " | " +
- astrExchangeTenor[i]
- );
- }
- }
- public static final void main (
- final String[] astrArgs)
- throws Exception
- {
- /*
- * Initialize the Credit Analytics Library
- */
- EnvManager.InitEnv ("");
- JulianDate dtToday = DateUtil.Today().addTenor ("0D");
- String strCurrency = "USD";
- OTCInstrumentCurve (
- dtToday,
- strCurrency
- );
- EnvManager.TerminateEnv();
- }
- }