CreditDefaultSwapIndex.java

package org.drip.sample.securitysuite;

import java.util.Map;

import org.drip.analytics.cashflow.CompositePeriod;
import org.drip.analytics.date.*;
import org.drip.analytics.support.CaseInsensitiveTreeMap;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.creator.MarketParamsBuilder;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.pricer.CreditPricerParams;
import org.drip.param.valuation.ValuationParams;
import org.drip.product.creator.CDSBuilder;
import org.drip.product.definition.CreditDefaultSwap;
import org.drip.service.env.EnvManager;
import org.drip.service.template.LatentMarketStateBuilder;
import org.drip.state.credit.CreditCurve;
import org.drip.state.discount.MergedDiscountForwardCurve;

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

/*!
 * Copyright (C) 2018 Lakshmi Krishnamurthy
 * Copyright (C) 2017 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.
 */

/**
 * CreditDefaultSwapIndex demonstrates the Analytics Calculation/Reconciliation for a CDX.
 * 
 * @author Lakshmi Krishnamurthy
 */

public class CreditDefaultSwapIndex {

    private static final MergedDiscountForwardCurve FundingCurve (
        final JulianDate dtSpot,
        final String strCurrency,
        final double dblBump)
        throws Exception
    {
        String[] astrDepositMaturityTenor = new String[] {
            "2D"
        };

        double[] adblDepositQuote = new double[] {
            0.013161 + dblBump // 2D
        };

        double[] adblFuturesQuote = new double[] {
            0.013225 + dblBump, // 98.6775
            0.014250 + dblBump, // 98.5750
            0.014750 + dblBump, // 98.5250
            0.015250 + dblBump, // 98.4750
            0.015750 + dblBump,  // 98.4250
            0.016500 + dblBump   // 98.3500
        };

        String[] astrFixFloatMaturityTenor = new String[] {
            "02Y",
            "03Y",
            "04Y",
            "05Y",
            "06Y",
            "07Y",
            "08Y",
            "09Y",
            "10Y",
            "11Y",
            "12Y",
            "15Y",
            "20Y",
            "25Y",
            "30Y",
            "40Y",
            "50Y"
        };

        double[] adblFixFloatQuote = new double[] {
            0.015540 + dblBump, //  2Y
            0.016423 + dblBump, //  3Y
            0.017209 + dblBump, //  4Y
            0.017980 + dblBump, //  5Y
            0.018743 + dblBump, //  6Y
            0.019455 + dblBump, //  7Y
            0.020080 + dblBump, //  8Y
            0.020651 + dblBump, //  9Y
            0.021195 + dblBump, // 10Y
            0.021651 + dblBump, // 11Y
            0.022065 + dblBump, // 12Y
            0.022952 + dblBump, // 15Y
            0.023825 + dblBump, // 20Y
            0.024175 + dblBump, // 25Y
            0.024347 + dblBump, // 30Y
            0.024225 + dblBump, // 40Y
            0.023968 + dblBump  // 50Y
        };

        return LatentMarketStateBuilder.SmoothFundingCurve (
            dtSpot,
            strCurrency,
            astrDepositMaturityTenor,
            adblDepositQuote,
            "ForwardRate",
            adblFuturesQuote,
            "ForwardRate",
            astrFixFloatMaturityTenor,
            adblFixFloatQuote,
            "SwapRate"
        );
    }

    private static final CreditCurve CreditCurve (
        final JulianDate dtSpot,
        final String strCreditCurve,
        final MergedDiscountForwardCurve mdfc,
        final double dblBump)
        throws Exception
    {
        return LatentMarketStateBuilder.CreditCurve (
            dtSpot,
            strCreditCurve,
            new String[] {
                 "6M",
                 "1Y",
                 "2Y",
                 "3Y",
                 "4Y",
                 "5Y",
                 "7Y",
                "10Y",
                "20Y",
                "30Y",
            },
            new double[] {
                392.509,    //  6M
                320.707,    //  1Y
                393.624,    //  2Y
                472.869,    //  3Y
                570.360,    //  4Y
                663.920,    //  5Y
                779.463,    //  7Y
                957.555,    // 10Y
                908.712,    // 20Y
                900.297,    // 30Y
            },
            new double[] {
                392.509,    //  6M
                320.707,    //  1Y
                393.624,    //  2Y
                472.869,    //  3Y
                570.360,    //  4Y
                663.920,    //  5Y
                779.463,    //  7Y
                957.555,    // 10Y
                908.712,    // 20Y
                900.297,    // 30Y
            },
            "FairPremium",
            mdfc
        );
    }

    public static final void main (
        final String[] astrArgs)
        throws Exception
    {
        EnvManager.InitEnv ("");

        JulianDate dtSpot = DateUtil.CreateFromYMD (
            2017,
            DateUtil.SEPTEMBER,
            17
        );

        JulianDate dtIssue = DateUtil.CreateFromYMD (
            2017,
            DateUtil.JUNE,
            20
        );

        String strCDXTenor = "5Y";
        String strCurrency = "USD";
        String strCDXName = "CDXNAHY";
        double dblCDXFixedCoupon = 0.05;

        CreditDefaultSwap cdx = CDSBuilder.CreateSNAC (
            dtIssue,
            strCDXTenor,
            dblCDXFixedCoupon,
            strCDXName
        );

        MergedDiscountForwardCurve mdfc = FundingCurve (
            dtSpot,
            strCurrency,
            0.
        );

        CreditCurve cc = CreditCurve (
            dtSpot,
            strCDXName,
            mdfc,
            0.
        );

        CurveSurfaceQuoteContainer csqc = MarketParamsBuilder.Credit (
            mdfc,
            cc
        );

        ValuationParams valParams = new ValuationParams (
            dtSpot,
            dtSpot,
            strCurrency
        );

        CreditPricerParams pricerParams = CreditPricerParams.Standard();

        CaseInsensitiveTreeMap<Double> mapOutput = cdx.value (
            valParams,
            pricerParams,
            csqc,
            null
        );

        System.out.println ("");

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

        for (Map.Entry<String, Double> me : mapOutput.entrySet())
            System.out.println ("\t | " + me.getKey() + " => " + me.getValue());

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

        System.out.println ("");

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

        for (CompositePeriod p : cdx.couponPeriods())
            System.out.println (
                "\t | " +
                DateUtil.YYYYMMDD (p.startDate()) + " | " +
                DateUtil.YYYYMMDD (p.endDate()) + " | " +
                DateUtil.YYYYMMDD (p.payDate()) + " | " +
                FormatUtil.FormatDouble (p.couponDCF(), 1, 3, 1.) + " | " +
                FormatUtil.FormatDouble (p.couponDCF(), 1, 2, 0.01 * 1.) + " | " +
                FormatUtil.FormatDouble (mdfc.df (p.payDate()), 1, 4, 1.) + " | " +
                FormatUtil.FormatDouble (cc.survival (p.payDate()), 1, 4, 1.) + " ||"
            );

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