PathForwardPrice.java

  1. package org.drip.sample.govviemc;

  3. import org.drip.analytics.date.*;
  4. import org.drip.numerical.common.FormatUtil;
  5. import org.drip.param.creator.MarketParamsBuilder;
  6. import org.drip.param.market.CurveSurfaceQuoteContainer;
  7. import org.drip.param.valuation.ValuationParams;
  8. import org.drip.product.creator.BondBuilder;
  9. import org.drip.product.credit.BondComponent;
  10. import org.drip.product.params.EmbeddedOptionSchedule;
  11. import org.drip.service.env.EnvManager;
  12. import org.drip.service.template.LatentMarketStateBuilder;
  13. import org.drip.state.discount.MergedDiscountForwardCurve;
  14. import org.drip.state.govvie.GovvieCurve;
  15. import org.drip.state.sequence.*;

  17. /*
  18.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  19.  */

  21. /*!
  22.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  23.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  24.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  25.  * 
  26.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  27.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  28.  *      credit, commodity, equity, FX, and structured products.
  29.  *  
  30.  *      https://lakshmidrip.github.io/DROP/
  31.  *  
  32.  *  DROP is composed of three modules:
  33.  *  
  34.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  35.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  36.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  37.  * 
  38.  *  DROP Analytics Core implements libraries for the following:
  39.  *  - Fixed Income Analytics
  40.  *  - Asset Backed Analytics
  41.  *  - XVA Analytics
  42.  *  - Exposure and Margin Analytics
  43.  * 
  44.  *  DROP Portfolio Core implements libraries for the following:
  45.  *  - Asset Allocation Analytics
  46.  *  - Transaction Cost Analytics
  47.  * 
  48.  *  DROP Numerical Core implements libraries for the following:
  49.  *  - Statistical Learning
  50.  *  - Numerical Optimizer
  51.  *  - Spline Builder
  52.  *  - Algorithm Support
  53.  * 
  54.  *  Documentation for DROP is Spread Over:
  55.  * 
  56.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  57.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  58.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  59.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  60.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  61.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  62.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  63.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  64.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  65.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  66.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  67.  * 
  68.  *  Licensed under the Apache License, Version 2.0 (the "License");
  69.  *      you may not use this file except in compliance with the License.
  70.  *   
  71.  *  You may obtain a copy of the License at
  72.  *      http://www.apache.org/licenses/LICENSE-2.0
  73.  *  
  74.  *  Unless required by applicable law or agreed to in writing, software
  75.  *      distributed under the License is distributed on an "AS IS" BASIS,
  76.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  77.  *  
  78.  *  See the License for the specific language governing permissions and
  79.  *      limitations under the License.
  80.  */

  82. /**
  83.  * <i>PathForwardPrice</i> demonstrates the Simulations of the Per-Path Callable Bond OAS Based Forward
  84.  * Price.
  85.  *  
  86.  * <br><br>
  87.  *  <ul>
  88.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  89.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  90.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  91.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/govviemc/README.md">Govvie Curve Monte Carlo Runs</a></li>
  92.  *  </ul>
  93.  * <br><br>
  94.  * 
  95.  * @author Lakshmi Krishnamurthy
  96.  */

  98. public class PathForwardPrice {

  100.     private static final MergedDiscountForwardCurve FundingCurve (
  101.         final JulianDate dtSpot,
  102.         final String strCurrency,
  103.         final double dblBump)
  104.         throws Exception
  105.     {
  106.         String[] astrDepositMaturityTenor = new String[] {
  107.             "2D"
  108.         };

  110.         double[] adblDepositQuote = new double[] {
  111.             0.0111956 + dblBump // 2D
  112.         };

  114.         double[] adblFuturesQuote = new double[] {
  115.             0.011375 + dblBump, // 98.8625
  116.             0.013350 + dblBump, // 98.6650
  117.             0.014800 + dblBump, // 98.5200
  118.             0.016450 + dblBump, // 98.3550
  119.             0.017850 + dblBump, // 98.2150
  120.             0.019300 + dblBump  // 98.0700
  121.         };

  123.         String[] astrFixFloatMaturityTenor = new String[] {
  124.             "02Y",
  125.             "03Y",
  126.             "04Y",
  127.             "05Y",
  128.             "06Y",
  129.             "07Y",
  130.             "08Y",
  131.             "09Y",
  132.             "10Y",
  133.             "11Y",
  134.             "12Y",
  135.             "15Y",
  136.             "20Y",
  137.             "25Y",
  138.             "30Y",
  139.             "40Y",
  140.             "50Y"
  141.         };

  143.         double[] adblFixFloatQuote = new double[] {
  144.             0.017029 + dblBump, //  2Y
  145.             0.019354 + dblBump, //  3Y
  146.             0.021044 + dblBump, //  4Y
  147.             0.022291 + dblBump, //  5Y
  148.             0.023240 + dblBump, //  6Y
  149.             0.024025 + dblBump, //  7Y
  150.             0.024683 + dblBump, //  8Y
  151.             0.025243 + dblBump, //  9Y
  152.             0.025720 + dblBump, // 10Y
  153.             0.026130 + dblBump, // 11Y
  154.             0.026495 + dblBump, // 12Y
  155.             0.027230 + dblBump, // 15Y
  156.             0.027855 + dblBump, // 20Y
  157.             0.028025 + dblBump, // 25Y
  158.             0.028028 + dblBump, // 30Y
  159.             0.027902 + dblBump, // 40Y
  160.             0.027655 + dblBump  // 50Y
  161.         };

  163.         return LatentMarketStateBuilder.SmoothFundingCurve (
  164.             dtSpot,
  165.             strCurrency,
  166.             astrDepositMaturityTenor,
  167.             adblDepositQuote,
  168.             "ForwardRate",
  169.             adblFuturesQuote,
  170.             "ForwardRate",
  171.             astrFixFloatMaturityTenor,
  172.             adblFixFloatQuote,
  173.             "SwapRate"
  174.         );
  175.     }

  177.     private static final PathGovvie PathGovvieCurves (
  178.         final JulianDate dtSpot,
  179.         final int iNumPath)
  180.         throws Exception
  181.     {
  182.         double dblVolatility = 0.10;
  183.         String strTreasuryCode = "UST";

  185.         String[] astrTenor = new String[] {
  186.             "01Y",
  187.             "02Y",
  188.             "03Y",
  189.             "05Y",
  190.             "07Y",
  191.             "10Y",
  192.             "20Y",
  193.             "30Y"
  194.         };

  196.         double[] adblTreasuryCoupon = new double[] {
  197.             0.0100,
  198.             0.0100,
  199.             0.0125,
  200.             0.0150,
  201.             0.0200,
  202.             0.0225,
  203.             0.0250,
  204.             0.0300
  205.         };

  207.         double[] adblTreasuryYield = new double[] {
  208.             0.0083, //  1Y
  209.             0.0122, //  2Y
  210.             0.0149, //  3Y
  211.             0.0193, //  5Y
  212.             0.0227, //  7Y
  213.             0.0248, // 10Y
  214.             0.0280, // 20Y
  215.             0.0308  // 30Y
  216.         };

  218.         return new PathGovvie (
  219.             new GovvieBuilderSettings (
  220.                 dtSpot,
  221.                 strTreasuryCode,
  222.                 astrTenor,
  223.                 adblTreasuryCoupon,
  224.                 adblTreasuryYield
  225.             ),
  226.             dblVolatility,
  227.             true
  228.         );
  229.     }

  231.     private static final BondComponent Callable (
  232.         final EmbeddedOptionSchedule eos)
  233.         throws Exception
  234.     {
  235.         JulianDate dtEffective = DateUtil.CreateFromYMD (
  236.             2009,
  237.             12,
  238.             3
  239.         );

  241.         JulianDate dtMaturity  = DateUtil.CreateFromYMD (
  242.             2039,
  243.             12,
  244.             1
  245.         );

  247.         double dblCoupon = 0.06558;
  248.         int iFreq = 2;
  249.         String strCUSIP = "033177XV3";
  250.         String strDayCount = "30/360";

  252.         BondComponent bond = BondBuilder.CreateSimpleFixed (
  253.             strCUSIP,
  254.             "USD",
  255.             "",
  256.             dblCoupon,
  257.             iFreq,
  258.             strDayCount,
  259.             dtEffective,
  260.             dtMaturity,
  261.             null,
  262.             null
  263.         );

  265.         bond.setEmbeddedCallSchedule (eos);

  267.         return bond;
  268.     }

  270.     public static final void main (
  271.         final String[] astrArgs)
  272.         throws Exception
  273.     {
  274.         EnvManager.InitEnv ("");

  276.         JulianDate dtSpot = DateUtil.CreateFromYMD (
  277.             2017,
  278.             DateUtil.MARCH,
  279.             24
  280.         );

  282.         int iNumPath = 50;
  283.         double dblCleanPrice = 1.08641;
  284.         int[] aiExerciseDate = new int[] {
  285.             DateUtil.CreateFromYMD (2019, 12,  1).julian(),
  286.             DateUtil.CreateFromYMD (2020, 12,  1).julian(),
  287.             DateUtil.CreateFromYMD (2021, 12,  1).julian(),
  288.             DateUtil.CreateFromYMD (2022, 12,  1).julian(),
  289.             DateUtil.CreateFromYMD (2023, 12,  1).julian(),
  290.             DateUtil.CreateFromYMD (2024, 12,  1).julian(),
  291.             DateUtil.CreateFromYMD (2025, 12,  1).julian(),
  292.             DateUtil.CreateFromYMD (2026, 12,  1).julian(),
  293.             DateUtil.CreateFromYMD (2027, 12,  1).julian(),
  294.             DateUtil.CreateFromYMD (2028, 12,  1).julian(),
  295.             DateUtil.CreateFromYMD (2029, 12,  1).julian(),
  296.             DateUtil.CreateFromYMD (2030, 12,  1).julian(),
  297.             DateUtil.CreateFromYMD (2031, 12,  1).julian(),
  298.             DateUtil.CreateFromYMD (2032, 12,  1).julian(),
  299.             DateUtil.CreateFromYMD (2033, 12,  1).julian(),
  300.             DateUtil.CreateFromYMD (2034, 12,  1).julian(),
  301.             DateUtil.CreateFromYMD (2035, 12,  1).julian(),
  302.             DateUtil.CreateFromYMD (2036, 12,  1).julian(),
  303.             DateUtil.CreateFromYMD (2037, 12,  1).julian(),
  304.             DateUtil.CreateFromYMD (2038, 12,  1).julian(),
  305.         };
  306.         double[] adblExercisePrice = new double[] {
  307.             1.,
  308.             1.,
  309.             1.,
  310.             1.,
  311.             1.,
  312.             1.,
  313.             1.,
  314.             1.,
  315.             1.,
  316.             1.,
  317.             1.,
  318.             1.,
  319.             1.,
  320.             1.,
  321.             1.,
  322.             1.,
  323.             1.,
  324.             1.,
  325.             1.,
  326.             1.,
  327.         };

  329.         int iNumVertex = aiExerciseDate.length;
  330.         double[][] aadblForwardPrice = new double[iNumPath][iNumVertex];
  331.         ValuationParams[] aValParamsEvent = new ValuationParams[iNumVertex];

  333.         BondComponent bond = Callable (
  334.             new EmbeddedOptionSchedule (
  335.                 aiExerciseDate,
  336.                 adblExercisePrice,
  337.                 false,
  338.                 30,
  339.                 false,
  340.                 Double.NaN,
  341.                 "",
  342.                 Double.NaN
  343.             )
  344.         );

  346.         PathGovvie pg = PathGovvieCurves (
  347.             dtSpot,
  348.             iNumPath
  349.         );

  351.         GovvieCurve[] aGCPath = pg.curveSequence (iNumPath);

  353.         MergedDiscountForwardCurve mdfc = FundingCurve (
  354.             dtSpot,
  355.             "USD",
  356.             0.
  357.         );

  359.         CurveSurfaceQuoteContainer csqcBase = MarketParamsBuilder.Create (
  360.             mdfc,
  361.             pg.govvieBuilderSettings().groundState(),
  362.             null,
  363.             null,
  364.             null,
  365.             null,
  366.             null
  367.         );

  369.         ValuationParams valParamsSpot = ValuationParams.Spot (dtSpot.julian());

  371.         double dblOASSpot = bond.oasFromPrice (
  372.             valParamsSpot,
  373.             csqcBase,
  374.             null,
  375.             dblCleanPrice
  376.         );

  378.         for (int iVertex = 0; iVertex < iNumVertex; ++iVertex)
  379.             aValParamsEvent[iVertex] = ValuationParams.Spot (aiExerciseDate[iVertex]);

  381.         System.out.println();

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

  385.         System.out.println ("\t||                                                                                FORWARD BOND PRICE                                                                                 ||");

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

  389.         for (int iPath = 0; iPath < iNumPath; ++iPath) {
  390.             String strDump = "\t||";

  392.             CurveSurfaceQuoteContainer csqcPath = MarketParamsBuilder.Create (
  393.                 mdfc,
  394.                 aGCPath[iPath],
  395.                 null,
  396.                 null,
  397.                 null,
  398.                 null,
  399.                 null
  400.             );

  402.             for (int iVertex = 0; iVertex < iNumVertex; ++iVertex) {
  403.                 strDump = strDump + FormatUtil.FormatDouble (
  404.                     aadblForwardPrice[iPath][iVertex] = bond.priceFromOAS (
  405.                         aValParamsEvent[iVertex],
  406.                         csqcPath,
  407.                         null,
  408.                         dblOASSpot
  409.                     ), 3, 2, 100) + " |";
  410.             }

  412.             System.out.println (strDump + "|");
  413.         }

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

  417.         System.out.println();

  419.         EnvManager.TerminateEnv();
  420.     }
  421. }
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