FXDeltaMargin20.java
package org.drip.sample.simmfx;
import java.util.Map;
import java.util.TreeMap;
import org.drip.analytics.support.CaseInsensitiveHashMap;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
import org.drip.simm.foundation.MarginEstimationSettings;
import org.drip.simm.fx.FXRiskThresholdContainer20;
import org.drip.simm.margin.BucketAggregate;
import org.drip.simm.margin.RiskMeasureAggregate;
import org.drip.simm.parameters.RiskMeasureSensitivitySettings;
import org.drip.simm.product.BucketSensitivity;
import org.drip.simm.product.RiskMeasureSensitivity;
/*
* -*- 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.
*/
/**
* FXDeltaMargin20 demonstrates the Construction of a Portfolio of FX Delta Sensitivities and their eventual
* SIMM 2.0 Margin Computation. 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 FXDeltaMargin20
{
private static final Map<String, Map<String, Double>> CategorySensitivityMap (
final String[] currencyArray,
final double notional)
throws Exception
{
Map<String, Map<String, Double>> currencySentivityMap = new TreeMap<String, Map<String, Double>>();
for (String currency : currencyArray)
{
int categoryIndex = FXRiskThresholdContainer20.CurrencyCategory (currency);
if (currencySentivityMap.containsKey ("" + categoryIndex))
{
Map<String, Double> riskFactorSensitivityMap = currencySentivityMap.get ("" + categoryIndex);
riskFactorSensitivityMap.put (
currency,
notional * (Math.random() - 0.5)
);
}
else
{
Map<String, Double> riskFactorSensitivityMap = new CaseInsensitiveHashMap<Double>();
riskFactorSensitivityMap.put (
currency,
notional * (Math.random() - 0.5)
);
currencySentivityMap.put (
"" + categoryIndex,
riskFactorSensitivityMap
);
}
}
return currencySentivityMap;
}
private static final void CategoryRiskFactorSensitivity (
final Map<String, Map<String, Double>> categorySensitivityMap)
throws Exception
{
System.out.println ("\t|-------------------||");
System.out.println ("\t| RISK FACTOR DELTA ||");
System.out.println ("\t|-------------------||");
System.out.println ("\t| L -> R: ||");
System.out.println ("\t| - Currency ||");
System.out.println ("\t| - Category ||");
System.out.println ("\t| - Delta ||");
System.out.println ("\t|-------------------||");
for (Map.Entry<String, Map<String, Double>> categorySensitivityMapEntry :
categorySensitivityMap.entrySet())
{
String categoryIndex = categorySensitivityMapEntry.getKey();
Map<String, Double> riskFactorSensitivityMap = categorySensitivityMapEntry.getValue();
for (Map.Entry<String, Double> riskFactorSensitivityMapEntry :
riskFactorSensitivityMap.entrySet())
{
String currency = riskFactorSensitivityMapEntry.getKey();
double riskFactorSensitivity = riskFactorSensitivityMapEntry.getValue();
System.out.println (
"\t| " +
currency + " => " +
categoryIndex + " | " +
FormatUtil.FormatDouble(riskFactorSensitivity, 2, 2, 1.) + " ||"
);
}
}
System.out.println ("\t|-------------------||");
System.out.println();
}
public static final void main (
final String[] inputs)
throws Exception
{
EnvManager.InitEnv ("");
double notional = 100.;
String[] currencyArray =
{
"USD",
"EUR",
"JPY",
"GBP",
"AUD",
"CHF",
"CAD",
"BRL",
"CNY",
"HKD",
"INR",
"KRW",
"MXN",
"NOK",
"NZD",
"RUB",
"SEK",
"SGD",
"TRY",
"ZAR",
"PKR",
"IDR"
};
MarginEstimationSettings marginEstimationSettings = MarginEstimationSettings.CornishFischer
(MarginEstimationSettings.POSITION_PRINCIPAL_COMPONENT_COVARIANCE_ESTIMATOR_ISDA);
RiskMeasureSensitivitySettings riskMeasureSensitivitySettings =
RiskMeasureSensitivitySettings.ISDA_FX_DELTA_20();
Map<String, Map<String, Double>> categorySensitivityMap = CategorySensitivityMap (
currencyArray,
notional
);
CategoryRiskFactorSensitivity (categorySensitivityMap);
Map<String, BucketSensitivity> bucketSensitivityMap = new TreeMap<String, BucketSensitivity>();
System.out.println ("\t|--------------------||");
System.out.println ("\t| BUCKET AGGREGATE ||");
System.out.println ("\t|--------------------||");
System.out.println ("\t| L -> R: ||");
System.out.println ("\t| - Bucket Index ||");
System.out.println ("\t| - Bucket Margin ||");
System.out.println ("\t| - Bucket Delta ||");
System.out.println ("\t|--------------------||");
for (Map.Entry<String, Map<String, Double>> categorySensitivityMapEntry :
categorySensitivityMap.entrySet())
{
String bucketIndex = categorySensitivityMapEntry.getKey();
BucketSensitivity bucketSensitivity = new BucketSensitivity
(categorySensitivityMapEntry.getValue());
bucketSensitivityMap.put (
"" + bucketIndex,
bucketSensitivity
);
BucketAggregate bucketAggregate = bucketSensitivity.aggregate
(riskMeasureSensitivitySettings.bucketSettingsMap().get (bucketIndex));
System.out.println ("\t| " +
bucketIndex + " => " +
FormatUtil.FormatDouble (Math.sqrt (bucketAggregate.sensitivityMarginVariance()), 4, 0, 1.) + " | " +
FormatUtil.FormatDouble (bucketAggregate.cumulativeSensitivityMargin(), 4, 0, 1.) + " ||"
);
}
System.out.println ("\t|--------------------||");
System.out.println();
RiskMeasureAggregate riskMeasureAggregate = new
RiskMeasureSensitivity (bucketSensitivityMap).linearAggregate (
riskMeasureSensitivitySettings,
marginEstimationSettings
);
System.out.println ("\t|--------------------------------------------------||");
System.out.println ("\t| SBA BASED DELTA MARGIN ||");
System.out.println ("\t|--------------------------------------------------||");
System.out.println ("\t| ||");
System.out.println ("\t| L -> R: ||");
System.out.println ("\t| ||");
System.out.println ("\t| - Core Delta SBA Margin ||");
System.out.println ("\t| - Residual Delta SBA Margin ||");
System.out.println ("\t| - SBA Delta Margin ||");
System.out.println ("\t|--------------------------------------------------||");
System.out.println ("\t| DELTA MARGIN COMPONENTS => " +
FormatUtil.FormatDouble (Math.sqrt (riskMeasureAggregate.coreSBAVariance()), 4, 0, 1.) +
" | " +
FormatUtil.FormatDouble (Math.sqrt (riskMeasureAggregate.residualSBAVariance()), 4, 0, 1.) +
" | " +
FormatUtil.FormatDouble (riskMeasureAggregate.sba(), 4, 0, 1.) + " ||"
);
System.out.println ("\t|--------------------------------------------------||");
System.out.println();
EnvManager.TerminateEnv();
}
}