G2PlusPlusDynamics.java

package org.drip.sample.hjm;

import org.drip.analytics.date.*;
import org.drip.dynamics.hjm.G2PlusPlus;
import org.drip.function.r1tor1.FlatUnivariate;
import org.drip.numerical.common.FormatUtil;
import org.drip.sequence.random.*;
import org.drip.service.env.EnvManager;

/*
 * -*- 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
 * 
 *  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>G2PlusPlusDynamics</i> demonstrates the Construction and Usage of the G2++ 2-Factor HJM Model Dynamics
 * for the Evolution of the Short Rate.
 *  
 * <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/hjm/README.md">Generic HJM Evolution</a></li>
 *  </ul>
 * <br><br>
 *
 * @author Lakshmi Krishnamurthy
 */

public class G2PlusPlusDynamics {

    private static final G2PlusPlus G2PlusPlusEvolver (
        final double dblSigma,
        final double dblA,
        final double dblEta,
        final double dblB,
        final double dblRho,
        final double dblStartingForwardRate)
        throws Exception
    {
        return new G2PlusPlus (
            dblSigma,
            dblA,
            dblEta,
            dblB,
            new UnivariateSequenceGenerator[] {
                new BoxMullerGaussian (
                    0.,
                    1.
                ),
                new BoxMullerGaussian (
                    0.,
                    1.
                )
            },
            dblRho,
            new FlatUnivariate (dblStartingForwardRate)
        );
    }

    private static final void ShortRateEvolution (
        final G2PlusPlus g2pp,
        final JulianDate dtStart,
        final String strCurrency,
        final String strViewTenor,
        final double dblStartingShortRate)
        throws Exception
    {
        int iDayStep = 2;
        double dblX = 0.;
        double dblY = 0.;
        JulianDate dtSpot = dtStart;
        double dblShortRate = dblStartingShortRate;

        int iStartDate = dtStart.julian();

        int iEndDate = dtStart.addTenor (strViewTenor).julian();

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

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

        System.out.println ("\t|         G2++ - 2-factor HJM Model - Short Rate Evolution Run          ||");

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

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

        System.out.println ("\t|    L->R:                                                              ||");

        System.out.println ("\t|        Date                                                           ||");

        System.out.println ("\t|        X (%)                                                          ||");

        System.out.println ("\t|        X - Increment (%)                                              ||");

        System.out.println ("\t|        Y (%)                                                          ||");

        System.out.println ("\t|        Y - Increment (%)                                              ||");

        System.out.println ("\t|        Phi (%)                                                        ||");

        System.out.println ("\t|        Short Rate (%)                                                 ||");

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

        while (dtSpot.julian() < iEndDate) {
            int iSpotDate = dtSpot.julian();

            double dblDeltaX = g2pp.deltaX (
                iStartDate,
                iSpotDate,
                dblX,
                iDayStep
            );

            dblX += dblDeltaX;

            double dblDeltaY = g2pp.deltaY (
                iStartDate,
                iSpotDate,
                dblY,
                iDayStep
            );

            dblY += dblDeltaY;

            double dblPhi = g2pp.phi (
                iStartDate,
                iSpotDate
            );

            dblShortRate = dblX + dblY + dblPhi;

            System.out.println ("\t| [" + dtSpot + "] = " +
                FormatUtil.FormatDouble (dblX, 1, 2, 100.) + "% | " +
                FormatUtil.FormatDouble (dblDeltaX, 1, 2, 100.) + "% || " +
                FormatUtil.FormatDouble (dblY, 1, 2, 100.) + "% | " +
                FormatUtil.FormatDouble (dblDeltaY, 1, 2, 100.) + "% || " +
                FormatUtil.FormatDouble (dblPhi, 1, 2, 100.) + "% || " +
                FormatUtil.FormatDouble (dblShortRate, 1, 2, 100.) + "% || "
            );

            dtSpot = dtSpot.addBusDays (
                iDayStep,
                strCurrency
            );
        }

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

    public static final void main (
        final String[] astrArgs)
        throws Exception
    {
        EnvManager.InitEnv ("");

        JulianDate dtSpot = DateUtil.Today();

        String strCurrency = "USD";
        double dblStartingShortRate = 0.05;
        double dblSigma = 0.05;
        double dblA = 0.5;
        double dblEta = 0.05;
        double dblB = 0.5;
        double dblRho = 0.5;

        G2PlusPlus g2pp = G2PlusPlusEvolver (
            dblSigma,
            dblA,
            dblEta,
            dblB,
            dblRho,
            dblStartingShortRate
        );

        ShortRateEvolution (
            g2pp,
            dtSpot,
            strCurrency,
            "4M",
            dblStartingShortRate
        );

        EnvManager.TerminateEnv();
    }
}