PathVertexExerciseIndicator.java

  1. package org.drip.sample.govviemc;

  3. import org.drip.analytics.date.*;
  4. import org.drip.measure.crng.RandomNumberGenerator;
  5. import org.drip.measure.discrete.CorrelatedPathVertexDimension;
  6. import org.drip.measure.dynamics.DiffusionEvaluatorLogarithmic;
  7. import org.drip.measure.process.DiffusionEvolver;
  8. import org.drip.param.creator.MarketParamsBuilder;
  9. import org.drip.param.market.CurveSurfaceQuoteContainer;
  10. import org.drip.param.valuation.ValuationParams;
  11. import org.drip.product.creator.BondBuilder;
  12. import org.drip.product.credit.BondComponent;
  13. import org.drip.product.params.EmbeddedOptionSchedule;
  14. import org.drip.service.env.EnvManager;
  15. import org.drip.service.template.LatentMarketStateBuilder;
  16. import org.drip.state.discount.MergedDiscountForwardCurve;
  17. import org.drip.state.govvie.GovvieCurve;
  18. import org.drip.state.sequence.*;

  20. /*
  21.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  22.  */

  24. /*!
  25.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  26.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  27.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  28.  * 
  29.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  30.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  31.  *      credit, commodity, equity, FX, and structured products.
  32.  *  
  33.  *      https://lakshmidrip.github.io/DROP/
  34.  *  
  35.  *  DROP is composed of three modules:
  36.  *  
  37.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  38.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  39.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  40.  * 
  41.  *  DROP Analytics Core implements libraries for the following:
  42.  *  - Fixed Income Analytics
  43.  *  - Asset Backed Analytics
  44.  *  - XVA Analytics
  45.  *  - Exposure and Margin Analytics
  46.  * 
  47.  *  DROP Portfolio Core implements libraries for the following:
  48.  *  - Asset Allocation Analytics
  49.  *  - Transaction Cost Analytics
  50.  * 
  51.  *  DROP Numerical Core implements libraries for the following:
  52.  *  - Statistical Learning
  53.  *  - Numerical Optimizer
  54.  *  - Spline Builder
  55.  *  - Algorithm Support
  56.  * 
  57.  *  Documentation for DROP is Spread Over:
  58.  * 
  59.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  60.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  61.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  62.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  63.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  64.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  65.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  66.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  67.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  68.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  69.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  70.  * 
  71.  *  Licensed under the Apache License, Version 2.0 (the "License");
  72.  *      you may not use this file except in compliance with the License.
  73.  *   
  74.  *  You may obtain a copy of the License at
  75.  *      http://www.apache.org/licenses/LICENSE-2.0
  76.  *  
  77.  *  Unless required by applicable law or agreed to in writing, software
  78.  *      distributed under the License is distributed on an "AS IS" BASIS,
  79.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  80.  *  
  81.  *  See the License for the specific language governing permissions and
  82.  *      limitations under the License.
  83.  */

  85. /**
  86.  * <i>PathVertexExerciseIndicator</i> demonstrates the Simulations of the Per-Path Callable Bond Forward
  87.  * Price Based Exercise Indicator.
  88.  *  
  89.  * <br><br>
  90.  *  <ul>
  91.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  92.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  93.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  94.  *      <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>
  95.  *  </ul>
  96.  * <br><br>
  97.  * 
  98.  * @author Lakshmi Krishnamurthy
  99.  */

  101. public class PathVertexExerciseIndicator {

  103.     private static final MergedDiscountForwardCurve FundingCurve (
  104.         final JulianDate dtSpot,
  105.         final String strCurrency,
  106.         final double dblBump)
  107.         throws Exception
  108.     {
  109.         String[] astrDepositMaturityTenor = new String[] {
  110.             "2D"
  111.         };

  113.         double[] adblDepositQuote = new double[] {
  114.             0.0111956 + dblBump // 2D
  115.         };

  117.         double[] adblFuturesQuote = new double[] {
  118.             0.011375 + dblBump, // 98.8625
  119.             0.013350 + dblBump, // 98.6650
  120.             0.014800 + dblBump, // 98.5200
  121.             0.016450 + dblBump, // 98.3550
  122.             0.017850 + dblBump, // 98.2150
  123.             0.019300 + dblBump  // 98.0700
  124.         };

  126.         String[] astrFixFloatMaturityTenor = new String[] {
  127.             "02Y",
  128.             "03Y",
  129.             "04Y",
  130.             "05Y",
  131.             "06Y",
  132.             "07Y",
  133.             "08Y",
  134.             "09Y",
  135.             "10Y",
  136.             "11Y",
  137.             "12Y",
  138.             "15Y",
  139.             "20Y",
  140.             "25Y",
  141.             "30Y",
  142.             "40Y",
  143.             "50Y"
  144.         };

  146.         double[] adblFixFloatQuote = new double[] {
  147.             0.017029 + dblBump, //  2Y
  148.             0.019354 + dblBump, //  3Y
  149.             0.021044 + dblBump, //  4Y
  150.             0.022291 + dblBump, //  5Y
  151.             0.023240 + dblBump, //  6Y
  152.             0.024025 + dblBump, //  7Y
  153.             0.024683 + dblBump, //  8Y
  154.             0.025243 + dblBump, //  9Y
  155.             0.025720 + dblBump, // 10Y
  156.             0.026130 + dblBump, // 11Y
  157.             0.026495 + dblBump, // 12Y
  158.             0.027230 + dblBump, // 15Y
  159.             0.027855 + dblBump, // 20Y
  160.             0.028025 + dblBump, // 25Y
  161.             0.028028 + dblBump, // 30Y
  162.             0.027902 + dblBump, // 40Y
  163.             0.027655 + dblBump  // 50Y
  164.         };

  166.         return LatentMarketStateBuilder.SmoothFundingCurve (
  167.             dtSpot,
  168.             strCurrency,
  169.             astrDepositMaturityTenor,
  170.             adblDepositQuote,
  171.             "ForwardRate",
  172.             adblFuturesQuote,
  173.             "ForwardRate",
  174.             astrFixFloatMaturityTenor,
  175.             adblFixFloatQuote,
  176.             "SwapRate"
  177.         );
  178.     }

  180.     private static final PathVertexGovvie ScenarioGovvieCurves (
  181.         final JulianDate dtSpot,
  182.         final int iNumPath,
  183.         final int iNumVertex)
  184.         throws Exception
  185.     {
  186.         double dblVolatility = 0.10;
  187.         String strTreasuryCode = "UST";

  189.         String[] astrTenor = new String[] {
  190.             "01Y",
  191.             "02Y",
  192.             "03Y",
  193.             "05Y",
  194.             "07Y",
  195.             "10Y",
  196.             "20Y",
  197.             "30Y"
  198.         };

  200.         double[] adblTreasuryCoupon = new double[] {
  201.             0.0100,
  202.             0.0100,
  203.             0.0125,
  204.             0.0150,
  205.             0.0200,
  206.             0.0225,
  207.             0.0250,
  208.             0.0300
  209.         };

  211.         double[] adblTreasuryYield = new double[] {
  212.             0.0083, //  1Y
  213.             0.0122, //  2Y
  214.             0.0149, //  3Y
  215.             0.0193, //  5Y
  216.             0.0227, //  7Y
  217.             0.0248, // 10Y
  218.             0.0280, // 20Y
  219.             0.0308  // 30Y
  220.         };

  222.         int iNumDimension = astrTenor.length;
  223.         double[][] aadblCorrelation = new double[iNumDimension][iNumDimension];

  225.         for (int i = 0; i < iNumDimension; ++i) {
  226.             for (int j = 0; j < iNumDimension; ++j)
  227.                 aadblCorrelation[i][j] = i == j ? 1. : 0.;
  228.         }

  230.         GovvieBuilderSettings gbs = new GovvieBuilderSettings (
  231.             dtSpot,
  232.             strTreasuryCode,
  233.             astrTenor,
  234.             adblTreasuryCoupon,
  235.             adblTreasuryYield
  236.         );

  238.         return PathVertexGovvie.Standard (
  239.             gbs,
  240.             new CorrelatedPathVertexDimension (
  241.                 new RandomNumberGenerator(),
  242.                 aadblCorrelation,
  243.                 iNumVertex,
  244.                 iNumPath,
  245.                 false,
  246.                 null
  247.             ),
  248.             new DiffusionEvolver (
  249.                 DiffusionEvaluatorLogarithmic.Standard (
  250.                     0.,
  251.                     dblVolatility
  252.                 )
  253.             )
  254.         );
  255.     }

  257.     private static final BondComponent Callable (
  258.         final EmbeddedOptionSchedule eos)
  259.         throws Exception
  260.     {
  261.         JulianDate dtEffective = DateUtil.CreateFromYMD (
  262.             2009,
  263.             12,
  264.             3
  265.         );

  267.         JulianDate dtMaturity  = DateUtil.CreateFromYMD (
  268.             2039,
  269.             12,
  270.             1
  271.         );

  273.         double dblCoupon = 0.06558;
  274.         int iFreq = 2;
  275.         String strCUSIP = "033177XV3";
  276.         String strDayCount = "30/360";

  278.         BondComponent bond = BondBuilder.CreateSimpleFixed (
  279.             strCUSIP,
  280.             "USD",
  281.             "",
  282.             dblCoupon,
  283.             iFreq,
  284.             strDayCount,
  285.             dtEffective,
  286.             dtMaturity,
  287.             null,
  288.             null
  289.         );

  291.         bond.setEmbeddedCallSchedule (eos);

  293.         return bond;
  294.     }

  296.     public static final void main (
  297.         final String[] astrArgs)
  298.         throws Exception
  299.     {
  300.         EnvManager.InitEnv ("");

  302.         JulianDate dtSpot = DateUtil.CreateFromYMD (
  303.             2017,
  304.             DateUtil.MARCH,
  305.             24
  306.         );

  308.         int iNumPath = 50;
  309.         double dblCleanPrice = 1.08641;
  310.         int[] aiExerciseDate = new int[] {
  311.             DateUtil.CreateFromYMD (2019, 12,  1).julian(),
  312.             DateUtil.CreateFromYMD (2020, 12,  1).julian(),
  313.             DateUtil.CreateFromYMD (2021, 12,  1).julian(),
  314.             DateUtil.CreateFromYMD (2022, 12,  1).julian(),
  315.             DateUtil.CreateFromYMD (2023, 12,  1).julian(),
  316.             DateUtil.CreateFromYMD (2024, 12,  1).julian(),
  317.             DateUtil.CreateFromYMD (2025, 12,  1).julian(),
  318.             DateUtil.CreateFromYMD (2026, 12,  1).julian(),
  319.             DateUtil.CreateFromYMD (2027, 12,  1).julian(),
  320.             DateUtil.CreateFromYMD (2028, 12,  1).julian(),
  321.             DateUtil.CreateFromYMD (2029, 12,  1).julian(),
  322.             DateUtil.CreateFromYMD (2030, 12,  1).julian(),
  323.             DateUtil.CreateFromYMD (2031, 12,  1).julian(),
  324.             DateUtil.CreateFromYMD (2032, 12,  1).julian(),
  325.             DateUtil.CreateFromYMD (2033, 12,  1).julian(),
  326.             DateUtil.CreateFromYMD (2034, 12,  1).julian(),
  327.             DateUtil.CreateFromYMD (2035, 12,  1).julian(),
  328.             DateUtil.CreateFromYMD (2036, 12,  1).julian(),
  329.             DateUtil.CreateFromYMD (2037, 12,  1).julian(),
  330.             DateUtil.CreateFromYMD (2038, 12,  1).julian(),
  331.         };
  332.         double[] adblExercisePrice = new double[] {
  333.             1.,
  334.             1.,
  335.             1.,
  336.             1.,
  337.             1.,
  338.             1.,
  339.             1.,
  340.             1.,
  341.             1.,
  342.             1.,
  343.             1.,
  344.             1.,
  345.             1.,
  346.             1.,
  347.             1.,
  348.             1.,
  349.             1.,
  350.             1.,
  351.             1.,
  352.             1.,
  353.         };

  355.         int iNumVertex = aiExerciseDate.length;
  356.         double[][] aadblForwardPrice = new double[iNumPath][iNumVertex];
  357.         ValuationParams[] aValParamsEvent = new ValuationParams[iNumVertex];

  359.         BondComponent bond = Callable (
  360.             new EmbeddedOptionSchedule (
  361.                 aiExerciseDate,
  362.                 adblExercisePrice,
  363.                 false,
  364.                 30,
  365.                 false,
  366.                 Double.NaN,
  367.                 "",
  368.                 Double.NaN
  369.             )
  370.         );

  372.         PathVertexGovvie mcrg = ScenarioGovvieCurves (
  373.             dtSpot,
  374.             iNumPath,
  375.             iNumVertex
  376.         );

  378.         GovvieCurve[][] aaGCPathEvent = mcrg.pathVertex (aiExerciseDate);

  380.         MergedDiscountForwardCurve mdfc = FundingCurve (
  381.             dtSpot,
  382.             "USD",
  383.             0.
  384.         );

  386.         CurveSurfaceQuoteContainer csqcBase = MarketParamsBuilder.Create (
  387.             mdfc,
  388.             mcrg.govvieBuilderSettings().groundState(),
  389.             null,
  390.             null,
  391.             null,
  392.             null,
  393.             null
  394.         );

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

  398.         double dblOASSpot = bond.oasFromPrice (
  399.             valParamsSpot,
  400.             csqcBase,
  401.             null,
  402.             dblCleanPrice
  403.         );

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

  408.         for (int iPath = 0; iPath < iNumPath; ++iPath) {
  409.             for (int iVertex = 0; iVertex < iNumVertex; ++iVertex) {
  410.                 CurveSurfaceQuoteContainer csqcEvent = MarketParamsBuilder.Create (
  411.                     mdfc,
  412.                     aaGCPathEvent[iPath][iVertex],
  413.                     null,
  414.                     null,
  415.                     null,
  416.                     null,
  417.                     null
  418.                 );

  420.                 aadblForwardPrice[iPath][iVertex] = bond.priceFromOAS (
  421.                     aValParamsEvent[iVertex],
  422.                     csqcEvent,
  423.                     null,
  424.                     dblOASSpot
  425.                 );
  426.             }
  427.         }

  429.         System.out.println();

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

  433.         System.out.println ("\t||                          FORWARD EXERCISE INDICATOR                           ||");

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

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

  440.             for (int iVertex = 0; iVertex < iNumVertex; ++iVertex)
  441.                 strDump = strDump + (aadblForwardPrice[iPath][iVertex] > adblExercisePrice[iVertex] ? " Y" : " N") + " |";

  443.             System.out.println (strDump + "|");
  444.         }

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

  448.         System.out.println();

  450.         EnvManager.TerminateEnv();
  451.     }
  452. }
Created with JaCoCo 0.7.9.201702052155