NonlinearCurveMeasures.java

  1. package org.drip.sample.funding;

  3. /*
  4.  * Credit Product imports
  5.  */

  7. import org.drip.analytics.date.JulianDate;
  8. import org.drip.analytics.support.*;
  9. import org.drip.market.otc.*;
  10. import org.drip.numerical.common.FormatUtil;
  11. import org.drip.numerical.differentiation.WengertJacobian;
  12. import org.drip.param.period.*;
  13. import org.drip.param.valuation.*;
  14. import org.drip.product.creator.*;
  15. import org.drip.product.definition.*;
  16. import org.drip.product.rates.*;
  17. import org.drip.param.creator.*;
  18. import org.drip.service.env.EnvManager;
  19. import org.drip.state.creator.ScenarioDiscountCurveBuilder;
  20. import org.drip.state.discount.MergedDiscountForwardCurve;
  21. import org.drip.state.identifier.ForwardLabel;

  23. /*
  24.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  25.  */

  27. /*!
  28.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  29.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  30.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  31.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  32.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  33.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  34.  * Copyright (C) 2013 Lakshmi Krishnamurthy
  35.  * Copyright (C) 2012 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>NonlinearCurveMeasures</i> contains a demo of the Non-linear Rates Analytics API Usage. It shows the
  95.  * following:
  96.  *  
  97.  * <br><br>
  98.  *  <ul>
  99.  *      <li>
  100.  *          Build a discount curve using: cash instruments only, EDF instruments only, IRS instruments only,
  101.  *              or all of them strung together.
  102.  *      </li>
  103.  *      <li>
  104.  *          Re-calculate the component input measure quotes from the calibrated discount curve object.
  105.  *      </li>
  106.  *      <li>
  107.  *          Compute the PVDF Wengert Jacobian across all the instruments used in the curve construction.
  108.  *      </li>
  109.  *  </ul>
  110.  *  
  111.  * <br><br>
  112.  *  <ul>
  113.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  114.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  115.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  116.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/funding/README.md">Funding Curve Builder</a></li>
  117.  *  </ul>
  118.  * <br><br>
  119.  * 
  120.  * @author Lakshmi Krishnamurthy
  121.  */

  123. public class NonlinearCurveMeasures {

  125.     private static final FixFloatComponent OTCIRS (
  126.         final JulianDate dtSpot,
  127.         final String strCurrency,
  128.         final String strMaturityTenor,
  129.         final double dblCoupon)
  130.     {
  131.         FixedFloatSwapConvention ffConv = IBORFixedFloatContainer.ConventionFromJurisdiction (
  132.             strCurrency,
  133.             "ALL",
  134.             strMaturityTenor,
  135.             "MAIN"
  136.         );

  138.         return ffConv.createFixFloatComponent (
  139.             dtSpot,
  140.             strMaturityTenor,
  141.             dblCoupon,
  142.             0.,
  143.             1.
  144.         );
  145.     }

  147.     /*
  148.      * Sample API demonstrating the creation of the discount curve from the rates input instruments
  149.      * 
  150.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  151.      */

  153.     public static void DiscountCurveFromRatesInstruments()
  154.         throws Exception
  155.     {
  156.         int NUM_DC_INSTR = 30;
  157.         double adblRate[] = new double[NUM_DC_INSTR];
  158.         int aiMaturityDate[] = new int[NUM_DC_INSTR];
  159.         String astrCalibMeasure[] = new String[NUM_DC_INSTR];
  160.         double adblCompCalibValue[] = new double[NUM_DC_INSTR];
  161.         CalibratableComponent aCompCalib[] = new CalibratableComponent[NUM_DC_INSTR];

  163.         JulianDate dtStart = org.drip.analytics.date.DateUtil.CreateFromYMD (
  164.             2011,
  165.             4,
  166.             6
  167.         );

  169.         // First 7 instruments - cash calibration

  171.         JulianDate dtCashEffective = dtStart.addBusDays (1, "USD");

  173.         aiMaturityDate[0] = dtCashEffective.addBusDays (1, "USD").julian(); // ON

  175.         aiMaturityDate[1] = dtCashEffective.addBusDays (2, "USD").julian(); // 1D (TN)

  177.         aiMaturityDate[2] = dtCashEffective.addBusDays (7, "USD").julian(); // 1W

  179.         aiMaturityDate[3] = dtCashEffective.addBusDays (14, "USD").julian(); // 2W

  181.         aiMaturityDate[4] = dtCashEffective.addBusDays (30, "USD").julian(); // 1M

  183.         aiMaturityDate[5] = dtCashEffective.addBusDays (60, "USD").julian(); // 2M

  185.         aiMaturityDate[6] = dtCashEffective.addBusDays (90, "USD").julian(); // 3M

  187.         /*
  188.          * Cash Rate Quotes
  189.          */

  191.         adblCompCalibValue[0] = .0013;
  192.         adblCompCalibValue[1] = .0017;
  193.         adblCompCalibValue[2] = .0017;
  194.         adblCompCalibValue[3] = .0018;
  195.         adblCompCalibValue[4] = .0020;
  196.         adblCompCalibValue[5] = .0023;
  197.         adblCompCalibValue[6] = .0026;

  199.         ComposableFloatingUnitSetting cfus = new ComposableFloatingUnitSetting (
  200.             "3M",
  201.             CompositePeriodBuilder.EDGE_DATE_SEQUENCE_SINGLE,
  202.             null,
  203.             ForwardLabel.Create (
  204.                 "USD",
  205.                 "3M"
  206.             ),
  207.             CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
  208.             0.
  209.         );

  211.         CompositePeriodSetting cps = new CompositePeriodSetting (
  212.             4,
  213.             "3M",
  214.             "USD",
  215.             null,
  216.             1.,
  217.             null,
  218.             null,
  219.             null,
  220.             null
  221.         );

  223.         CashSettleParams csp = new CashSettleParams (
  224.             0,
  225.             "USD",
  226.             0
  227.         );

  229.         for (int i = 0; i < 7; ++i) {
  230.             adblRate[i] = 0.01;
  231.             astrCalibMeasure[i] = "Rate";

  233.             aCompCalib[i] = SingleStreamComponentBuilder.Deposit (
  234.                 dtCashEffective, // Effective
  235.                 new JulianDate (aiMaturityDate[i]).addBusDays (
  236.                     2,
  237.                     "USD"
  238.                 ), // Maturity
  239.                 ForwardLabel.Create (
  240.                     "USD",
  241.                     "3M"
  242.                 )
  243.             );

  245.             aCompCalib[i] = new SingleStreamComponent (
  246.                 "DEPOSIT_" + aiMaturityDate[i],
  247.                 new Stream (
  248.                     CompositePeriodBuilder.FloatingCompositeUnit (
  249.                         CompositePeriodBuilder.EdgePair (
  250.                             dtStart,
  251.                             new JulianDate (aiMaturityDate[i]).addBusDays (
  252.                                 2,
  253.                                 "USD"
  254.                             )
  255.                         ),
  256.                         cps,
  257.                         cfus
  258.                     )
  259.                 ),
  260.                 csp
  261.             );

  263.             aCompCalib[i].setPrimaryCode (aCompCalib[i].name());
  264.         }

  266.         // Next 8 instruments - EDF calibration

  268.         adblCompCalibValue[7] = .0027;
  269.         adblCompCalibValue[8] = .0032;
  270.         adblCompCalibValue[9] = .0041;
  271.         adblCompCalibValue[10] = .0054;
  272.         adblCompCalibValue[11] = .0077;
  273.         adblCompCalibValue[12] = .0104;
  274.         adblCompCalibValue[13] = .0134;
  275.         adblCompCalibValue[14] = .0160;

  277.         CalibratableComponent[] aEDF = SingleStreamComponentBuilder.ForwardRateFuturesPack (
  278.             dtStart,
  279.             8,
  280.             "USD"
  281.         );

  283.         for (int i = 0; i < 8; ++i) {
  284.             adblRate[i + 7] = 0.01;
  285.             aCompCalib[i + 7] = aEDF[i];
  286.             astrCalibMeasure[i + 7] = "Rate";

  288.             aiMaturityDate[i + 7] = aEDF[i].maturityDate().julian();
  289.         }

  291.         // Final 15 instruments - IRS calibration

  293.         JulianDate dtIRSEffective = dtStart.addBusDays (
  294.             2,
  295.             "USD"
  296.         );

  298.         String[] astrIRSTenor = new String[] {
  299.             "4Y",
  300.             "5Y",
  301.             "6Y",
  302.             "7Y",
  303.             "8Y",
  304.             "9Y",
  305.             "10Y",
  306.             "11Y",
  307.             "12Y",
  308.             "15Y",
  309.             "20Y",
  310.             "25Y",
  311.             "30Y",
  312.             "40Y",
  313.             "50Y",
  314.         };

  316.         aiMaturityDate[15] = dtIRSEffective.addTenor (astrIRSTenor[0]).julian();

  318.         aiMaturityDate[16] = dtIRSEffective.addTenor (astrIRSTenor[1]).julian();

  320.         aiMaturityDate[17] = dtIRSEffective.addTenor (astrIRSTenor[2]).julian();

  322.         aiMaturityDate[18] = dtIRSEffective.addTenor (astrIRSTenor[3]).julian();

  324.         aiMaturityDate[19] = dtIRSEffective.addTenor (astrIRSTenor[4]).julian();

  326.         aiMaturityDate[20] = dtIRSEffective.addTenor (astrIRSTenor[5]).julian();

  328.         aiMaturityDate[21] = dtIRSEffective.addTenor (astrIRSTenor[6]).julian();

  330.         aiMaturityDate[22] = dtIRSEffective.addTenor (astrIRSTenor[7]).julian();

  332.         aiMaturityDate[23] = dtIRSEffective.addTenor (astrIRSTenor[8]).julian();

  334.         aiMaturityDate[24] = dtIRSEffective.addTenor (astrIRSTenor[9]).julian();

  336.         aiMaturityDate[25] = dtIRSEffective.addTenor (astrIRSTenor[10]).julian();

  338.         aiMaturityDate[26] = dtIRSEffective.addTenor (astrIRSTenor[11]).julian();

  340.         aiMaturityDate[27] = dtIRSEffective.addTenor (astrIRSTenor[12]).julian();

  342.         aiMaturityDate[28] = dtIRSEffective.addTenor (astrIRSTenor[13]).julian();

  344.         aiMaturityDate[29] = dtIRSEffective.addTenor (astrIRSTenor[14]).julian();

  346.         adblCompCalibValue[15] = .0166;
  347.         adblCompCalibValue[16] = .0206;
  348.         adblCompCalibValue[17] = .0241;
  349.         adblCompCalibValue[18] = .0269;
  350.         adblCompCalibValue[19] = .0292;
  351.         adblCompCalibValue[20] = .0311;
  352.         adblCompCalibValue[21] = .0326;
  353.         adblCompCalibValue[22] = .0340;
  354.         adblCompCalibValue[23] = .0351;
  355.         adblCompCalibValue[24] = .0375;
  356.         adblCompCalibValue[25] = .0393;
  357.         adblCompCalibValue[26] = .0402;
  358.         adblCompCalibValue[27] = .0407;
  359.         adblCompCalibValue[28] = .0409;
  360.         adblCompCalibValue[29] = .0409;

  362.         for (int i = 0; i < 15; ++i) {
  363.             astrCalibMeasure[i + 15] = "Rate";
  364.             adblRate[i + 15] = 0.01;

  366.             aCompCalib[i + 15] = OTCIRS (
  367.                 dtIRSEffective,
  368.                 "USD",
  369.                 astrIRSTenor[i],
  370.                 0.
  371.             );
  372.         }

  374.         /*
  375.          * Build the IR curve from the components, their calibration measures, and their calibration quotes.
  376.          */

  378.         MergedDiscountForwardCurve dc = ScenarioDiscountCurveBuilder.NonlinearBuild (
  379.             dtStart,
  380.             "USD",
  381.             aCompCalib,
  382.             adblCompCalibValue,
  383.             astrCalibMeasure,
  384.             null
  385.         );

  387.         /*
  388.          * Re-calculate the component input measure quotes from the calibrated discount curve object
  389.          */

  391.         for (int i = 0; i < aCompCalib.length; ++i)
  392.             System.out.println (astrCalibMeasure[i] + "[" + i + "] = " +
  393.                 FormatUtil.FormatDouble (aCompCalib[i].measureValue (new ValuationParams (dtStart, dtStart, "USD"), null,
  394.                     MarketParamsBuilder.Create (dc, null, null, null, null, null, null),
  395.                         null, astrCalibMeasure[i]), 1, 5, 1.) + " | " + FormatUtil.FormatDouble (adblCompCalibValue[i], 1, 5, 1.));

  397.         for (int i = 0; i < aCompCalib.length; ++i) {
  398.             WengertJacobian wjComp = aCompCalib[i].jackDDirtyPVDManifestMeasure (
  399.                 new ValuationParams (
  400.                     dtStart,
  401.                     dtStart,
  402.                     "USD"
  403.                 ),
  404.                 null,
  405.                 MarketParamsBuilder.Create (
  406.                     dc,
  407.                     null,
  408.                     null,
  409.                     null,
  410.                     null,
  411.                     null,
  412.                     null
  413.                 ),
  414.                 null
  415.             );

  417.             System.out.println ("PV/DF Micro Jack[" + aCompCalib[i].name() + "]=" +
  418.                 (null == wjComp ? null : wjComp.displayString()));
  419.         }
  420.     }

  422.     public static final void main (
  423.         final String astrArgs[])
  424.         throws Exception
  425.     {
  426.         String strConfig = "";

  428.         EnvManager.InitEnv (strConfig);

  430.         long lStart = System.nanoTime();

  432.         DiscountCurveFromRatesInstruments();

  434.         System.out.println ("Time Taken: " + ((int)(1.e-09 * (System.nanoTime() - lStart))) + " sec");

  436.         EnvManager.TerminateEnv();
  437.     }
  438. }
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