RatesCurrencyVegaMargin20.java
package org.drip.sample.simmir;
import java.util.ArrayList;
import java.util.HashMap;
import java.util.List;
import java.util.Map;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
import org.drip.simm.margin.SensitivityAggregateIR;
import org.drip.simm.foundation.MarginEstimationSettings;
import org.drip.simm.margin.RiskMeasureAggregateIR;
import org.drip.simm.parameters.RiskMeasureSensitivitySettingsIR;
import org.drip.simm.product.BucketSensitivityIR;
import org.drip.simm.product.RiskFactorTenorSensitivity;
import org.drip.simm.product.RiskMeasureSensitivityIR;
/*
* -*- 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.
*/
/**
* RatesCurrencyVegaMargin20 illustrates the Computation of the SIMM 2.0 IR Vega Margin for a Currency
* Bucket's IR 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 RatesCurrencyVegaMargin20
{
private static final RiskFactorTenorSensitivity CurveTenorSensitivityMap (
final double notional)
throws Exception
{
Map<String, Double> tenorSensitivityMap = new HashMap<String, Double>();
tenorSensitivityMap.put (
"2W",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"1M",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"3M",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"6M",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"1Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"2Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"3Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"5Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"10Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"15Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"20Y",
notional * (Math.random() - 0.5)
);
tenorSensitivityMap.put (
"30Y",
notional * (Math.random() - 0.5)
);
return new RiskFactorTenorSensitivity (tenorSensitivityMap);
}
private static final void DisplayBucketSensitivityIR (
final String currency,
final BucketSensitivityIR bucketSensitivityIR)
throws Exception
{
Map<String, Double> oisTenorSensitivity = bucketSensitivityIR.oisTenorSensitivity().sensitivityMap();
Map<String, Double> libor1MTenorSensitivity =
bucketSensitivityIR.libor1MTenorSensitivity().sensitivityMap();
Map<String, Double> libor3MTenorSensitivity =
bucketSensitivityIR.libor3MTenorSensitivity().sensitivityMap();
Map<String, Double> libor6MTenorSensitivity =
bucketSensitivityIR.libor6MTenorSensitivity().sensitivityMap();
Map<String, Double> libor12MTenorSensitivity =
bucketSensitivityIR.libor12MTenorSensitivity().sensitivityMap();
Map<String, Double> primeTenorSensitivity =
bucketSensitivityIR.primeTenorSensitivity().sensitivityMap();
Map<String, Double> municipalTenorSensitivity =
bucketSensitivityIR.municipalTenorSensitivity().sensitivityMap();
System.out.println ("\t||-----------------------------------------------------------------------------------------||");
System.out.println ("\t|| " + currency + " INTEREST CURVE TENOR SENSITIVITY ||");
System.out.println ("\t||-----------------------------------------------------------------------------------------||");
System.out.println ("\t|| ||");
System.out.println ("\t|| L -> R: ||");
System.out.println ("\t|| - Curve Type ||");
System.out.println ("\t|| - OIS Tenor Vega Sensitivity ||");
System.out.println ("\t|| - LIBOR1M Tenor Vega Sensitivity ||");
System.out.println ("\t|| - LIBOR3M Tenor Vega Sensitivity ||");
System.out.println ("\t|| - LIBOR6M Tenor Vega Sensitivity ||");
System.out.println ("\t|| - LIBOR12M Tenor Vega Sensitivity ||");
System.out.println ("\t|| - PRIME Tenor Vega Sensitivity ||");
System.out.println ("\t|| - MUNICIPAL Tenor Vega Sensitivity ||");
System.out.println ("\t||-----------------------------------------------------------------------------------------||");
System.out.println ("\t|| OIS | LIBOR1M | LIBOR3M | LIBOR6M | LIBOR12M | PRIME | MUNICIPAL ||");
System.out.println ("\t||-----------------------------------------------------------------------------------------||");
for (String tenor : oisTenorSensitivity.keySet())
{
System.out.println (
"\t|| " +
FormatUtil.FormatDouble (oisTenorSensitivity.get (tenor), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (libor1MTenorSensitivity.get (tenor), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (libor3MTenorSensitivity.get (tenor), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (libor6MTenorSensitivity.get (tenor), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (libor12MTenorSensitivity.get (tenor), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (primeTenorSensitivity.get (tenor), 2, 2, 1.) + " | " +
FormatUtil.FormatDouble (municipalTenorSensitivity.get (tenor), 2, 2, 1.) + " ||"
);
}
System.out.println ("\t||-----------------------------------------------------------------------------------------||");
System.out.println();
}
private static final void DisplayRiskMeasureAggregate (
final RiskMeasureAggregateIR riskMeasureAggregateIR)
throws Exception
{
System.out.println ("\t||--------------------------------------------||");
System.out.println ("\t|| IR RISK CLASS AGGREGATE MARGIN METRICS ||");
System.out.println ("\t||--------------------------------------------||");
System.out.println (
"\t|| Core Vega SBA Variance => " +
FormatUtil.FormatDouble (riskMeasureAggregateIR.coreSBAVariance(), 10, 0, 1.) + " ||"
);
System.out.println (
"\t|| Residual Vega SBA Variance => " +
FormatUtil.FormatDouble (riskMeasureAggregateIR.residualSBAVariance(), 10, 0, 1.) + " ||"
);
System.out.println (
"\t|| Vega SBA => " +
FormatUtil.FormatDouble (riskMeasureAggregateIR.sba(), 10, 0, 1.) + " ||"
);
System.out.println ("\t||--------------------------------------------||");
System.out.println();
}
private static final void VegaMarginCovarianceEntry (
final String currency,
final SensitivityAggregateIR irSensitivityAggregate)
throws Exception
{
double marginCovariance_OIS_OIS = irSensitivityAggregate.marginCovariance_OIS_OIS();
double marginCovariance_OIS_LIBOR1M = irSensitivityAggregate.marginCovariance_OIS_LIBOR1M();
double marginCovariance_OIS_LIBOR3M = irSensitivityAggregate.marginCovariance_OIS_LIBOR3M();
double marginCovariance_OIS_LIBOR6M = irSensitivityAggregate.marginCovariance_OIS_LIBOR6M();
double marginCovariance_OIS_LIBOR12M = irSensitivityAggregate.marginCovariance_OIS_LIBOR12M();
double marginCovariance_OIS_PRIME = irSensitivityAggregate.marginCovariance_OIS_PRIME();
double marginCovariance_OIS_MUNICIPAL = irSensitivityAggregate.marginCovariance_OIS_MUNICIPAL();
double marginCovariance_LIBOR1M_LIBOR1M = irSensitivityAggregate.marginCovariance_LIBOR1M_LIBOR1M();
double marginCovariance_LIBOR1M_LIBOR3M = irSensitivityAggregate.marginCovariance_LIBOR1M_LIBOR3M();
double marginCovariance_LIBOR1M_LIBOR6M = irSensitivityAggregate.marginCovariance_LIBOR1M_LIBOR6M();
double marginCovariance_LIBOR1M_LIBOR12M = irSensitivityAggregate.marginCovariance_LIBOR1M_LIBOR12M();
double marginCovariance_LIBOR1M_PRIME = irSensitivityAggregate.marginCovariance_LIBOR1M_PRIME();
double marginCovariance_LIBOR1M_MUNICIPAL = irSensitivityAggregate.marginCovariance_LIBOR1M_MUNICIPAL();
double marginCovariance_LIBOR3M_LIBOR3M = irSensitivityAggregate.marginCovariance_LIBOR3M_LIBOR3M();
double marginCovariance_LIBOR3M_LIBOR6M = irSensitivityAggregate.marginCovariance_LIBOR3M_LIBOR6M();
double marginCovariance_LIBOR3M_LIBOR12M = irSensitivityAggregate.marginCovariance_LIBOR3M_LIBOR12M();
double marginCovariance_LIBOR3M_PRIME = irSensitivityAggregate.marginCovariance_LIBOR3M_PRIME();
double marginCovariance_LIBOR3M_MUNICIPAL = irSensitivityAggregate.marginCovariance_LIBOR3M_MUNICIPAL();
double marginCovariance_LIBOR6M_LIBOR6M = irSensitivityAggregate.marginCovariance_LIBOR6M_LIBOR6M();
double marginCovariance_LIBOR6M_LIBOR12M = irSensitivityAggregate.marginCovariance_LIBOR6M_LIBOR12M();
double marginCovariance_LIBOR6M_PRIME = irSensitivityAggregate.marginCovariance_LIBOR6M_PRIME();
double marginCovariance_LIBOR6M_MUNICIPAL = irSensitivityAggregate.marginCovariance_LIBOR6M_MUNICIPAL();
double marginCovariance_LIBOR12M_LIBOR12M = irSensitivityAggregate.marginCovariance_LIBOR12M_LIBOR12M();
double marginCovariance_LIBOR12M_PRIME = irSensitivityAggregate.marginCovariance_LIBOR12M_PRIME();
double marginCovariance_LIBOR12M_MUNICIPAL = irSensitivityAggregate.marginCovariance_LIBOR12M_MUNICIPAL();
double marginCovariance_PRIME_PRIME = irSensitivityAggregate.marginCovariance_PRIME_PRIME();
double marginCovariance_PRIME_MUNICIPAL = irSensitivityAggregate.marginCovariance_PRIME_MUNICIPAL();
double marginCovariance_MUNICIPAL_MUNICIPAL = irSensitivityAggregate.marginCovariance_MUNICIPAL_MUNICIPAL();
System.out.println ("\t||-------------------------------------||");
System.out.println ("\t|| " + currency + " RISK FACTOR MARGIN COVARIANCE ||");
System.out.println ("\t||-------------------------------------||");
System.out.println ("\t|| ||");
System.out.println ("\t|| - L -> R: ||");
System.out.println ("\t|| - Curve #1 ||");
System.out.println ("\t|| - Curve #2 ||");
System.out.println ("\t|| - Covariance ||");
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| OIS - OIS => " +
FormatUtil.FormatDouble (marginCovariance_OIS_OIS, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| OIS - LIBOR1M => " +
FormatUtil.FormatDouble (marginCovariance_OIS_LIBOR1M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| OIS - LIBOR3M => " +
FormatUtil.FormatDouble (marginCovariance_OIS_LIBOR3M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| OIS - LIBOR6M => " +
FormatUtil.FormatDouble (marginCovariance_OIS_LIBOR6M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| OIS - LIBOR12M => " +
FormatUtil.FormatDouble (marginCovariance_OIS_LIBOR12M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| OIS - PRIME => " +
FormatUtil.FormatDouble (marginCovariance_OIS_PRIME, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| OIS - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_OIS_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| LIBOR1M - LIBOR1M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR1M_LIBOR1M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR1M - LIBOR3M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR1M_LIBOR3M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR1M - LIBOR6M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR1M_LIBOR6M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR1M - LIBOR12M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR1M_LIBOR12M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR1M - PRIME => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR1M_PRIME, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR1M - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR1M_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| LIBOR3M - LIBOR3M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR3M_LIBOR3M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR3M - LIBOR6M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR3M_LIBOR6M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR3M - LIBOR12M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR3M_LIBOR12M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR3M - PRIME => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR3M_PRIME, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR3M - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR3M_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| LIBOR6M - LIBOR6M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR6M_LIBOR6M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR6M - LIBOR12M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR6M_LIBOR12M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR6M - PRIME => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR6M_PRIME, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR6M - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR6M_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| LIBOR12M - LIBOR12M => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR12M_LIBOR12M, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR12M - PRIME => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR12M_PRIME, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| LIBOR12M - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_LIBOR12M_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| PRIME - PRIME => " +
FormatUtil.FormatDouble (marginCovariance_PRIME_PRIME, 9, 0, 1.) + " ||"
);
System.out.println (
"\t|| PRIME - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_PRIME_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println (
"\t|| MUNICIPAL - MUNICIPAL => " +
FormatUtil.FormatDouble (marginCovariance_MUNICIPAL_MUNICIPAL, 9, 0, 1.) + " ||"
);
System.out.println ("\t||-------------------------------------||");
System.out.println();
}
public static final void main (
final String[] inputArray)
throws Exception
{
EnvManager.InitEnv ("");
double notional = 100.;
String currency = "USD";
List<String> currencyList = new ArrayList<String>();
currencyList.add (currency);
MarginEstimationSettings marginEstimationSettings = MarginEstimationSettings.CornishFischer
(MarginEstimationSettings.POSITION_PRINCIPAL_COMPONENT_COVARIANCE_ESTIMATOR_ISDA);
RiskMeasureSensitivitySettingsIR riskMeasureSensitivitySettingsIR =
RiskMeasureSensitivitySettingsIR.ISDA_VEGA_20 (currencyList);
BucketSensitivityIR bucketSensitivityIR = new BucketSensitivityIR (
CurveTenorSensitivityMap (notional),
CurveTenorSensitivityMap (notional),
CurveTenorSensitivityMap (notional),
CurveTenorSensitivityMap (notional),
CurveTenorSensitivityMap (notional),
CurveTenorSensitivityMap (notional),
CurveTenorSensitivityMap (notional)
);
DisplayBucketSensitivityIR (
currency,
bucketSensitivityIR
);
Map<String, BucketSensitivityIR> bucketSensitivityMap = new HashMap<String, BucketSensitivityIR>();
bucketSensitivityMap.put (
currency,
bucketSensitivityIR
);
RiskMeasureSensitivityIR riskClassSensitivityIR = new RiskMeasureSensitivityIR
(bucketSensitivityMap);
RiskMeasureAggregateIR riskMeasureAggregateIR = riskClassSensitivityIR.linearAggregate (
riskMeasureSensitivitySettingsIR,
marginEstimationSettings
);
VegaMarginCovarianceEntry (
currency,
riskMeasureAggregateIR.bucketAggregateMap().get (currency).sensitivityAggregate()
);
DisplayRiskMeasureAggregate (riskMeasureAggregateIR);
EnvManager.TerminateEnv();
}
}