JurisdictionOTCInstrumentMeasures.java
package org.drip.sample.ois;
import java.util.Map;
import org.drip.analytics.date.JulianDate;
import org.drip.function.r1tor1.QuadraticRationalShapeControl;
import org.drip.market.otc.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.creator.*;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.valuation.ValuationParams;
import org.drip.product.creator.SingleStreamComponentBuilder;
import org.drip.product.definition.CalibratableComponent;
import org.drip.product.rates.*;
import org.drip.service.env.EnvManager;
import org.drip.spline.basis.PolynomialFunctionSetParams;
import org.drip.spline.params.*;
import org.drip.spline.stretch.*;
import org.drip.state.creator.ScenarioDiscountCurveBuilder;
import org.drip.state.discount.MergedDiscountForwardCurve;
import org.drip.state.estimator.LatentStateStretchBuilder;
import org.drip.state.identifier.OvernightLabel;
import org.drip.state.inference.*;
/*
* -*- 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.
*/
/**
* JurisdictionOTCInstrumentMeasures contains the Curve Construction and Valuation Functionality of the OTC
* OIS Instruments across Multiple Jurisdictions.
*
* @author Lakshmi Krishnamurthy
*/
public class JurisdictionOTCInstrumentMeasures {
private static final FixFloatComponent OTCOISFixFloat (
final JulianDate dtSpot,
final String strCurrency,
final String strMaturityTenor,
final double dblCoupon)
{
FixedFloatSwapConvention ffConv = OvernightFixedFloatContainer.FundConventionFromJurisdiction (
strCurrency
);
return ffConv.createFixFloatComponent (
dtSpot,
strMaturityTenor,
dblCoupon,
0.,
1.
);
}
/*
* Construct the Array of Deposit Instruments from the given set of parameters
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final SingleStreamComponent[] DepositInstrumentsFromMaturityDays (
final JulianDate dtEffective,
final String strCurrency,
final int[] aiDay)
throws Exception
{
SingleStreamComponent[] aDeposit = new SingleStreamComponent[aiDay.length];
for (int i = 0; i < aiDay.length; ++i)
aDeposit[i] = SingleStreamComponentBuilder.Deposit (
dtEffective,
dtEffective.addBusDays (
aiDay[i],
strCurrency
),
OvernightLabel.Create (
strCurrency
)
);
return aDeposit;
}
/*
* Construct the Array of Swap Instruments from the given set of parameters
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final FixFloatComponent[] OISFromMaturityTenor (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrMaturityTenor,
final double[] adblCoupon)
throws Exception
{
FixFloatComponent[] aOIS = new FixFloatComponent[astrMaturityTenor.length];
for (int i = 0; i < astrMaturityTenor.length; ++i)
aOIS[i] = OTCOISFixFloat (
dtSpot,
strCurrency,
astrMaturityTenor[i],
adblCoupon[i]
);
return aOIS;
}
/*
* Construct the Array of Swap Instruments from the given set of parameters
*
* USE WITH CARE: This sample ignores errors and does not handle exceptions.
*/
private static final FixFloatComponent[] OISFuturesFromMaturityTenor (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrStartTenor,
final String[] astrMaturityTenor,
final double[] adblCoupon)
throws Exception
{
FixFloatComponent[] aOISFutures = new FixFloatComponent[astrMaturityTenor.length];
for (int i = 0; i < astrMaturityTenor.length; ++i)
aOISFutures[i] = OTCOISFixFloat (
dtSpot.addTenor (astrStartTenor[i]),
strCurrency,
astrMaturityTenor[i],
adblCoupon[i]
);
return aOISFutures;
}
private static final void OTCOISRun (
final JulianDate dtSpot,
final String strCurrency,
final String[] astrOTCMaturityTenor,
final boolean bCalibMetricDisplay)
throws Exception
{
if (bCalibMetricDisplay) {
System.out.println ("\n\t----------------------------------------------------------------");
System.out.println ("\t--------- DISCOUNT CURVE WITH OVERNIGHT INDEX ------------------");
System.out.println ("\t----------------------------------------------------------------");
}
/*
* Construct the Array of Deposit Instruments and their Quotes from the given set of parameters
*/
SingleStreamComponent[] aDepositComp = DepositInstrumentsFromMaturityDays (
dtSpot,
strCurrency,
new int[] {
1, 2, 3
}
);
double[] adblDepositQuote = new double[] {
0.0004, 0.0004, 0.0004 // Deposit
};
/*
* Construct the Deposit Instrument Set Stretch Builder
*/
LatentStateStretchSpec depositStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
" DEPOSIT ",
aDepositComp,
"ForwardRate",
adblDepositQuote
);
/*
* Construct the Array of Short End OIS Instruments and their Quotes from the given set of parameters
*/
double[] adblShortEndOISQuote = new double[] {
0.00070, // 1W
0.00069, // 2W
0.00078, // 3W
0.00074 // 1M
};
CalibratableComponent[] aShortEndOISComp = OISFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"1W", "2W", "3W", "1M"
},
adblShortEndOISQuote
);
/*
* Construct the Short End OIS Instrument Set Stretch Builder
*/
LatentStateStretchSpec oisShortEndStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
"SHORT END OIS",
aShortEndOISComp,
"SwapRate",
adblShortEndOISQuote
);
/*
* Construct the Array of OIS Futures Instruments and their Quotes from the given set of parameters
*/
double[] adblOISFutureQuote = new double[] {
0.00046, // 1M x 1M
0.00016, // 2M x 1M
-0.00007, // 3M x 1M
-0.00013, // 4M x 1M
-0.00014 // 5M x 1M
};
CalibratableComponent[] aOISFutureComp = OISFuturesFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"1M", "2M", "3M", "4M", "5M"
},
new java.lang.String[] {
"1M", "1M", "1M", "1M", "1M"
},
adblOISFutureQuote
);
/*
* Construct the OIS Future Instrument Set Stretch Builder
*/
LatentStateStretchSpec oisFutureStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
" OIS FUTURE ",
aOISFutureComp,
"SwapRate",
adblOISFutureQuote
);
/*
* Construct the Array of Long End OIS Instruments and their Quotes from the given set of parameters
*/
double[] adblLongEndOISQuote = new double[] {
0.00002, // 15M
0.00008, // 18M
0.00021, // 21M
0.00036, // 2Y
0.00127, // 3Y
0.00274, // 4Y
0.00456, // 5Y
0.00647, // 6Y
0.00827, // 7Y
0.00996, // 8Y
0.01147, // 9Y
0.01280, // 10Y
0.01404, // 11Y
0.01516, // 12Y
0.01764, // 15Y
0.01939, // 20Y
0.02003, // 25Y
0.02038 // 30Y
};
CalibratableComponent[] aLongEndOISComp = OISFromMaturityTenor (
dtSpot,
strCurrency,
new java.lang.String[] {
"15M", "18M", "21M", "2Y", "3Y", "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y"
},
adblLongEndOISQuote
);
/*
* Construct the Long End OIS Instrument Set Stretch Builder
*/
LatentStateStretchSpec oisLongEndStretch = LatentStateStretchBuilder.ForwardFundingStretchSpec (
"LONG END OIS ",
aLongEndOISComp,
"SwapRate",
adblLongEndOISQuote
);
LatentStateStretchSpec[] aStretchSpec = new LatentStateStretchSpec[] {
depositStretch,
oisShortEndStretch,
oisFutureStretch,
oisLongEndStretch
};
/*
* Set up the Linear Curve Calibrator using the following parameters:
* - Cubic Exponential Mixture Basis Spline Set
* - Ck = 2, Segment Curvature Penalty = 2
* - Quadratic Rational Shape Controller
* - Natural Boundary Setting
*/
LinearLatentStateCalibrator lcc = new LinearLatentStateCalibrator (
new SegmentCustomBuilderControl (
MultiSegmentSequenceBuilder.BASIS_SPLINE_POLYNOMIAL,
new PolynomialFunctionSetParams (4),
SegmentInelasticDesignControl.Create (
2,
2
),
new ResponseScalingShapeControl (
true,
new QuadraticRationalShapeControl (0.)
),
null
),
BoundarySettings.NaturalStandard(),
MultiSegmentSequence.CALIBRATE,
null,
null
);
ValuationParams valParams = new ValuationParams (
dtSpot,
dtSpot,
strCurrency
);
/*
* Construct the Shape Preserving Discount Curve by applying the linear curve calibrator to the array
* of Deposit and Swap Stretches.
*/
MergedDiscountForwardCurve dc = ScenarioDiscountCurveBuilder.ShapePreservingDFBuild (
strCurrency,
lcc,
aStretchSpec,
valParams,
null,
null,
null,
1.
);
CurveSurfaceQuoteContainer mktParams = MarketParamsBuilder.Create (
dc,
null,
null,
null,
null,
null,
null
);
if (bCalibMetricDisplay) {
/*
* Cross-Comparison of the Deposit Calibration Instrument "Rate" metric across the different curve
* construction methodologies.
*/
System.out.println ("\t----------------------------------------------------------------");
System.out.println ("\t DEPOSIT INSTRUMENTS CALIBRATION RECOVERY");
System.out.println ("\t----------------------------------------------------------------");
for (int i = 0; i < aDepositComp.length; ++i)
System.out.println ("\t[" + aDepositComp[i].effectiveDate() + " => " + aDepositComp[i].maturityDate() + "] = " +
FormatUtil.FormatDouble (aDepositComp[i].measureValue (valParams, null, mktParams, null, "Rate"), 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (adblDepositQuote[i], 1, 6, 1.));
/*
* Cross-Comparison of the Short End OIS Calibration Instrument "Rate" metric across the different curve
* construction methodologies.
*/
System.out.println ("\n\t----------------------------------------------------------------");
System.out.println ("\t OIS SHORT END INSTRUMENTS CALIBRATION RECOVERY");
System.out.println ("\t----------------------------------------------------------------");
for (int i = 0; i < aShortEndOISComp.length; ++i) {
Map<String, Double> mapShortEndOISComp = aShortEndOISComp[i].value (valParams, null, mktParams, null);
System.out.println ("\t[" + aShortEndOISComp[i].effectiveDate() + " => " + aShortEndOISComp[i].maturityDate() + "] = " +
FormatUtil.FormatDouble (mapShortEndOISComp.get ("CalibSwapRate"), 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (adblShortEndOISQuote[i], 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (mapShortEndOISComp.get ("FairPremium"), 1, 6, 1.)
);
}
/*
* Cross-Comparison of the OIS Future Calibration Instrument "Rate" metric across the different curve
* construction methodologies.
*/
System.out.println ("\n\t----------------------------------------------------------------");
System.out.println ("\t OIS FUTURE INSTRUMENTS CALIBRATION RECOVERY");
System.out.println ("\t----------------------------------------------------------------");
for (int i = 0; i < aOISFutureComp.length; ++i) {
Map<String, Double> mapOISFutureComp = aOISFutureComp[i].value (valParams, null, mktParams, null);
System.out.println ("\t[" + aOISFutureComp[i].effectiveDate() + " => " + aOISFutureComp[i].maturityDate() + "] = " +
FormatUtil.FormatDouble (mapOISFutureComp.get ("SwapRate"), 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (adblOISFutureQuote[i], 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (mapOISFutureComp.get ("FairPremium"), 1, 6, 1.)
);
}
/*
* Cross-Comparison of the Long End OIS Calibration Instrument "Rate" metric across the different curve
* construction methodologies.
*/
System.out.println ("\n\t----------------------------------------------------------------");
System.out.println ("\t OIS LONG END INSTRUMENTS CALIBRATION RECOVERY");
System.out.println ("\t----------------------------------------------------------------");
for (int i = 0; i < aLongEndOISComp.length; ++i) {
Map<String, Double> mapLongEndOISComp = aLongEndOISComp[i].value (valParams, null, mktParams, null);
System.out.println ("\t[" + aLongEndOISComp[i].effectiveDate() + " => " + aLongEndOISComp[i].maturityDate() + "] = " +
FormatUtil.FormatDouble (mapLongEndOISComp.get ("CalibSwapRate"), 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (adblLongEndOISQuote[i], 1, 6, 1.) + " | " +
FormatUtil.FormatDouble (mapLongEndOISComp.get ("FairPremium"), 1, 6, 1.)
);
}
System.out.println ("\t----------------------------------------------------------------");
}
System.out.print ("\t[" + strCurrency + "] = ");
for (int i = 0; i < astrOTCMaturityTenor.length; ++i) {
FixFloatComponent swap = OTCOISFixFloat (
dtSpot,
strCurrency,
astrOTCMaturityTenor[i],
0.
);
Map<String, Double> mapOutput = swap.value (
valParams,
null,
mktParams,
null
);
System.out.print (
FormatUtil.FormatDouble (mapOutput.get ("SwapRate"), 1, 4, 100.) + "% (" +
FormatUtil.FormatDouble (mapOutput.get ("FairPremium"), 1, 4, 100.) + "%) || "
);
}
System.out.println();
}
public static final void main (
final String[] astrArgs)
throws Exception
{
/*
* Initialize the Credit Analytics Library
*/
EnvManager.InitEnv ("");
JulianDate dtToday = org.drip.analytics.date.DateUtil.Today();
String[] astrOTCMaturityTenor = new String[] {
"1Y", "3Y", "5Y", "7Y", "10Y"
};
OTCOISRun (dtToday, "AUD", astrOTCMaturityTenor, true);
System.out.println ("\n\t--------------------------------------------------------------------------------------------------------------------------");
System.out.println ("\t JURISDICTION 1Y || 3Y || 5Y || 7Y || 10Y ||");
System.out.println ("\t--------------------------------------------------------------------------------------------------------------------------");
OTCOISRun (dtToday, "AUD", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "CAD", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "EUR", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "GBP", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "INR", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "JPY", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "SGD", astrOTCMaturityTenor, false);
OTCOISRun (dtToday, "USD", astrOTCMaturityTenor, false);
}
}