CreditNonQualifyingBucketVegaMarginFlow20.java

package org.drip.sample.simmcrnq;

import java.util.HashMap;
import java.util.Map;

import org.drip.analytics.support.CaseInsensitiveHashMap;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
import org.drip.simm.margin.BucketAggregateCR;
import org.drip.simm.margin.RiskMeasureAggregateCR;
import org.drip.simm.parameters.BucketSensitivitySettingsCR;
import org.drip.simm.parameters.BucketVegaSettingsCR;
import org.drip.simm.product.BucketSensitivityCR;
import org.drip.simm.product.RiskFactorTenorSensitivity;

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

/*!
 * Copyright (C) 2018 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.
 */

/**
 * CreditNonQualifyingBucketVegaMarginFlow20 illustrates the Steps in the Computation of the SIMM 2.0 Credit
 *  Non-Qualifying Vega Margin for a single CR Bucket's Exposure Sensitivities. The References are:
 *  
 *  - Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Credit Exposure in the Presence of Initial Margin,
 *      https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2806156, eSSRN.
 *  
 *  - Albanese, C., S. Caenazzo, and O. Frankel (2017): Regression Sensitivities for Initial Margin
 *      Calculations, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2763488, eSSRN.
 *  
 *  - Anfuso, F., D. Aziz, P. Giltinan, and K. Loukopoulus (2017): A Sound Modeling and Back-testing
 *      Framework for Forecasting Initial Margin Requirements,
 *      https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2716279, eSSRN.
 *  
 *  - Caspers, P., P. Giltinan, R. Lichters, and N. Nowaczyk (2017): Forecasting Initial Margin Requirements
 *      - A Model Evaluation https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2911167, eSSRN.
 *  
 *  - International Swaps and Derivatives Association (2017): SIMM v2.0 Methodology,
 *      https://www.isda.org/a/oFiDE/isda-simm-v2.pdf.
 * 
 * @author Lakshmi Krishnamurthy
 */

public class CreditNonQualifyingBucketVegaMarginFlow20
{

    private static final void AddTenorSensitivity (
        final Map<String, Double> tenorSensitivityMap,
        final double notional,
        final String tenor)
        throws Exception
    {
        if (tenorSensitivityMap.containsKey (tenor))
        {
            tenorSensitivityMap.put (
                tenor,
                tenorSensitivityMap.get (tenor) + notional * (Math.random() - 0.5)
            );
        }
        else
        {
            tenorSensitivityMap.put (
                tenor,
                notional * (Math.random() - 0.5)
            );
        }
    }

    private static final RiskFactorTenorSensitivity CurveTenorSensitivityMap (
        final double notional)
        throws Exception
    {
        Map<String, Double> tenorSensitivityMap = new HashMap<String, Double>();

        AddTenorSensitivity (
            tenorSensitivityMap,
            notional,
            "1Y"
        );

        AddTenorSensitivity (
            tenorSensitivityMap,
            notional,
            "2Y"
        );

        AddTenorSensitivity (
            tenorSensitivityMap,
            notional,
            "3Y"
        );

        AddTenorSensitivity (
            tenorSensitivityMap,
            notional,
            "5Y"
        );

        AddTenorSensitivity (
            tenorSensitivityMap,
            notional,
            "10Y"
        );

        return new RiskFactorTenorSensitivity (tenorSensitivityMap);
    }

    private static final void DisplayComponentTenorSensitivity (
        final String componentName,
        final RiskFactorTenorSensitivity tenorSensitivityMap)
        throws Exception
    {
        System.out.println();

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

        System.out.println ("\t|  " + componentName + " VEGA    ||");

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

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

        System.out.println ("\t|  L -> R:     ||");

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

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

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

        for (Map.Entry<String, Double> tenorSensitivityEntry :
            tenorSensitivityMap.sensitivityMap().entrySet())
        {
            System.out.println (
                "\t| " +
                tenorSensitivityEntry.getKey() + " => " +
                FormatUtil.FormatDouble (tenorSensitivityEntry.getValue(), 2, 2, 1.) + " ||"
            );
        }

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

        System.out.println();
    }

    private static final void ComponentRiskFactorTenorSensitivity (
        final Map<String, RiskFactorTenorSensitivity> tenorSensitivityMap,
        final double notional,
        final String componentName)
        throws Exception
    {
        RiskFactorTenorSensitivity ustRiskFactorSensitivity = CurveTenorSensitivityMap (notional);

        tenorSensitivityMap.put (
            componentName,
            ustRiskFactorSensitivity
        );

        DisplayComponentTenorSensitivity (
            componentName,
            ustRiskFactorSensitivity
        );
    }

    private static final void DisplayRiskMeasureAggregate (
        final RiskMeasureAggregateCR riskMeasureAggregateCR)
        throws Exception
    {
        System.out.println ("\t||--------------------------------------------||");

        System.out.println ("\t||   CR RISK CLASS AGGREGATE MARGIN METRICS   ||");

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

        System.out.println (
            "\t|| Core Vega SBA Variance      => " +
            FormatUtil.FormatDouble (riskMeasureAggregateCR.coreSBAVariance(), 10, 0, 1.) + " ||"
        );

        System.out.println (
            "\t|| Residual Vega SBA Variance  => " +
            FormatUtil.FormatDouble (riskMeasureAggregateCR.residualSBAVariance(), 10, 0, 1.) + " ||"
        );

        System.out.println (
            "\t|| Vega SBA                    => " +
            FormatUtil.FormatDouble (riskMeasureAggregateCR.sba(), 10, 0, 1.) + " ||"
        );

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

        System.out.println();
    }

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

        int bucketIndex = 1;
        double notional = 100.;
        String[] componentNameArray = new String[]
        {
            "UST",
            "BND",
            "FRT",
            "ITA",
            "ESP",
            "GLT",
        };

        Map<String, RiskFactorTenorSensitivity> tenorSensitivityMap = new
            CaseInsensitiveHashMap<RiskFactorTenorSensitivity>();

        for (String componentName : componentNameArray)
        {
            ComponentRiskFactorTenorSensitivity (
                tenorSensitivityMap,
                notional,
                componentName
            );
        }

        BucketSensitivityCR bucketSensitivityCR = new BucketSensitivityCR (tenorSensitivityMap);

        DisplayComponentTenorSensitivity (
            "NET",
            bucketSensitivityCR.cumulativeTenorSensitivityMap()
        );

        BucketSensitivitySettingsCR bucketSensitivitySettingsCR = BucketVegaSettingsCR.ISDA_CRNQ_20
            (bucketIndex);

        BucketAggregateCR bucketAggregateCR = bucketSensitivityCR.aggregate (bucketSensitivitySettingsCR);

        Map<String, BucketAggregateCR> bucketAggregateCRMap = new HashMap<String, BucketAggregateCR>();

        bucketAggregateCRMap.put (
            "" + bucketIndex,
            bucketAggregateCR
        );

        RiskMeasureAggregateCR riskMeasureAggregateCR = new RiskMeasureAggregateCR (
            bucketAggregateCRMap,
            bucketAggregateCR.sensitivityMarginVariance(),
            0.
        );

        DisplayRiskMeasureAggregate (riskMeasureAggregateCR);

        EnvManager.TerminateEnv();
    }
}