EQMarginComparison.java
package org.drip.sample.simmvariance;
import java.util.HashMap;
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.margin.RiskClassAggregate;
import org.drip.simm.margin.RiskMeasureAggregate;
import org.drip.simm.parameters.RiskClassSensitivitySettings;
import org.drip.simm.product.BucketSensitivity;
import org.drip.simm.product.RiskClassSensitivity;
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.
*/
/**
* EQMarginComparison illustrates the Comparison of the Equity Margin Estimates using difference Schemes for
* Calculating the Position-Bucket Principal Component Co-variance. 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 EQMarginComparison
{
private static final void AddBucketRiskFactorSensitivity (
final Map<String, Map<String, Double>> bucketRiskFactorSensitivityMap,
final int bucketIndex,
final double notional,
final String[] equityArray)
{
Map<String, Double> riskFactorSensitivityMap = new CaseInsensitiveHashMap<Double>();
for (String equity : equityArray)
{
riskFactorSensitivityMap.put (
equity,
notional * (Math.random() - 0.5)
);
}
bucketRiskFactorSensitivityMap.put (
"" + bucketIndex,
riskFactorSensitivityMap
);
}
private static final Map<String, Map<String, Double>> BucketRiskFactorSensitivityMap (
final double notional)
throws Exception
{
Map<String, Map<String, Double>> bucketRiskFactorSensitivityMap =
new TreeMap<String, Map<String, Double>>();
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
-1,
notional,
new String[]
{
"BOEING ",
"LOCKHEED",
"RAND ",
"RAYTHEON",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
1,
notional,
new String[]
{
"ADP ",
"PSEANDG ",
"STAPLES ",
"U-HAUL ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
2,
notional,
new String[]
{
"CISCO ",
"DEERE ",
"HALIBTN ",
"VERIZON ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
3,
notional,
new String[]
{
"DUKE ",
"MONSANTO",
"MMM ",
"VEDANTA ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
4,
notional,
new String[]
{
"AMAZON ",
"GOLDMAN ",
"MORGAN ",
"REMAX ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
5,
notional,
new String[]
{
"ALDI ",
"INFOSYS ",
"OLLA ",
"RELIANCE",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
6,
notional,
new String[]
{
"GCC ",
"NOKIA ",
"SIEMENS ",
"VODAFONE",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
7,
notional,
new String[]
{
"ADIDAS ",
"BAYER ",
"BILLERTN",
"DE BEER ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
8,
notional,
new String[]
{
"NOKIA ",
"NOMURA ",
"QATARSOV",
"SOTHEBY ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
9,
notional,
new String[]
{
"AUTODESK",
"CALYPSO ",
"NUMERIX ",
"WEBLOGIC",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
10,
notional,
new String[]
{
"COGNIZAN",
"TATAMOTO",
"TOBLERON",
"TVS ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
11,
notional,
new String[]
{
"DJIA ",
"LEHMAN ",
"RUSSELL ",
"SANDP ",
}
);
AddBucketRiskFactorSensitivity (
bucketRiskFactorSensitivityMap,
12,
notional,
new String[]
{
"CBOE ",
"CITI ",
"RUSSELL ",
"VIX ",
}
);
return bucketRiskFactorSensitivityMap;
}
private static final void ISDABucketCovarianceMargin (
final String positionBucketCovarianceScheme,
final Map<String, BucketSensitivity> bucketDeltaSensitivityMap,
final Map<String, BucketSensitivity> bucketVegaSensitivityMap,
final RiskClassSensitivitySettings riskClassSensitivitySettings,
final MarginEstimationSettings marginEstimationSettings)
throws Exception
{
RiskClassAggregate riskClassAggregate = new RiskClassSensitivity (
new RiskMeasureSensitivity (bucketDeltaSensitivityMap),
new RiskMeasureSensitivity (bucketVegaSensitivityMap),
new RiskMeasureSensitivity (bucketVegaSensitivityMap)
).aggregate (
riskClassSensitivitySettings,
marginEstimationSettings
);
RiskMeasureAggregate deltaRiskMeasureAggregate = riskClassAggregate.deltaMargin();
RiskMeasureAggregate vegaRiskMeasureAggregate = riskClassAggregate.vegaMargin();
RiskMeasureAggregate curvatureRiskMeasureAggregate = riskClassAggregate.curvatureMargin();
System.out.println ("\t|----------------------------------------||");
System.out.println ("\t| " + positionBucketCovarianceScheme + " SBA MARGIN ||");
System.out.println ("\t|----------------------------------------||");
System.out.println ("\t| MEASURE => CORE | RESIDUAL | TOTAL ||");
System.out.println ("\t|----------------------------------------||");
System.out.println ("\t| DELTA => " +
FormatUtil.FormatDouble (Math.sqrt (deltaRiskMeasureAggregate.coreSBAVariance()), 5, 0, 1.) +
" | " +
FormatUtil.FormatDouble (Math.sqrt (deltaRiskMeasureAggregate.residualSBAVariance()), 5, 0, 1.) +
" |" +
FormatUtil.FormatDouble (deltaRiskMeasureAggregate.sba(), 5, 0, 1.) + " ||"
);
System.out.println ("\t| VEGA => " +
FormatUtil.FormatDouble (Math.sqrt (vegaRiskMeasureAggregate.coreSBAVariance()), 5, 0, 1.) +
" | " +
FormatUtil.FormatDouble (Math.sqrt (vegaRiskMeasureAggregate.residualSBAVariance()), 5, 0, 1.) +
" |" +
FormatUtil.FormatDouble (vegaRiskMeasureAggregate.sba(), 5, 0, 1.) + " ||"
);
System.out.println ("\t| CURVATURE => " +
FormatUtil.FormatDouble (Math.sqrt (curvatureRiskMeasureAggregate.coreSBAVariance()), 5, 0, 1.) +
" | " +
FormatUtil.FormatDouble (Math.sqrt (curvatureRiskMeasureAggregate.residualSBAVariance()), 5, 0, 1.) +
" |" +
FormatUtil.FormatDouble (curvatureRiskMeasureAggregate.sba(), 5, 0, 1.) + " ||"
);
System.out.println ("\t|----------------------------------------||");
System.out.println();
}
public static final void main (
final String[] inputArray)
throws Exception
{
EnvManager.InitEnv ("");
double notional = 100.;
int vegaDurationDays = 365;
RiskClassSensitivitySettings riskClassSensitivitySettings = RiskClassSensitivitySettings.ISDA_EQ_20
(vegaDurationDays);
Map<String, Map<String, Double>> bucketDeltaMap = BucketRiskFactorSensitivityMap (notional);
Map<String, BucketSensitivity> bucketDeltaSensitivityMap = new HashMap<String, BucketSensitivity>();
for (Map.Entry<String, Map<String, Double>> bucketDeltaMapEntry : bucketDeltaMap.entrySet())
{
bucketDeltaSensitivityMap.put (
bucketDeltaMapEntry.getKey(),
new BucketSensitivity (bucketDeltaMapEntry.getValue())
);
}
Map<String, Map<String, Double>> bucketVegaMap = BucketRiskFactorSensitivityMap (notional);
Map<String, BucketSensitivity> bucketVegaSensitivityMap = new HashMap<String, BucketSensitivity>();
for (Map.Entry<String, Map<String, Double>> bucketVegaMapEntry : bucketVegaMap.entrySet())
{
bucketVegaSensitivityMap.put (
bucketVegaMapEntry.getKey(),
new BucketSensitivity (bucketVegaMapEntry.getValue())
);
}
ISDABucketCovarianceMargin (
MarginEstimationSettings.POSITION_PRINCIPAL_COMPONENT_COVARIANCE_ESTIMATOR_ISDA,
bucketDeltaSensitivityMap,
bucketVegaSensitivityMap,
riskClassSensitivitySettings,
MarginEstimationSettings.CornishFischer
(MarginEstimationSettings.POSITION_PRINCIPAL_COMPONENT_COVARIANCE_ESTIMATOR_ISDA)
);
ISDABucketCovarianceMargin (
MarginEstimationSettings.POSITION_PRINCIPAL_COMPONENT_COVARIANCE_ESTIMATOR_FRTB,
bucketDeltaSensitivityMap,
bucketVegaSensitivityMap,
riskClassSensitivitySettings,
MarginEstimationSettings.CornishFischer
(MarginEstimationSettings.POSITION_PRINCIPAL_COMPONENT_COVARIANCE_ESTIMATOR_FRTB)
);
EnvManager.TerminateEnv();
}
}