DomesticCollateralForeignForexAnalysis.java
- package org.drip.sample.piterbarg2012;
- import org.drip.analytics.date.*;
- import org.drip.analytics.support.CaseInsensitiveTreeMap;
- import org.drip.function.r1tor1.*;
- import org.drip.param.creator.*;
- import org.drip.param.market.CurveSurfaceQuoteContainer;
- import org.drip.param.valuation.*;
- import org.drip.product.fx.DomesticCollateralizedForeignForward;
- import org.drip.product.params.CurrencyPair;
- import org.drip.service.env.EnvManager;
- import org.drip.state.creator.*;
- import org.drip.state.curve.ForeignCollateralizedDiscountCurve;
- import org.drip.state.discount.MergedDiscountForwardCurve;
- import org.drip.state.fx.FXCurve;
- import org.drip.state.identifier.*;
- import org.drip.state.nonlinear.*;
- import org.drip.state.volatility.VolatilityCurve;
- /*
- * -*- 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.
- */
- /**
- * DomesticCollateralForeignForexAnalysis contains an analysis of the correlation and volatility impact on the
- * price of a Domestic Collateralized ForeignPay-out Forex Contract.
- *
- * @author Lakshmi Krishnamurthy
- */
- public class DomesticCollateralForeignForexAnalysis {
- public static final void main (
- final String[] astrArgs)
- throws Exception
- {
- /*
- * Initialize the Credit Analytics Library
- */
- EnvManager.InitEnv ("");
- JulianDate dtToday = DateUtil.Today();
- String strDomesticCurrency = "USD";
- String strForeignCurrency = "EUR";
- String strMaturity = "1Y";
- double dblFXFwdStrike = 0.984;
- double dblDomesticCollateralRate = 0.02;
- double dblCollateralizedFXRate = 1.10;
- CurrencyPair cp = CurrencyPair.FromCode (strForeignCurrency + "/" + strDomesticCurrency);
- MergedDiscountForwardCurve dcCcyDomesticCollatDomestic = ScenarioDiscountCurveBuilder.ExponentiallyCompoundedFlatRate (
- dtToday,
- strDomesticCurrency,
- dblDomesticCollateralRate
- );
- ValuationParams valParams = new ValuationParams (
- dtToday,
- dtToday,
- strDomesticCurrency
- );
- FXCurve fxCurve = new FlatForwardFXCurve (
- dtToday.julian(),
- cp,
- dblCollateralizedFXRate,
- new int[] {dtToday.julian()},
- new double[] {dblCollateralizedFXRate}
- );
- VolatilityCurve vcForeignFunding = new FlatForwardVolatilityCurve (
- dtToday.julian(),
- VolatilityLabel.Standard (CollateralLabel.Standard (strForeignCurrency)),
- strDomesticCurrency,
- new int[] {dtToday.julian()},
- new double[] {0.}
- );
- VolatilityCurve vcFX = new FlatForwardVolatilityCurve (
- dtToday.julian(),
- VolatilityLabel.Standard (FXLabel.Standard (cp)),
- strDomesticCurrency,
- new int[] {dtToday.julian()},
- new double[] {0.}
- );
- MergedDiscountForwardCurve dcCcyForeignCollatDomestic = new ForeignCollateralizedDiscountCurve (
- strForeignCurrency,
- dcCcyDomesticCollatDomestic,
- fxCurve,
- vcForeignFunding,
- vcFX,
- new FlatUnivariate (0.)
- );
- CurveSurfaceQuoteContainer mktParams = MarketParamsBuilder.Create (
- null,
- null,
- null,
- null,
- null,
- null,
- null
- );
- mktParams.setPayCurrencyCollateralCurrencyCurve (
- strForeignCurrency,
- strDomesticCurrency,
- dcCcyForeignCollatDomestic
- );
- mktParams.setPayCurrencyCollateralCurrencyCurve (
- strDomesticCurrency,
- strDomesticCurrency,
- dcCcyDomesticCollatDomestic
- );
- mktParams.setFXState (
- ScenarioFXCurveBuilder.CubicPolynomialCurve (
- "FX::" + cp.code(),
- dtToday,
- cp,
- new String[] {"10Y"},
- new double[] {dblCollateralizedFXRate},
- dblCollateralizedFXRate
- )
- );
- DomesticCollateralizedForeignForward dcff = new DomesticCollateralizedForeignForward (
- cp,
- dblFXFwdStrike,
- dtToday.addTenor (strMaturity)
- );
- CaseInsensitiveTreeMap<Double> mapBaseValue = dcff.value (
- new ValuationParams (
- dtToday,
- dtToday,
- strDomesticCurrency
- ),
- null,
- mktParams,
- null
- );
- double dblBaselinePrice = mapBaseValue.get ("Price");
- double dblBaselineParForward = mapBaseValue.get ("ParForward");
- double[] adblForeignRatesVolatility = new double[] {
- 0.1, 0.2, 0.3, 0.4, 0.5
- };
- double[] adblFXVolatility = new double[] {
- 0.10, 0.15, 0.20, 0.25, 0.30
- };
- double[] adblFXForeignRatesCorrelation = new double[] {
- -0.99, -0.50, 0.00, 0.50, 0.99
- };
- System.out.println ("\tPrinting the Domestic Collateralized Foreign Forex Output in Order (Left -> Right):");
- System.out.println ("\t\tPrice (%)");
- System.out.println ("\t\tPrice Difference (%)");
- System.out.println ("\t\tPar Forward (abs)");
- System.out.println ("\t\tPar Forward Difference (abs)");
- System.out.println ("\t-------------------------------------------------------------");
- System.out.println ("\t-------------------------------------------------------------");
- for (double dblForeignRatesVolatility : adblForeignRatesVolatility) {
- for (double dblFXVolatility : adblFXVolatility) {
- for (double dblFXForeignRatesCorrelation : adblFXForeignRatesCorrelation) {
- dcCcyForeignCollatDomestic = new ForeignCollateralizedDiscountCurve (
- strForeignCurrency,
- dcCcyDomesticCollatDomestic,
- fxCurve,
- new FlatForwardVolatilityCurve (
- dtToday.julian(),
- VolatilityLabel.Standard (CollateralLabel.Standard (strForeignCurrency)),
- strDomesticCurrency,
- new int[] {dtToday.julian()},
- new double[] {dblForeignRatesVolatility}
- ),
- new FlatForwardVolatilityCurve (
- dtToday.julian(),
- VolatilityLabel.Standard (FXLabel.Standard (cp)),
- strDomesticCurrency,
- new int[] {dtToday.julian()},
- new double[] {dblFXVolatility}
- ),
- new FlatUnivariate (dblFXForeignRatesCorrelation)
- );
- mktParams.setPayCurrencyCollateralCurrencyCurve (
- strForeignCurrency,
- strDomesticCurrency,
- dcCcyForeignCollatDomestic
- );
- CaseInsensitiveTreeMap<Double> mapDCFF = dcff.value (
- valParams,
- null,
- mktParams,
- null
- );
- double dblPrice = mapDCFF.get ("Price");
- double dblParForward = mapDCFF.get ("ParForward");
- System.out.println ("\t[" +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblForeignRatesVolatility, 2, 0, 100.) + "%," +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblFXVolatility, 2, 0, 100.) + "%," +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblFXForeignRatesCorrelation, 2, 0, 100.) + "%] = " +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblPrice, 2, 2, 100.) + " | " +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblPrice - dblBaselinePrice, 2, 2, 100.) + " | " +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblParForward, 1, 4, 1.) + " | " +
- org.drip.numerical.common.FormatUtil.FormatDouble (dblParForward - dblBaselineParForward, 1, 4, 1.)
- );
- }
- }
- }
- }
- }