FundingNativeForwardReconciler.java
package org.drip.sample.multicurve;
import org.drip.analytics.date.*;
import org.drip.market.otc.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.valuation.ValuationParams;
import org.drip.product.creator.SingleStreamComponentBuilder;
import org.drip.product.definition.CalibratableComponent;
import org.drip.product.rates.FixFloatComponent;
import org.drip.service.env.EnvManager;
import org.drip.state.creator.ScenarioDiscountCurveBuilder;
import org.drip.state.discount.*;
import org.drip.state.forward.ForwardCurve;
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
*
* 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.
*/
/**
* FundingNativeForwardReconciler demonstrates the Construction of the Forward Curve Native to the Discount
* Curve across different Tenors, and display their Reconciliation.
*
* @author Lakshmi Krishnamurthy
*/
public class FundingNativeForwardReconciler {
private static final FixFloatComponent OTCFixFloat (
final JulianDate dtSpot,
final String strCurrency,
final String strMaturityTenor,
final double dblCoupon)
{
FixedFloatSwapConvention ffConv = IBORFixedFloatContainer.ConventionFromJurisdiction (
strCurrency,
"ALL",
strMaturityTenor,
"MAIN"
);
return ffConv.createFixFloatComponent (
dtSpot,
strMaturityTenor,
dblCoupon,
0.,
1.
);
}
private static final CalibratableComponent[] DepositInstrumentsFromMaturityDays (
final JulianDate dtEffective,
final int[] aiDay,
final int iNumFuture,
final String strCurrency)
throws Exception
{
CalibratableComponent[] aCalibComp = new CalibratableComponent[aiDay.length + iNumFuture];
for (int i = 0; i < aiDay.length; ++i)
aCalibComp[i] = SingleStreamComponentBuilder.Deposit (
dtEffective,
dtEffective.addBusDays (
aiDay[i],
strCurrency
),
ForwardLabel.Create (
strCurrency,
"3M"
)
);
CalibratableComponent[] aEDF = SingleStreamComponentBuilder.ForwardRateFuturesPack (
dtEffective,
iNumFuture,
strCurrency
);
for (int i = aiDay.length; i < aiDay.length + iNumFuture; ++i)
aCalibComp[i] = aEDF[i - aiDay.length];
return aCalibComp;
}
private static final FixFloatComponent[] SwapInstrumentsFromMaturityTenor (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrMaturityTenor,
final double[] adblCoupon)
throws Exception
{
FixFloatComponent[] aIRS = new FixFloatComponent[astrMaturityTenor.length];
for (int i = 0; i < astrMaturityTenor.length; ++i)
aIRS[i] = OTCFixFloat (
dtSpot,
strCurrency,
astrMaturityTenor[i],
adblCoupon[i]
);
return aIRS;
}
private static final MergedDiscountForwardCurve MakeDC (
final JulianDate dtSpot,
final String strCurrency)
throws Exception
{
/*
* Construct the array of Deposit instruments and their quotes.
*/
CalibratableComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
dtSpot,
new int[] {
30,
60,
91,
182,
273
},
0,
strCurrency
);
double[] adblDepositQuote = new double[] {
0.0668750, // 30D
0.0675000, // 60D
0.0678125, // 91D
0.0712500, // 182D
0.0750000 // 273D
};
String[] astrDepositManifestMeasure = new String[] {
"ForwardRate", // 30D
"ForwardRate", // 60D
"ForwardRate", // 91D
"ForwardRate", // 182D
"ForwardRate" // 273D
};
/*
* Construct the array of Swap instruments and their quotes.
*/
double[] adblSwapQuote = new double[] {
0.08265, // 2Y
0.08550, // 3Y
0.08655, // 4Y
0.08770, // 5Y
0.08910, // 7Y
0.08920 // 10Y
};
String[] astrSwapManifestMeasure = new String[] {
"SwapRate", // 2Y
"SwapRate", // 3Y
"SwapRate", // 4Y
"SwapRate", // 5Y
"SwapRate", // 7Y
"SwapRate" // 10Y
};
CalibratableComponent[] aSwapComp = SwapInstrumentsFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"2Y",
"3Y",
"4Y",
"5Y",
"7Y",
"10Y"
},
adblSwapQuote
);
/*
* Construct a shape preserving and smoothing KLK Hyperbolic Spline from the cash/swap instruments.
*/
return ScenarioDiscountCurveBuilder.CubicKLKHyperbolicDFRateShapePreserver (
"KLK_HYPERBOLIC_SHAPE_TEMPLATE",
new ValuationParams (
dtSpot,
dtSpot,
strCurrency
),
aDepositComp,
adblDepositQuote,
astrDepositManifestMeasure,
aSwapComp,
adblSwapQuote,
astrSwapManifestMeasure,
false
);
}
private static final void DiscountForwardReconciliation (
final JulianDate dtSpot,
final MergedDiscountForwardCurve dc,
final ForwardCurve fc,
final String strTenor)
throws Exception
{
int iNumTenor = 20;
JulianDate dtStart = dtSpot;
System.out.println ("\n\t|--------------------------------------------------||");
System.out.println ("\t|-------- RECONCILIATION FOR " + fc.label().fullyQualifiedName() + " ---------||");
System.out.println ("\t|--------------------------------------------------||");
System.out.println ("\t| ||");
for (int i = 0; i < iNumTenor; ++i) {
JulianDate dtEnd = dtStart.addTenor (strTenor);
System.out.println (
"\t| [" + dtStart + " - " + dtEnd + "] | " +
FormatUtil.FormatDouble (dc.libor (dtStart, strTenor), 1, 2, 100.) + "% | " +
FormatUtil.FormatDouble (fc.forward (dtEnd), 1, 2, 100.) + "% ||"
);
dtStart = dtEnd;
}
System.out.println ("\t| ||");
System.out.println ("\t|--------------------------------------------------||");
System.out.println ("\t|--------------------------------------------------||\n");
}
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv ("");
JulianDate dtSpot = DateUtil.CreateFromYMD (
1995,
DateUtil.FEBRUARY,
3
);
String strCurrency = "GBP";
String[] astrFRATenor = {
"1M", "3M", "6M", "12M"
};
MergedDiscountForwardCurve dc = MakeDC (
dtSpot,
strCurrency
);
for (String strFRATenor : astrFRATenor) {
ForwardCurve fcNative = dc.nativeForwardCurve (strFRATenor);
DiscountForwardReconciliation (
dtSpot,
dc,
fcNative,
strFRATenor
);
}
}
}