EvolutionMetrics.java

  1. package org.drip.sample.hullwhite;

  3. import org.drip.analytics.date.*;
  4. import org.drip.dynamics.hullwhite.*;
  5. import org.drip.function.r1tor1.FlatUnivariate;
  6. import org.drip.numerical.common.FormatUtil;
  7. import org.drip.sequence.random.BoxMullerGaussian;
  8. import org.drip.service.env.EnvManager;
  9. import org.drip.state.identifier.FundingLabel;

  11. /*
  12.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  13.  */

  15. /*!
  16.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  17.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  18.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  19.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  20.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  21.  * 
  22.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  23.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  24.  *      credit, commodity, equity, FX, and structured products.
  25.  *  
  26.  *      https://lakshmidrip.github.io/DROP/
  27.  *  
  28.  *  DROP is composed of three modules:
  29.  *  
  30.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  31.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  32.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  33.  * 
  34.  *  DROP Analytics Core implements libraries for the following:
  35.  *  - Fixed Income Analytics
  36.  *  - Asset Backed Analytics
  37.  *  - XVA Analytics
  38.  *  - Exposure and Margin Analytics
  39.  * 
  40.  *  DROP Portfolio Core implements libraries for the following:
  41.  *  - Asset Allocation Analytics
  42.  *  - Transaction Cost Analytics
  43.  * 
  44.  *  DROP Numerical Core implements libraries for the following:
  45.  *  - Statistical Learning
  46.  *  - Numerical Optimizer
  47.  *  - Spline Builder
  48.  *  - Algorithm Support
  49.  * 
  50.  *  Documentation for DROP is Spread Over:
  51.  * 
  52.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  53.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  54.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  55.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  56.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  57.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  58.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  59.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  60.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  61.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  62.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  63.  * 
  64.  *  Licensed under the Apache License, Version 2.0 (the "License");
  65.  *      you may not use this file except in compliance with the License.
  66.  *   
  67.  *  You may obtain a copy of the License at
  68.  *      http://www.apache.org/licenses/LICENSE-2.0
  69.  *  
  70.  *  Unless required by applicable law or agreed to in writing, software
  71.  *      distributed under the License is distributed on an "AS IS" BASIS,
  72.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  73.  *  
  74.  *  See the License for the specific language governing permissions and
  75.  *      limitations under the License.
  76.  */

  78. /**
  79.  * <i>EvolutionMetrics</i> demonstrates the Construction and Usage of the Hull-White Metrics Using Hull-White
  80.  * 1F Model Dynamics for the Evolution of the Short Rate.
  81.  *  
  82.  * <br><br>
  83.  *  <ul>
  84.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  85.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  86.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  87.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/hullwhite/README.md">Hull-White 1F Dynamics</a></li>
  88.  *  </ul>
  89.  * <br><br>
  90.  *
  91.  * @author Lakshmi Krishnamurthy
  92.  */

  94. public class EvolutionMetrics {

  96.     private static final SingleFactorStateEvolver HullWhiteEvolver (
  97.         final String strCurrency,
  98.         final double dblSigma,
  99.         final double dblA,
  100.         final double dblStartingForwardRate)
  101.         throws Exception
  102.     {
  103.         return new SingleFactorStateEvolver (
  104.             FundingLabel.Standard (strCurrency),
  105.             dblSigma,
  106.             dblA,
  107.             new FlatUnivariate (dblStartingForwardRate),
  108.             new BoxMullerGaussian (
  109.                 0.,
  110.                 1.
  111.             )
  112.         );
  113.     }

  115.     private static final void DumpMetrics (
  116.         final ShortRateUpdate hwem)
  117.         throws Exception
  118.     {
  119.         System.out.println ("\t| [" + new JulianDate (hwem.evolutionStartDate()) + " -> " +
  120.             new JulianDate (hwem.evolutionFinishDate()) + "] => " +
  121.             FormatUtil.FormatDouble (hwem.initialShortRate(), 1, 2, 100.) + "% | " +
  122.             FormatUtil.FormatDouble (hwem.realizedFinalShortRate(), 1, 2, 100.) + "% | " +
  123.             FormatUtil.FormatDouble (hwem.expectedFinalShortRate(), 1, 2, 100.) + "% | " +
  124.             FormatUtil.FormatDouble (hwem.zeroCouponBondPrice (0.975), 1, 2, 100.) + " | " +
  125.             FormatUtil.FormatDouble (Math.sqrt (hwem.finalShortRateVariance()), 1, 2, 100.) + "% || "
  126.         );
  127.     }

  129.     public static final void main (
  130.         final String[] astrArgs)
  131.         throws Exception
  132.     {
  133.         EnvManager.InitEnv ("");

  135.         JulianDate dtSpot = DateUtil.Today();

  137.         String strCurrency = "USD";
  138.         double dblStartingShortRate = 0.05;
  139.         double dblSigma = 0.03;
  140.         double dblA = 1.;
  141.         int iNumRun = 50;

  143.         SingleFactorStateEvolver hw = HullWhiteEvolver (
  144.             strCurrency,
  145.             dblSigma,
  146.             dblA,
  147.             dblStartingShortRate
  148.         );

  150.         int iSpotDate = dtSpot.julian();

  152.         int iInitialDate = dtSpot.addMonths (1).julian();

  154.         int iFinalDate = dtSpot.addMonths (7).julian();

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

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

  160.         System.out.println ("\t|    Hull-White Scenario Evolution Metrics                                 ||");

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

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

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

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

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

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

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

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

  178.         System.out.println ("\t|        Zero Coupon Bond Price                                            ||");

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

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

  184.         ShortRateUpdate sruInitial = ShortRateUpdate.Create (
  185.             FundingLabel.Standard (strCurrency),
  186.             iInitialDate,
  187.             iInitialDate,
  188.             iFinalDate,
  189.             dblStartingShortRate,
  190.             dblStartingShortRate,
  191.             dblStartingShortRate,
  192.             0.,
  193.             1.
  194.         );

  196.         for (int i = 0; i < iNumRun; ++i)
  197.             DumpMetrics (
  198.                 (ShortRateUpdate) hw.evolve (
  199.                     iSpotDate,
  200.                     iInitialDate,
  201.                     iFinalDate - iInitialDate,
  202.                     sruInitial
  203.                 )
  204.             );

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

  208.         EnvManager.TerminateEnv();
  209.     }
  210. }
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