TemplatedFundingCurveBuilder.java

package org.drip.sample.funding;

import org.drip.analytics.date.*;
import org.drip.analytics.support.*;
import org.drip.market.otc.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.creator.*;
import org.drip.param.period.*;
import org.drip.param.valuation.*;
import org.drip.product.definition.*;
import org.drip.product.rates.*;
import org.drip.service.env.EnvManager;
import org.drip.state.creator.ScenarioDiscountCurveBuilder;
import org.drip.state.discount.MergedDiscountForwardCurve;
import org.drip.state.identifier.ForwardLabel;

/*
 * -*- 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
 * Copyright (C) 2013 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>TemplatedFundingCurveBuilder</i> sample demonstrates the usage of the different pre-built Funding Curve
 * Builders. It shows the following:
 *  
 * <br><br>
 *  <ul>
 *      <li>
 *          Construct the Array of Cash Instruments and their Quotes from the given set of parameters.
 *      </li>
 *      <li>
 *          Construct the Array of Swap Instruments and their Quotes from the given set of parameters.
 *      </li>
 *      <li>
 *          Construct the Cubic Tension KLK Hyperbolic Discount Factor Shape Preserver.
 *      </li>
 *      <li>
 *          Construct the Cubic Tension KLK Hyperbolic Discount Factor Shape Preserver with Zero Rate
 *              Smoothening applied.
 *      </li>
 *      <li>
 *          Construct the Cubic Polynomial Discount Factor Shape Preserver.
 *      </li>
 *      <li>
 *          Construct the Cubic Polynomial Discount Factor Shape Preserver with Zero Rate Smoothening
 *              applied.
 *      </li>
 *      <li>
 *          Construct the Discount Curve using the Bear Sterns' DENSE Methodology.
 *      </li>
 *      <li>
 *          Construct the Discount Curve using the Bear Sterns' DUALDENSE Methodology.
 *      </li>
 *      <li>
 *          Cross-Comparison of the Cash Calibration Instrument "Rate" metric across the different curve
 *              construction methodologies.
 *      </li>
 *      <li>
 *          Cross-Comparison of the Swap Calibration Instrument "Rate" metric across the different curve
 *              construction methodologies.
 *      </li>
 *      <li>
 *          Cross-Comparison of the generated Discount Factor across the different curve construction
 *              Methodologies for different node points.
 *      </li>
 *  </ul>
 *  
 * <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/funding/README.md">Funding Curve Builder</a></li>
 *  </ul>
 * <br><br>
 * 
 * @author Lakshmi Krishnamurthy
 */

public class TemplatedFundingCurveBuilder {

    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) {
            FixFloatComponent irs = OTCIRS (
                dtSpot,
                strCurrency,
                astrMaturityTenor[i],
                0.
            );

            irs.setPrimaryCode ("IRS." + astrMaturityTenor[i] + "." + strCurrency);

            aIRS[i] = irs;
        }

        return aIRS;
    }

    /*
     * Compute the desired component Metric
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    private static final double ComponentMetric (
        final Component comp,
        final ValuationParams valParams,
        final MergedDiscountForwardCurve dc,
        final String strMeasure)
        throws Exception
    {
        return comp.measureValue (
            valParams,
            null,
            MarketParamsBuilder.Create (
                dc,
                null,
                null,
                null,
                null,
                null,
                null
            ),
            null,
            strMeasure
        );
    }

    /*
     * This sample demonstrates the usage of the different pre-built Discount Curve Builders. It shows the
     *  following:
     *  - Construct the Array of Cash Instruments and their Quotes from the given set of parameters.
     *  - Construct the Array of Swap Instruments and their Quotes from the given set of parameters.
     *  - Construct the Cubic Tension KLK Hyperbolic Discount Factor Shape Preserver.
     *  - Construct the Cubic Tension KLK Hyperbolic Discount Factor Shape Preserver with Zero Rate
     *      Smoothening applied.
     *  - Construct the Cubic Polynomial Discount Factor Shape Preserver.
     *  - Construct the Cubic Polynomial Discount Factor Shape Preserver with Zero Rate Smoothening applied.
     *  - Construct the Discount Curve using the Bear Sterns' DENSE Methodology.
     *  - Construct the Discount Curve using the Bear Sterns' DUALDENSE Methodology.
     *  - Cross-Comparison of the Cash Calibration Instrument "Rate" metric across the different curve
     *      construction methodologies.
     *  - Cross-Comparison of the Swap Calibration Instrument "Rate" metric across the different curve
     *      construction methodologies.
     *  - Cross-Comparison of the generated Discount Factor across the different curve construction
     *      Methodologies for different node points.
     * 
     *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
     */

    public static final void TemplatedDiscountCurveBuilderSample (
        final JulianDate dtSpot,
        final String strCurrency)
        throws Exception
    {
        ValuationParams valParams = new ValuationParams (
            dtSpot,
            dtSpot,
            strCurrency
        );

        /*
         * Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
         */

        SingleStreamComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
            dtSpot,
            strCurrency,
            new int[] {
                2, 7, 14, 30, 60, 90, 180, 270, 360, 450, 540, 630, 720
            }
        );

        double[] adblDepositQuote = new double[] {
            0.0017, 0.0017, 0.0018, 0.0020, 0.0023, 0.0027, 0.0032, 0.0041, 0.0054, 0.0077, 0.0104, 0.0134, 0.0160
        };

        String[] astrDepositManifestMeasure = new String[] {
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate",
            "ForwardRate"
        };

        /*
         * 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
        };

        String[] astrSwapManifestMeasure = new String[] {
            "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate", "SwapRate"
        };

        /*
         * Construct the Cubic Tension KLK Hyperbolic Discount Factor Shape Preserver
         */

        MergedDiscountForwardCurve dcKLKHyperbolicShapePreserver = ScenarioDiscountCurveBuilder.CubicKLKHyperbolicDFRateShapePreserver (
            "KLK_HYPERBOLIC_SHAPE_TEMPLATE",
            valParams,
            aDepositComp,
            adblDepositQuote,
            astrDepositManifestMeasure,
            aSwapComp,
            adblSwapQuote,
            astrSwapManifestMeasure,
            false
        );

        /*
         * Construct the Cubic Tension KLK Hyperbolic Discount Factor Shape Preserver with Zero Rate
         *  Smoothening applied
         */

        MergedDiscountForwardCurve dcKLKHyperbolicSmoother = ScenarioDiscountCurveBuilder.CubicKLKHyperbolicDFRateShapePreserver (
            "KLK_HYPERBOLIC_SMOOTH_TEMPLATE",
            valParams,
            aDepositComp,
            adblDepositQuote,
            astrDepositManifestMeasure,
            aSwapComp,
            adblSwapQuote,
            astrSwapManifestMeasure,
            true
        );

        /*
         * Construct the Cubic Polynomial Discount Factor Shape Preserver
         */

        MergedDiscountForwardCurve dcCubicPolyShapePreserver = ScenarioDiscountCurveBuilder.CubicPolyDFRateShapePreserver (
            "CUBIC_POLY_SHAPE_TEMPLATE",
            valParams,
            aDepositComp,
            adblDepositQuote,
            astrDepositManifestMeasure,
            aSwapComp,
            adblSwapQuote,
            astrSwapManifestMeasure,
            false
        );

        /*
         * Construct the Cubic Polynomial Discount Factor Shape Preserver with Zero Rate Smoothening applied.
         */

        MergedDiscountForwardCurve dcCubicPolySmoother = ScenarioDiscountCurveBuilder.CubicPolyDFRateShapePreserver (
            "CUBIC_POLY_SMOOTH_TEMPLATE",
            valParams,
            aDepositComp,
            adblDepositQuote,
            astrDepositManifestMeasure,
            aSwapComp,
            adblSwapQuote,
            astrSwapManifestMeasure,
            true
        );

        /*
         * Construct the Discount Curve using the Bear Sterns' DENSE Methodology.
         */

        MergedDiscountForwardCurve dcDENSE = ScenarioDiscountCurveBuilder.DENSE (
            "DENSE",
            valParams,
            aDepositComp,
            adblDepositQuote,
            astrDepositManifestMeasure,
            aSwapComp,
            adblSwapQuote,
            astrSwapManifestMeasure,
            null
        );

        /*
         * Construct the Discount Curve using the Bear Sterns' DUAL DENSE Methodology.
         */

        MergedDiscountForwardCurve dcDualDENSE = ScenarioDiscountCurveBuilder.DUALDENSE (
            "DENSE",
            valParams,
            aDepositComp,
            adblDepositQuote,
            "1M",
            astrDepositManifestMeasure,
            aSwapComp,
            adblSwapQuote,
            "3M",
            astrSwapManifestMeasure,
            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\t\t\t\t\t\tDEPOSIT INSTRUMENTS CALIBRATION RECOVERY");

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

        System.out.println ("\t   MATURITY  | KLK HYPER SHAPE | KLK HYPER SMOTH | CUBE POLY SHAPE | CUBE POLY SMOTH |      DENSE      |   DUAL  DENSE   |      INPUT");

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

        for (int i = 0; i < aDepositComp.length; ++i)
            System.out.println ("\t[" + aDepositComp[i].maturityDate() + "] =    " +
                FormatUtil.FormatDouble (ComponentMetric (aDepositComp[i], valParams, dcKLKHyperbolicShapePreserver, "Rate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aDepositComp[i], valParams, dcKLKHyperbolicSmoother, "Rate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aDepositComp[i], valParams, dcCubicPolyShapePreserver, "Rate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aDepositComp[i], valParams, dcCubicPolySmoother, "Rate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aDepositComp[i], valParams, dcDENSE, "Rate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aDepositComp[i], valParams, dcDualDENSE, "Rate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (adblDepositQuote[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\t\t\t\t\t\tSWAP INSTRUMENTS CALIBRATION RECOVERY");

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

        System.out.println ("\t   MATURITY  | KLK HYPER SHAPE | KLK HYPER SMOTH | CUBE POLY SHAPE | CUBE POLY SMOTH |      DENSE      |   DUAL  DENSE   |      INPUT");

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

        for (int i = 0; i < aSwapComp.length; ++i)
            System.out.println ("\t[" + aSwapComp[i].maturityDate() + "] =    " +
                FormatUtil.FormatDouble (ComponentMetric (aSwapComp[i], valParams, dcKLKHyperbolicShapePreserver, "CalibSwapRate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aSwapComp[i], valParams, dcKLKHyperbolicSmoother, "CalibSwapRate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aSwapComp[i], valParams, dcCubicPolyShapePreserver, "CalibSwapRate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aSwapComp[i], valParams, dcCubicPolySmoother, "CalibSwapRate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aSwapComp[i], valParams, dcDENSE, "CalibSwapRate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (ComponentMetric (aSwapComp[i], valParams, dcDualDENSE, "CalibSwapRate"), 1, 6, 1.) + "    |    " +
                FormatUtil.FormatDouble (adblSwapQuote[i], 1, 6, 1.)
            );

        /*
         * Cross-Comparison of the generated Discount Factor across the different curve construction
         *  methodologies for different node points.
         */

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

        System.out.println ("\t      DF     |   KLK HYPER SHAPE |  KLK HYPER SMOTH  |  CUBE POLY SHAPE  |  CUBE POLY SMOTH  |       DENSE       |     DUAL DENSE    ");

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

        int iStartDate = aDepositComp[0].maturityDate().julian();

        int iEndDate = aSwapComp[aSwapComp.length - 1].maturityDate().julian();

        int iDateIncrement = (iEndDate - iStartDate) / 20;

        for (int iDate = iStartDate; iDate <= iEndDate; iDate += iDateIncrement) {
            System.out.println ("\t[" + new JulianDate (iDate) + "] =    " +
                FormatUtil.FormatDouble (dcKLKHyperbolicShapePreserver.df (iDate), 1, 8, 1.) + "    |    " +
                FormatUtil.FormatDouble (dcKLKHyperbolicSmoother.df (iDate), 1, 8, 1.) + "    |    " +
                FormatUtil.FormatDouble (dcCubicPolyShapePreserver.df (iDate), 1, 8, 1.) + "    |    " +
                FormatUtil.FormatDouble (dcCubicPolySmoother.df (iDate), 1, 8, 1.) + "    |    " +
                FormatUtil.FormatDouble (dcDENSE.df (iDate), 1, 8, 1.) + "    |    " +
                FormatUtil.FormatDouble (dcDualDENSE.df (iDate), 1, 8, 1.)
            );
        }
    }

    public static final void main (
        final String[] astrArgs)
        throws Exception
    {
        /*
         * Initialize the Credit Analytics Library
         */

        EnvManager.InitEnv ("");

        String strCurrency = "EUR";

        JulianDate dtToday = DateUtil.Today().addTenorAndAdjust (
            "0D",
            strCurrency
        );

        TemplatedDiscountCurveBuilderSample (
            dtToday,
            strCurrency
        );

        EnvManager.TerminateEnv();
    }
}