DomesticCollateralForeignForex.java

  1. package org.drip.sample.piterbarg2012;

  3. import java.util.Map;

  5. import org.drip.analytics.date.*;
  6. import org.drip.analytics.support.CaseInsensitiveTreeMap;
  7. import org.drip.function.r1tor1.*;
  8. import org.drip.param.creator.*;
  9. import org.drip.param.market.CurveSurfaceQuoteContainer;
  10. import org.drip.param.valuation.*;
  11. import org.drip.product.fx.DomesticCollateralizedForeignForward;
  12. import org.drip.product.params.CurrencyPair;
  13. import org.drip.service.env.EnvManager;
  14. import org.drip.state.creator.*;
  15. import org.drip.state.curve.ForeignCollateralizedDiscountCurve;
  16. import org.drip.state.discount.MergedDiscountForwardCurve;
  17. import org.drip.state.fx.FXCurve;
  18. import org.drip.state.identifier.*;
  19. import org.drip.state.nonlinear.*;
  20. import org.drip.state.volatility.VolatilityCurve;

  22. /*
  23.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  24.  */

  26. /*!
  27.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  28.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  29.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  30.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  31.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  32.  * 
  33.  *  This file is part of DRIP, a free-software/open-source library for buy/side financial/trading model
  34.  *      libraries targeting analysts and developers
  35.  *      https://lakshmidrip.github.io/DRIP/
  36.  *  
  37.  *  DRIP is composed of four main libraries:
  38.  *  
  39.  *  - DRIP Fixed Income - https://lakshmidrip.github.io/DRIP-Fixed-Income/
  40.  *  - DRIP Asset Allocation - https://lakshmidrip.github.io/DRIP-Asset-Allocation/
  41.  *  - DRIP Numerical Optimizer - https://lakshmidrip.github.io/DRIP-Numerical-Optimizer/
  42.  *  - DRIP Statistical Learning - https://lakshmidrip.github.io/DRIP-Statistical-Learning/
  43.  * 
  44.  *  - DRIP Fixed Income: Library for Instrument/Trading Conventions, Treasury Futures/Options,
  45.  *      Funding/Forward/Overnight Curves, Multi-Curve Construction/Valuation, Collateral Valuation and XVA
  46.  *      Metric Generation, Calibration and Hedge Attributions, Statistical Curve Construction, Bond RV
  47.  *      Metrics, Stochastic Evolution and Option Pricing, Interest Rate Dynamics and Option Pricing, LMM
  48.  *      Extensions/Calibrations/Greeks, Algorithmic Differentiation, and Asset Backed Models and Analytics.
  49.  * 
  50.  *  - DRIP Asset Allocation: Library for model libraries for MPT framework, Black Litterman Strategy
  51.  *      Incorporator, Holdings Constraint, and Transaction Costs.
  52.  * 
  53.  *  - DRIP Numerical Optimizer: Library for Numerical Optimization and Spline Functionality.
  54.  * 
  55.  *  - DRIP Statistical Learning: Library for Statistical Evaluation and Machine Learning.
  56.  * 
  57.  *  Licensed under the Apache License, Version 2.0 (the "License");
  58.  *      you may not use this file except in compliance with the License.
  59.  *   
  60.  *  You may obtain a copy of the License at
  61.  *      http://www.apache.org/licenses/LICENSE-2.0
  62.  *  
  63.  *  Unless required by applicable law or agreed to in writing, software
  64.  *      distributed under the License is distributed on an "AS IS" BASIS,
  65.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  66.  *  
  67.  *  See the License for the specific language governing permissions and
  68.  *      limitations under the License.
  69.  */

  71. /**
  72.  * DomesticCollateralForeignForex demonstrates the construction and the usage of Domestic Currency
  73.  *  Collateralized Foreign Pay-out FX forward product, and the generation of its measures.
  74.  *  
  75.  * @author Lakshmi Krishnamurthy
  76.  */

  78. public class DomesticCollateralForeignForex {
  79.     public static final void main (
  80.         final String[] astrArgs)
  81.         throws Exception
  82.     {
  83.         /*
  84.          * Initialize the Credit Analytics Library
  85.          */

  87.         EnvManager.InitEnv ("");

  89.         JulianDate dtToday = DateUtil.Today();

  91.         String strDomesticCurrency = "USD";
  92.         String strForeignCurrency = "EUR";
  93.         String strMaturity = "1Y";
  94.         double dblFXFwdStrike = 0.984;
  95.         double dblForeignCollateralRate = 0.02;
  96.         double dblCollateralizedFXRate = 1.10;
  97.         double dblForeignRatesVolatility = 0.30;
  98.         double dblFXVolatility = 0.20;
  99.         double dblFXForeignRatesCorrelation = 0.50;

  101.         CurrencyPair cp = CurrencyPair.FromCode (strForeignCurrency + "/" + strDomesticCurrency);

  103.         MergedDiscountForwardCurve dcCcyDomesticCollatDomestic = ScenarioDiscountCurveBuilder.ExponentiallyCompoundedFlatRate (
  104.             dtToday,
  105.             strForeignCurrency,
  106.             dblForeignCollateralRate
  107.         );

  109.         FXCurve fxCurve = new FlatForwardFXCurve (
  110.             dtToday.julian(),
  111.             cp,
  112.             dblCollateralizedFXRate,
  113.             new int[] {dtToday.julian()},
  114.             new double[] {dblCollateralizedFXRate}
  115.         );

  117.         VolatilityCurve vcForeignFunding = new FlatForwardVolatilityCurve (
  118.             dtToday.julian(),
  119.             VolatilityLabel.Standard (CollateralLabel.Standard (strForeignCurrency)),
  120.             strDomesticCurrency,
  121.             new int[] {dtToday.julian()},
  122.             new double[] {dblForeignRatesVolatility}
  123.         );

  125.         VolatilityCurve vcFX = new FlatForwardVolatilityCurve (
  126.             dtToday.julian(),
  127.             VolatilityLabel.Standard (FXLabel.Standard (cp)),
  128.             strDomesticCurrency,
  129.             new int[] {dtToday.julian()},
  130.             new double[] {dblFXVolatility}
  131.         );

  133.         MergedDiscountForwardCurve dcCcyForeignCollatDomestic = new ForeignCollateralizedDiscountCurve (
  134.             strForeignCurrency,
  135.             dcCcyDomesticCollatDomestic,
  136.             fxCurve,
  137.             vcForeignFunding,
  138.             vcFX,
  139.             new FlatUnivariate (dblFXForeignRatesCorrelation)
  140.         );

  142.         CurveSurfaceQuoteContainer mktParams = MarketParamsBuilder.Create (
  143.             null,
  144.             null,
  145.             null,
  146.             null,
  147.             null,
  148.             null,
  149.             null
  150.         );

  152.         mktParams.setPayCurrencyCollateralCurrencyCurve (
  153.             strForeignCurrency,
  154.             strDomesticCurrency,
  155.             dcCcyForeignCollatDomestic
  156.         );

  158.         mktParams.setPayCurrencyCollateralCurrencyCurve (
  159.             strDomesticCurrency,
  160.             strDomesticCurrency,
  161.             dcCcyDomesticCollatDomestic
  162.         );

  164.         mktParams.setFXState (
  165.             ScenarioFXCurveBuilder.CubicPolynomialCurve (
  166.                 "FX::" + cp.code(),
  167.                 dtToday,
  168.                 cp,
  169.                 new String[] {"10Y"},
  170.                 new double[] {dblCollateralizedFXRate},
  171.                 dblCollateralizedFXRate
  172.             )
  173.         );

  175.         DomesticCollateralizedForeignForward dcff = new DomesticCollateralizedForeignForward (
  176.             cp,
  177.             dblFXFwdStrike,
  178.             dtToday.addTenor (strMaturity)
  179.         );

  181.         CaseInsensitiveTreeMap<Double> mapDCFF = dcff.value (
  182.             new ValuationParams (
  183.                 dtToday,
  184.                 dtToday,
  185.                 strDomesticCurrency
  186.             ),
  187.             null,
  188.             mktParams,
  189.             null
  190.         );

  192.         for (Map.Entry<String, Double> me : mapDCFF.entrySet())
  193.             System.out.println ("\t" + me.getKey() + " => " + me.getValue());
  194.     }
  195. }
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