CustomBasisCurveBuilder.java

package org.drip.sample.multicurve;

import org.drip.analytics.date.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
import org.drip.state.basis.BasisCurve;
import org.drip.state.creator.ScenarioBasisCurveBuilder;
import org.drip.state.identifier.ForwardLabel;

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

/*!
 * Copyright (C) 2018 Lakshmi Krishnamurthy
 * Copyright (C) 2017 Lakshmi Krishnamurthy
 * Copyright (C) 2016 Lakshmi Krishnamurthy
 * Copyright (C) 2015 Lakshmi Krishnamurthy
 * Copyright (C) 2014 Lakshmi Krishnamurthy
 * 
 *  This file is part of DRIP, a free-software/open-source library for buy/side financial/trading model
 *      libraries targeting analysts and developers
 *      https://lakshmidrip.github.io/DRIP/
 *  
 *  DRIP is composed of four main libraries:
 *  
 *  - DRIP Fixed Income - https://lakshmidrip.github.io/DRIP-Fixed-Income/
 *  - DRIP Asset Allocation - https://lakshmidrip.github.io/DRIP-Asset-Allocation/
 *  - DRIP Numerical Optimizer - https://lakshmidrip.github.io/DRIP-Numerical-Optimizer/
 *  - DRIP Statistical Learning - https://lakshmidrip.github.io/DRIP-Statistical-Learning/
 * 
 *  - DRIP Fixed Income: Library for Instrument/Trading Conventions, Treasury Futures/Options,
 *      Funding/Forward/Overnight Curves, Multi-Curve Construction/Valuation, Collateral Valuation and XVA
 *      Metric Generation, Calibration and Hedge Attributions, Statistical Curve Construction, Bond RV
 *      Metrics, Stochastic Evolution and Option Pricing, Interest Rate Dynamics and Option Pricing, LMM
 *      Extensions/Calibrations/Greeks, Algorithmic Differentiation, and Asset Backed Models and Analytics.
 * 
 *  - DRIP Asset Allocation: Library for model libraries for MPT framework, Black Litterman Strategy
 *      Incorporator, Holdings Constraint, and Transaction Costs.
 * 
 *  - DRIP Numerical Optimizer: Library for Numerical Optimization and Spline Functionality.
 * 
 *  - DRIP Statistical Learning: Library for Statistical Evaluation and Machine Learning.
 * 
 *  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.
 */

/**
 * CustomBasisCurveBuilder contains the sample demonstrating the full functionality behind creating highly
 *  customized spline based Basis curves.
 * 
 * @author Lakshmi Krishnamurthy
 */

public class CustomBasisCurveBuilder {
    public static final void main (
        final String[] astrArgs)
        throws Exception
    {
        /*
         * Initialize the Credit Analytics Library
         */

        EnvManager.InitEnv ("");

        JulianDate dtToday = DateUtil.Today();

        String[] astrTenor = new String[] {
            "1Y", "2Y", "3Y", "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y"
        };

        double[] adblBasis = new double[] {
            0.00186,    //  1Y
            0.00127,    //  2Y
            0.00097,    //  3Y
            0.00080,    //  4Y
            0.00067,    //  5Y
            0.00058,    //  6Y
            0.00051,    //  7Y
            0.00046,    //  8Y
            0.00042,    //  9Y
            0.00038,    // 10Y
            0.00035,    // 11Y
            0.00033,    // 12Y
            0.00028,    // 15Y
            0.00022,    // 20Y
            0.00020,    // 25Y
            0.00018     // 30Y
        };

        BasisCurve bcCubicPolynomial = ScenarioBasisCurveBuilder.CubicPolynomialBasisCurve (
            "USD3M6MBasis_CubicPolynomial",
            dtToday,
            ForwardLabel.Create (
                "USD",
                "6M"
            ),
            ForwardLabel.Create (
                "USD",
                "3M"
            ),
            false,
            astrTenor,
            adblBasis
        );

        BasisCurve bcQuinticPolynomial = ScenarioBasisCurveBuilder.QuarticPolynomialBasisCurve (
            "USD3M6MBasis_QuinticPolynomial",
            dtToday,
            ForwardLabel.Create (
                "USD",
                "6M"
            ),
            ForwardLabel.Create (
                "USD",
                "3M"
            ),
            false,
            astrTenor,
            adblBasis
        );

        BasisCurve bcKaklisPandelis = ScenarioBasisCurveBuilder.KaklisPandelisBasisCurve (
            "USD3M6MBasis_KaklisPandelis",
            dtToday,
            ForwardLabel.Create (
                "USD",
                "6M"
            ),
            ForwardLabel.Create (
                "USD",
                "3M"
            ),
            false,
            astrTenor,
            adblBasis
        );

        BasisCurve bcKLKHyperbolic = ScenarioBasisCurveBuilder.KLKHyperbolicBasisCurve (
            "USD3M6MBasis_KLKHyperbolic",
            dtToday,
            ForwardLabel.Create (
                "USD",
                "6M"
            ),
            ForwardLabel.Create (
                "USD",
                "3M"
            ),
            false,
            astrTenor,
            adblBasis,
            1.
        );

        BasisCurve bcKLKRationalLinear = ScenarioBasisCurveBuilder.KLKRationalLinearBasisCurve (
            "USD3M6MBasis_KLKRationalLinear",
            dtToday,
            ForwardLabel.Create (
                "USD",
                "6M"
            ),
            ForwardLabel.Create (
                "USD",
                "3M"
            ),
            false,
            astrTenor,
            adblBasis,
            0.1
        );

        BasisCurve bcKLKRationalQuadratic = ScenarioBasisCurveBuilder.KLKRationalLinearBasisCurve (
            "USD3M6MBasis_KLKRationalQuadratic",
            dtToday,
            ForwardLabel.Create (
                "USD",
                "6M"
            ),
            ForwardLabel.Create (
                "USD",
                "3M"
            ),
            false,
            astrTenor,
            adblBasis,
            2.
        );

        System.out.println ("\tPrinting the Basis Node Values in Order (Left -> Right):");

        System.out.println ("\t\tCalculated Cubic Polynomial Basis (%)");

        System.out.println ("\t\tCalculated Quintic Polynomial Basis (%)");

        System.out.println ("\t\tCalculated Kaklis Pandelis Basis (%)");

        System.out.println ("\t\tCalculated KLK Hyperbolic Basis (%)");

        System.out.println ("\t\tCalculated KLK Rational Linear Basis (%)");

        System.out.println ("\t\tCalculated KLK Rational Quadratic Basis (%)");

        System.out.println ("\t\tInput Quote (bp)");

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

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

        for (int i = 0; i < adblBasis.length; ++i)
            System.out.println ("\t" + astrTenor[i] + " => " +
                FormatUtil.FormatDouble (bcCubicPolynomial.basis (astrTenor[i]), 1, 2, 10000.) + " | " +
                FormatUtil.FormatDouble (bcQuinticPolynomial.basis (astrTenor[i]), 1, 2, 10000.) + " | " +
                FormatUtil.FormatDouble (bcKaklisPandelis.basis (astrTenor[i]), 1, 2, 10000.) + " | " +
                FormatUtil.FormatDouble (bcKLKHyperbolic.basis (astrTenor[i]), 1, 2, 10000.) + " | " +
                FormatUtil.FormatDouble (bcKLKRationalLinear.basis (astrTenor[i]), 1, 2, 10000.) + " | " +
                FormatUtil.FormatDouble (bcKLKRationalQuadratic.basis (astrTenor[i]), 1, 2, 10000.) + " | " +
                FormatUtil.FormatDouble (adblBasis[i], 1, 2, 10000.)
            );

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

        System.out.println ("\t|  DATE    =>  CUBIC | QUINTIC  | KAKPAND | KLKHYPER | KLKRATLNR | KLKRATQUA |");

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

        for (int i = 3; i < 30; ++i) {
            JulianDate dt = dtToday.addTenor (i + "Y");

            System.out.println ("\t" + dt + " => " +
                FormatUtil.FormatDouble (bcCubicPolynomial.basis (dt), 1, 2, 10000.) + "  |  " +
                FormatUtil.FormatDouble (bcQuinticPolynomial.basis (dt), 1, 2, 10000.) + "   |  " +
                FormatUtil.FormatDouble (bcKaklisPandelis.basis (dt), 1, 2, 10000.) + "  |  " +
                FormatUtil.FormatDouble (bcKLKHyperbolic.basis (dt), 1, 2, 10000.) + "   |  " +
                FormatUtil.FormatDouble (bcKLKRationalLinear.basis (dt), 1, 2, 10000.) + "    |  " +
                FormatUtil.FormatDouble (bcKLKRationalQuadratic.basis (dt), 1, 2, 10000.) + "    |  "
            );
        }

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