MultiFactorCurveDynamics.java

  1. package org.drip.sample.lmm;

  3. import java.util.List;

  5. import org.drip.analytics.date.JulianDate;
  6. import org.drip.analytics.definition.MarketSurface;
  7. import org.drip.analytics.support.CompositePeriodBuilder;
  8. import org.drip.dynamics.lmm.*;
  9. import org.drip.function.r1tor1.QuadraticRationalShapeControl;
  10. import org.drip.numerical.common.FormatUtil;
  11. import org.drip.param.creator.*;
  12. import org.drip.param.market.CurveSurfaceQuoteContainer;
  13. import org.drip.param.period.*;
  14. import org.drip.param.valuation.*;
  15. import org.drip.product.creator.SingleStreamComponentBuilder;
  16. import org.drip.product.rates.*;
  17. import org.drip.sequence.random.*;
  18. import org.drip.service.env.EnvManager;
  19. import org.drip.spline.basis.PolynomialFunctionSetParams;
  20. import org.drip.spline.grid.Span;
  21. import org.drip.spline.params.*;
  22. import org.drip.spline.stretch.*;
  23. import org.drip.state.creator.*;
  24. import org.drip.state.discount.*;
  25. import org.drip.state.estimator.LatentStateStretchBuilder;
  26. import org.drip.state.forward.ForwardCurve;
  27. import org.drip.state.identifier.*;
  28. import org.drip.state.inference.*;

  30. /*
  31.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  32.  */

  34. /*!
  35.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  36.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  37.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  38.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  39.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  40.  * 
  41.  *  This file is part of DROP, an open-source library targeting risk, transaction costs, exposure, margin
  42.  *      calculations, valuation adjustment, and portfolio construction within and across fixed income,
  43.  *      credit, commodity, equity, FX, and structured products.
  44.  *  
  45.  *      https://lakshmidrip.github.io/DROP/
  46.  *  
  47.  *  DROP is composed of three modules:
  48.  *  
  49.  *  - DROP Analytics Core - https://lakshmidrip.github.io/DROP-Analytics-Core/
  50.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  51.  *  - DROP Numerical Core - https://lakshmidrip.github.io/DROP-Numerical-Core/
  52.  * 
  53.  *  DROP Analytics Core implements libraries for the following:
  54.  *  - Fixed Income Analytics
  55.  *  - Asset Backed Analytics
  56.  *  - XVA Analytics
  57.  *  - Exposure and Margin Analytics
  58.  * 
  59.  *  DROP Portfolio Core implements libraries for the following:
  60.  *  - Asset Allocation Analytics
  61.  *  - Transaction Cost Analytics
  62.  * 
  63.  *  DROP Numerical Core implements libraries for the following:
  64.  *  - Statistical Learning
  65.  *  - Numerical Optimizer
  66.  *  - Spline Builder
  67.  *  - Algorithm Support
  68.  * 
  69.  *  Documentation for DROP is Spread Over:
  70.  * 
  71.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  72.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  73.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  74.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  75.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  76.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  77.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  78.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  79.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  80.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  81.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  82.  * 
  83.  *  Licensed under the Apache License, Version 2.0 (the "License");
  84.  *      you may not use this file except in compliance with the License.
  85.  *   
  86.  *  You may obtain a copy of the License at
  87.  *      http://www.apache.org/licenses/LICENSE-2.0
  88.  *  
  89.  *  Unless required by applicable law or agreed to in writing, software
  90.  *      distributed under the License is distributed on an "AS IS" BASIS,
  91.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  92.  *  
  93.  *  See the License for the specific language governing permissions and
  94.  *      limitations under the License.
  95.  */

  97. /**
  98.  * <i>MultiFactorCurveDynamics</i> demonstrates the Construction and Usage of the Curve LIBOR State Evolver,
  99.  * and the eventual Evolution of the related Discount/Forward Latent State Quantification Metrics. The
  100.  * References are:
  101.  *  
  102.  * <br><br>
  103.  *  <ul>
  104.  *      <li>
  105.  *          Goldys, B., M. Musiela, and D. Sondermann (1994): Log-normality of Rates and Term Structure
  106.  *              Models, The University of New South Wales.
  107.  *      </li>
  108.  *      <li>
  109.  *          Musiela, M. (1994): Nominal Annual Rates and Log-normal Volatility Structure, The University of
  110.  *              New South Wales.
  111.  *      </li>
  112.  *      <li>
  113.  *          Brace, A., D. Gatarek, and M. Musiela (1997): The Market Model of Interest Rate Dynamics,
  114.  *              Mathematical Finance 7 (2), 127-155.
  115.  *      </li>
  116.  *  </ul>
  117.  *  
  118.  * <br><br>
  119.  *  <ul>
  120.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/AnalyticsCore.md">Analytics Core Module</a></li>
  121.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics Library</a></li>
  122.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/README.md">Sample</a></li>
  123.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/sample/lmm/README.md">LIBOR Market (LMM-BGM Variant) Evolution</a></li>
  124.  *  </ul>
  125.  * <br><br>
  126.  *
  127.  * @author Lakshmi Krishnamurthy
  128.  */

  130. public class MultiFactorCurveDynamics {

  132.     /*
  133.      * Construct the Array of Deposit Instruments from the given set of parameters
  134.      * 
  135.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  136.      */

  138.     private static final SingleStreamComponent[] DepositInstrumentsFromMaturityDays (
  139.         final JulianDate dtEffective,
  140.         final String strCurrency,
  141.         final int[] aiDay)
  142.         throws Exception
  143.     {
  144.         SingleStreamComponent[] aDeposit = new SingleStreamComponent[aiDay.length];

  146.         ComposableFloatingUnitSetting cfus = new ComposableFloatingUnitSetting (
  147.             "3M",
  148.             CompositePeriodBuilder.EDGE_DATE_SEQUENCE_SINGLE,
  149.             null,
  150.             ForwardLabel.Create (
  151.                 strCurrency,
  152.                 "3M"
  153.             ),
  154.             CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
  155.             0.
  156.         );

  158.         CompositePeriodSetting cps = new CompositePeriodSetting (
  159.             4,
  160.             "3M",
  161.             strCurrency,
  162.             null,
  163.             1.,
  164.             null,
  165.             null,
  166.             null,
  167.             null
  168.         );

  170.         CashSettleParams csp = new CashSettleParams (
  171.             0,
  172.             strCurrency,
  173.             0
  174.         );

  176.         for (int i = 0; i < aiDay.length; ++i) {
  177.             aDeposit[i] = new SingleStreamComponent (
  178.                 "DEPOSIT_" + aiDay[i],
  179.                 new Stream (
  180.                     CompositePeriodBuilder.FloatingCompositeUnit (
  181.                         CompositePeriodBuilder.EdgePair (
  182.                             dtEffective,
  183.                             dtEffective.addBusDays (
  184.                                 aiDay[i],
  185.                                 strCurrency
  186.                             )
  187.                         ),
  188.                         cps,
  189.                         cfus
  190.                     )
  191.                 ),
  192.                 csp
  193.             );

  195.             aDeposit[i].setPrimaryCode (aiDay[i] + "D");
  196.         }

  198.         return aDeposit;
  199.     }

  201.     /*
  202.      * Construct the Array of Swap Instruments from the given set of parameters
  203.      * 
  204.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  205.      */

  207.     private static final FixFloatComponent[] SwapInstrumentsFromMaturityTenor (
  208.         final JulianDate dtEffective,
  209.         final String strCurrency,
  210.         final String[] astrMaturityTenor)
  211.         throws Exception
  212.     {
  213.         FixFloatComponent[] aIRS = new FixFloatComponent[astrMaturityTenor.length];

  215.         UnitCouponAccrualSetting ucasFixed = new UnitCouponAccrualSetting (
  216.             4,
  217.             "Act/360",
  218.             false,
  219.             "Act/360",
  220.             false,
  221.             strCurrency,
  222.             true,
  223.             CompositePeriodBuilder.ACCRUAL_COMPOUNDING_RULE_GEOMETRIC
  224.         );

  226.         ComposableFloatingUnitSetting cfusFloating = new ComposableFloatingUnitSetting (
  227.             "3M",
  228.             CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
  229.             null,
  230.             ForwardLabel.Create (
  231.                 strCurrency,
  232.                 "3M"
  233.             ),
  234.             CompositePeriodBuilder.REFERENCE_PERIOD_IN_ADVANCE,
  235.             0.
  236.         );

  238.         ComposableFixedUnitSetting cfusFixed = new ComposableFixedUnitSetting (
  239.             "3M",
  240.             CompositePeriodBuilder.EDGE_DATE_SEQUENCE_REGULAR,
  241.             null,
  242.             0.,
  243.             0.,
  244.             strCurrency
  245.         );

  247.         CompositePeriodSetting cpsFloating = new CompositePeriodSetting (
  248.             4,
  249.             "3M",
  250.             strCurrency,
  251.             null,
  252.             -1.,
  253.             null,
  254.             null,
  255.             null,
  256.             null
  257.         );

  259.         CompositePeriodSetting cpsFixed = new CompositePeriodSetting (
  260.             4,
  261.             "3M",
  262.             strCurrency,
  263.             null,
  264.             1.,
  265.             null,
  266.             null,
  267.             null,
  268.             null
  269.         );

  271.         CashSettleParams csp = new CashSettleParams (
  272.             0,
  273.             strCurrency,
  274.             0
  275.         );

  277.         for (int i = 0; i < astrMaturityTenor.length; ++i) {
  278.             List<Integer> lsFixedStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
  279.                 dtEffective,
  280.                 "3M",
  281.                 astrMaturityTenor[i],
  282.                 null
  283.             );

  285.             List<Integer> lsFloatingStreamEdgeDate = CompositePeriodBuilder.RegularEdgeDates (
  286.                 dtEffective,
  287.                 "3M",
  288.                 astrMaturityTenor[i],
  289.                 null
  290.             );

  292.             Stream floatingStream = new Stream (
  293.                 CompositePeriodBuilder.FloatingCompositeUnit (
  294.                     lsFloatingStreamEdgeDate,
  295.                     cpsFloating,
  296.                     cfusFloating
  297.                 )
  298.             );

  300.             Stream fixedStream = new Stream (
  301.                 CompositePeriodBuilder.FixedCompositeUnit (
  302.                     lsFixedStreamEdgeDate,
  303.                     cpsFixed,
  304.                     ucasFixed,
  305.                     cfusFixed
  306.                 )
  307.             );

  309.             FixFloatComponent irs = new FixFloatComponent (
  310.                 fixedStream,
  311.                 floatingStream,
  312.                 csp
  313.             );

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

  317.             aIRS[i] = irs;
  318.         }

  320.         return aIRS;
  321.     }

  323.     /*
  324.      * This sample demonstrates discount curve calibration and input instrument calibration quote recovery.
  325.      *  It shows the following:
  326.      *  - Construct the Array of Cash/Swap Instruments and their Quotes from the given set of parameters.
  327.      *  - Construct the Cash/Swap Instrument Set Stretch Builder.
  328.      *  - Set up the Linear Curve Calibrator using the following parameters:
  329.      *      - Cubic Exponential Mixture Basis Spline Set
  330.      *      - Ck = 2, Segment Curvature Penalty = 2
  331.      *      - Quadratic Rational Shape Controller
  332.      *      - Natural Boundary Setting
  333.      *  - Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
  334.      *      of Cash and Swap Stretches.
  335.      *  - Cross-Comparison of the Cash/Swap Calibration Instrument "Rate" metric across the different curve
  336.      *      construction methodologies.
  337.      * 
  338.      *      USE WITH CARE: This sample ignores errors and does not handle exceptions.
  339.      */

  341.     private static final MergedDiscountForwardCurve OTCInstrumentCurve (
  342.         final JulianDate dtSpot,
  343.         final String strCurrency)
  344.         throws Exception
  345.     {
  346.         /*
  347.          * Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
  348.          */

  350.         SingleStreamComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
  351.             dtSpot,
  352.             strCurrency,
  353.             new int[] {
  354.                 1, 2, 7, 14, 30, 60
  355.             }
  356.         );

  358.         double[] adblDepositQuote = new double[] {
  359.             0.0013, 0.0017, 0.0017, 0.0018, 0.0020, 0.0023
  360.         };

  362.         /*
  363.          * Construct the Deposit Instrument Set Stretch Builder
  364.          */

  366.         LatentStateStretchSpec depositStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
  367.             "DEPOSIT",
  368.             aDepositComp,
  369.             "ForwardRate",
  370.             adblDepositQuote
  371.         );

  373.         /*
  374.          * Construct the Array of EDF Instruments and their Quotes from the given set of parameters
  375.          */

  377.         SingleStreamComponent[] aEDFComp = SingleStreamComponentBuilder.ForwardRateFuturesPack (
  378.             dtSpot,
  379.             8,
  380.             strCurrency
  381.         );

  383.         double[] adblEDFQuote = new double[] {
  384.             0.0027, 0.0032, 0.0041, 0.0054, 0.0077, 0.0104, 0.0134, 0.0160
  385.         };

  387.         /*
  388.          * Construct the EDF Instrument Set Stretch Builder
  389.          */

  391.         LatentStateStretchSpec edfStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
  392.             "EDF",
  393.             aEDFComp,
  394.             "ForwardRate",
  395.             adblEDFQuote
  396.         );

  398.         /*
  399.          * Construct the Array of Swap Instruments and their Quotes from the given set of parameters
  400.          */

  402.         FixFloatComponent[] aSwapComp = SwapInstrumentsFromMaturityTenor (
  403.             dtSpot,
  404.             strCurrency,
  405.             new java.lang.String[] {
  406.                 "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y", "40Y", "50Y"
  407.             }
  408.         );

  410.         double[] adblSwapQuote = new double[] {
  411.             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
  412.         };

  414.         /*
  415.          * Construct the Swap Instrument Set Stretch Builder
  416.          */

  418.         LatentStateStretchSpec swapStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
  419.             "SWAP",
  420.             aSwapComp,
  421.             "SwapRate",
  422.             adblSwapQuote
  423.         );

  425.         LatentStateStretchSpec[] aStretchSpec = new LatentStateStretchSpec[] {
  426.             depositStretch,
  427.             edfStretch,
  428.             swapStretch
  429.         };

  431.         /*
  432.          * Set up the Linear Curve Calibrator using the following parameters:
  433.          *  - Cubic Exponential Mixture Basis Spline Set
  434.          *  - Ck = 2, Segment Curvature Penalty = 2
  435.          *  - Quadratic Rational Shape Controller
  436.          *  - Natural Boundary Setting
  437.          */

  439.         LinearLatentStateCalibrator lcc = new LinearLatentStateCalibrator (
  440.             new SegmentCustomBuilderControl (
  441.                 MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
  442.                 new PolynomialFunctionSetParams (4),
  443.                 SegmentInelasticDesignControl.Create (
  444.                     2,
  445.                     2
  446.                 ),
  447.                 new ResponseScalingShapeControl (
  448.                     true,
  449.                     new QuadraticRationalShapeControl (0.)
  450.                 ),
  451.                 null
  452.             ),
  453.             BoundarySettings.NaturalStandard(),
  454.             MultiSegmentSequence.CALIBRATE,
  455.             null,
  456.             null
  457.         );

  459.         ValuationParams valParams = new ValuationParams (
  460.             dtSpot,
  461.             dtSpot,
  462.             strCurrency
  463.         );

  465.         /*
  466.          * Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
  467.          *  of Deposit, Futures, and Swap Stretches.
  468.          */

  470.         MergedDiscountForwardCurve dc = ScenarioDiscountCurveBuilder.ShapePreservingDFBuild (
  471.             strCurrency,
  472.             lcc,
  473.             aStretchSpec,
  474.             valParams,
  475.             null,
  476.             null,
  477.             null,
  478.             1.
  479.         );

  481.         CurveSurfaceQuoteContainer csqs = MarketParamsBuilder.Create (
  482.             dc,
  483.             null,
  484.             null,
  485.             null,
  486.             null,
  487.             null,
  488.             null
  489.         );

  491.         /*
  492.          * Cross-Comparison of the Deposit Calibration Instrument "Rate" metric across the different curve
  493.          *  construction methodologies.
  494.          */

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

  498.         System.out.println ("\t     DEPOSIT INSTRUMENTS CALIBRATION RECOVERY");

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

  502.         for (int i = 0; i < aDepositComp.length; ++i)
  503.             System.out.println ("\t[" + aDepositComp[i].maturityDate() + "] = " +
  504.                 FormatUtil.FormatDouble (aDepositComp[i].measureValue (valParams, null, csqs,
  505.                     null, "Rate"), 1, 6, 1.) + " | " + FormatUtil.FormatDouble (adblDepositQuote[i], 1, 6, 1.));

  507.         /*
  508.          * Cross-Comparison of the EDF Calibration Instrument "Rate" metric across the different curve
  509.          *  construction methodologies.
  510.          */

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

  514.         System.out.println ("\t     EDF INSTRUMENTS CALIBRATION RECOVERY");

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

  518.         for (int i = 0; i < aEDFComp.length; ++i)
  519.             System.out.println ("\t[" + aEDFComp[i].maturityDate() + "] = " +
  520.                 FormatUtil.FormatDouble (aEDFComp[i].measureValue (valParams, null, csqs, null, "Rate"), 1, 6, 1.)
  521.                     + " | " + FormatUtil.FormatDouble (adblEDFQuote[i], 1, 6, 1.));

  523.         /*
  524.          * Cross-Comparison of the Swap Calibration Instrument "Rate" metric across the different curve
  525.          *  construction methodologies.
  526.          */

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

  530.         System.out.println ("\t     SWAP INSTRUMENTS CALIBRATION RECOVERY");

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

  534.         for (int i = 0; i < aSwapComp.length; ++i)
  535.             System.out.println ("\t[" + aSwapComp[i].maturityDate() + "] = " +
  536.                 FormatUtil.FormatDouble (aSwapComp[i].measureValue (valParams, null, csqs, null, "CalibSwapRate"), 1, 6, 1.)
  537.                     + " | " + FormatUtil.FormatDouble (adblSwapQuote[i], 1, 6, 1.) + " | " +
  538.                         FormatUtil.FormatDouble (aSwapComp[i].measureValue (valParams, null, csqs, null, "FairPremium"), 1, 6, 1.));

  540.         return dc;
  541.     }

  543.     private static final MarketSurface FlatVolatilitySurface (
  544.         final JulianDate dtStart,
  545.         final String strCurrency,
  546.         final double dblFlatVol)
  547.         throws Exception
  548.     {
  549.         return ScenarioMarketSurfaceBuilder.CustomSplineWireSurface (
  550.             "VIEW_TARGET_VOLATILITY_SURFACE",
  551.             dtStart,
  552.             strCurrency,
  553.             new double[] {
  554.                 dtStart.julian(),
  555.                 dtStart.addYears (2).julian(),
  556.                 dtStart.addYears (4).julian(),
  557.                 dtStart.addYears (6).julian(),
  558.                 dtStart.addYears (8).julian(),
  559.                 dtStart.addYears (10).julian()
  560.             },
  561.             new double[] {
  562.                 dtStart.julian(),
  563.                 dtStart.addYears (2).julian(),
  564.                 dtStart.addYears (4).julian(),
  565.                 dtStart.addYears (6).julian(),
  566.                 dtStart.addYears (8).julian(),
  567.                 dtStart.addYears (10).julian()
  568.             },
  569.             new double[][] {
  570.                 {dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol},
  571.                 {dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol},
  572.                 {dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol},
  573.                 {dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol},
  574.                 {dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol},
  575.                 {dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol, dblFlatVol},
  576.             },
  577.             new SegmentCustomBuilderControl (
  578.                 MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
  579.                 new PolynomialFunctionSetParams (4),
  580.                 SegmentInelasticDesignControl.Create (
  581.                     2,
  582.                     2
  583.                 ),
  584.                 null,
  585.                 null
  586.             ),
  587.             new SegmentCustomBuilderControl (
  588.                 MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
  589.                 new PolynomialFunctionSetParams (4),
  590.                 SegmentInelasticDesignControl.Create (
  591.                     2,
  592.                     2
  593.                 ),
  594.                 null,
  595.                 null
  596.             )
  597.         );
  598.     }

  600.     private static final LognormalLIBORVolatility LLVInstance (
  601.         final int iSpotDate,
  602.         final ForwardLabel forwardLabel,
  603.         final MarketSurface[] aMS,
  604.         final double[][] aadblCorrelation,
  605.         final int iNumFactor)
  606.         throws Exception
  607.     {
  608.         UnivariateSequenceGenerator[] aUSG = new UnivariateSequenceGenerator[aMS.length];

  610.         for (int i = 0; i < aUSG.length; ++i)
  611.             aUSG[i] = new BoxMullerGaussian (
  612.                 0.,
  613.                 1.
  614.             );

  616.         return new LognormalLIBORVolatility (
  617.             iSpotDate,
  618.             forwardLabel,
  619.             aMS,
  620.             new PrincipalFactorSequenceGenerator (
  621.                 aUSG,
  622.                 aadblCorrelation,
  623.                 iNumFactor
  624.             )
  625.         );
  626.     }

  628.     public static final void main (
  629.         final String[] astrArgs)
  630.         throws Exception
  631.     {
  632.         EnvManager.InitEnv ("");

  634.         String strTenor = "3M";
  635.         String strCurrency = "USD";
  636.         double dblFlatVol1 = 0.35;
  637.         double dblFlatVol2 = 0.42;
  638.         double dblFlatVol3 = 0.27;
  639.         double dblFlatForwardRate = 0.02;
  640.         int iNumRun = 1;

  642.         int[] aiNumFactor = {
  643.             1, 2, 3
  644.         };

  646.         double[][] aadblCorrelation = new double[][] {
  647.             {1.0, 0.1, 0.2},
  648.             {0.1, 1.0, 0.2},
  649.             {0.2, 0.1, 1.0}
  650.         };

  652.         ForwardLabel forwardLabel = ForwardLabel.Create (
  653.             strCurrency,
  654.             strTenor
  655.         );

  657.         FundingLabel fundingLabel = FundingLabel.Standard (
  658.             strCurrency
  659.         );

  661.         JulianDate dtSpot = org.drip.analytics.date.DateUtil.Today();

  663.         MarketSurface[] aMS = new MarketSurface[] {
  664.             FlatVolatilitySurface (
  665.                 dtSpot,
  666.                 strCurrency,
  667.                 dblFlatVol1
  668.             ),
  669.             FlatVolatilitySurface (
  670.                 dtSpot,
  671.                 strCurrency,
  672.                 dblFlatVol2
  673.             ),
  674.             FlatVolatilitySurface (
  675.                 dtSpot,
  676.                 strCurrency,
  677.                 dblFlatVol3
  678.             )
  679.         };

  681.         ForwardCurve fc = ScenarioForwardCurveBuilder.FlatForwardForwardCurve (
  682.             dtSpot,
  683.             forwardLabel,
  684.             dblFlatForwardRate
  685.         );

  687.         MergedDiscountForwardCurve dc = OTCInstrumentCurve (
  688.             dtSpot,
  689.             strCurrency
  690.         );

  692.         int iSpotDate = dtSpot.julian();

  694.         JulianDate dtView = dtSpot.addTenor ("1Y");

  696.         int iViewDate = dtView.julian();

  698.         int iNumForwardTenor = 5;
  699.         int iViewTimeIncrement = 1;
  700.         String strBoundary = "\t|";
  701.         String strTenorDump = "\t|";
  702.         JulianDate[] adtIndex = new JulianDate[iNumForwardTenor + 1];
  703.         JulianDate[] adtForward = new JulianDate[iNumForwardTenor + 1];

  705.         for (int iTenorDate = 0; iTenorDate <= iNumForwardTenor; ++iTenorDate) {
  706.             adtIndex[iTenorDate] = 0 == iTenorDate ? dtView : adtIndex[iTenorDate - 1].addTenor (forwardLabel.tenor());

  708.             adtForward[iTenorDate] = 0 == iTenorDate ?
  709.                 dtView.addTenor (forwardLabel.tenor()) :
  710.                 adtForward[iTenorDate - 1].addTenor (forwardLabel.tenor());

  712.             strBoundary += "---------------";
  713.             strTenorDump += "  " + adtForward[iTenorDate] + "  |";
  714.         }

  716.         SegmentCustomBuilderControl scbc = new SegmentCustomBuilderControl (
  717.             MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
  718.             new PolynomialFunctionSetParams (4),
  719.             SegmentInelasticDesignControl.Create (
  720.                 2,
  721.                 2
  722.             ),
  723.             new ResponseScalingShapeControl (
  724.                 true,
  725.                 new QuadraticRationalShapeControl (1.)
  726.             ),
  727.             null
  728.         );

  730.          for (int iNumFactor : aiNumFactor) {
  731.             LognormalLIBORCurveEvolver llce = LognormalLIBORCurveEvolver.Create (
  732.                 fundingLabel,
  733.                 forwardLabel,
  734.                 iNumForwardTenor,
  735.                 scbc
  736.             );

  738.             BGMCurveUpdate bgmcu = BGMCurveUpdate.Create (
  739.                 fundingLabel,
  740.                 forwardLabel,
  741.                 iSpotDate,
  742.                 iSpotDate,
  743.                 fc,
  744.                 null,
  745.                 dc,
  746.                 null,
  747.                 null,
  748.                 null,
  749.                 null,
  750.                 null,
  751.                 LLVInstance (
  752.                     dtSpot.julian(),
  753.                     forwardLabel,
  754.                     aMS,
  755.                     aadblCorrelation,
  756.                     iNumFactor
  757.                 )
  758.             );

  760.             for (int iRun = 0; iRun < iNumRun; ++iRun) {
  761.                 String strLIBORDump = "\t|";
  762.                 String strDiscountFactorDump = "\t|";
  763.                 String strLIBORIncrementDump = "\t|";
  764.                 String strSpotRateIncrementDump = "\t|";
  765.                 String strNominalAnnualForwardDump = "\t|";
  766.                 String strEffectiveAnnualForwardDump = "\t|";
  767.                 String strDiscountFactorIncrementDump = "\t|";
  768.                 String strContinuousForwardIncrementDump = "\t|";

  770.                 BGMCurveUpdate bgmUpdate = llce.evolve (
  771.                     iSpotDate,
  772.                     iViewDate,
  773.                     iViewTimeIncrement,
  774.                     bgmcu
  775.                 );

  777.                 ForwardCurve fcLIBOR = bgmUpdate.forwardCurve();

  779.                 MergedDiscountForwardCurve dcDiscountFactor = bgmUpdate.discountCurve();

  781.                 Span spanLIBORIncrement = bgmUpdate.forwardCurveIncrement();

  783.                 Span spanDFIncrement = bgmUpdate.discountCurveIncrement();

  785.                 Span spanContinuousForwardIncrement = bgmUpdate.continuousForwardRateIncrement();

  787.                 Span spanSpotRateIncrement = bgmUpdate.spotRateIncrement();

  789.                 Span spanEffectiveAnnualForward = bgmUpdate.instantaneousEffectiveForwardRate();

  791.                 Span spanNominalAnnualForward = bgmUpdate.instantaneousNominalForwardRate();

  793.                 for (int iTenorDate = 0; iTenorDate <= iNumForwardTenor; ++iTenorDate) {
  794.                     strLIBORDump += "    " +
  795.                         FormatUtil.FormatDouble (fcLIBOR.forward (adtForward[iTenorDate]), 1, 2, 100.) +
  796.                         "%    |";

  798.                     strDiscountFactorDump += "   " +
  799.                         FormatUtil.FormatDouble (dcDiscountFactor.df (adtIndex[iTenorDate]), 1, 4, 1.) +
  800.                         "    |";

  802.                     strLIBORIncrementDump += "     " +
  803.                         FormatUtil.FormatDouble (spanLIBORIncrement.calcResponseValue (adtIndex[iTenorDate].julian()), 2, 0, 10000.) +
  804.                         "      |";

  806.                     strDiscountFactorIncrementDump += "     " +
  807.                         FormatUtil.FormatDouble (spanDFIncrement.calcResponseValue (adtIndex[iTenorDate].julian()), 2, 0, 100.) +
  808.                         "      |";

  810.                     strContinuousForwardIncrementDump += "     " +
  811.                         FormatUtil.FormatDouble (spanContinuousForwardIncrement.calcResponseValue (adtIndex[iTenorDate].julian()), 2, 0, 10000.) +
  812.                         "      |";

  814.                     strSpotRateIncrementDump += "     " +
  815.                         FormatUtil.FormatDouble (spanSpotRateIncrement.calcResponseValue (adtIndex[iTenorDate].julian()), 2, 0, 10000.) +
  816.                         "      |";

  818.                     strEffectiveAnnualForwardDump += "    " +
  819.                         FormatUtil.FormatDouble (spanEffectiveAnnualForward.calcResponseValue (adtIndex[iTenorDate].julian()), 1, 2, 100.) +
  820.                         "%    |";

  822.                     strNominalAnnualForwardDump += "    " +
  823.                         FormatUtil.FormatDouble (spanNominalAnnualForward.calcResponseValue (adtIndex[iTenorDate].julian()), 1, 2, 100.) +
  824.                         "%    |";
  825.                 }

  827.                 System.out.println ("\n\n" +
  828.                     strBoundary + "\n" +
  829.                     strTenorDump + "\n" +
  830.                     strBoundary + "\n" +
  831.                     strLIBORDump + "\n" +
  832.                     strDiscountFactorDump + "\n" +
  833.                     strLIBORIncrementDump + "\n" +
  834.                     strDiscountFactorIncrementDump + "\n" +
  835.                     strContinuousForwardIncrementDump + "\n" +
  836.                     strSpotRateIncrementDump + "\n" +
  837.                     strEffectiveAnnualForwardDump + "\n" +
  838.                     strNominalAnnualForwardDump + "\n" +
  839.                     strBoundary
  840.                 );
  841.             }
  842.         }

  844.         EnvManager.TerminateEnv();
  845.     }
  846. }
Created with JaCoCo 0.7.9.201702052155