ZeroCouponBullet3.java

package org.drip.sample.sovereign;

import org.drip.analytics.date.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.creator.MarketParamsBuilder;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.valuation.*;
import org.drip.product.creator.BondBuilder;
import org.drip.product.credit.BondComponent;
import org.drip.product.definition.*;
import org.drip.service.env.EnvManager;
import org.drip.service.template.*;
import org.drip.state.discount.MergedDiscountForwardCurve;
import org.drip.state.govvie.GovvieCurve;

/*
 * -*- 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.
 */

/**
 * ZeroCouponBullet3 demonstrates Non-EOS Zero Coupon Multi-flavor Bond Pricing and Relative Value Measure
 *  Generation Functionality.
 * 
 * @author Lakshmi Krishnamurthy
 */

public class ZeroCouponBullet3 {

	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[] {
			0.0111956 + dblBump // 2D
		};

		double[] adblFuturesQuote = new double[] {
			0.011375 + dblBump,	// 98.8625
			0.013350 + dblBump,	// 98.6650
			0.014800 + dblBump,	// 98.5200
			0.016450 + dblBump,	// 98.3550
			0.017850 + dblBump,	// 98.2150
			0.019300 + dblBump	// 98.0700
		};

		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[] {
			0.017029 + dblBump, //  2Y
			0.019354 + dblBump, //  3Y
			0.021044 + dblBump, //  4Y
			0.022291 + dblBump, //  5Y
			0.023240 + dblBump, //  6Y
			0.024025 + dblBump, //  7Y
			0.024683 + dblBump, //  8Y
			0.025243 + dblBump, //  9Y
			0.025720 + dblBump, // 10Y
			0.026130 + dblBump, // 11Y
			0.026495 + dblBump, // 12Y
			0.027230 + dblBump, // 15Y
			0.027855 + dblBump, // 20Y
			0.028025 + dblBump, // 25Y
			0.028028 + dblBump, // 30Y
			0.027902 + dblBump, // 40Y
			0.027655 + dblBump  // 50Y
		};

		MergedDiscountForwardCurve dcFunding = LatentMarketStateBuilder.SmoothFundingCurve (
			dtSpot,
			strCurrency,
			astrDepositMaturityTenor,
			adblDepositQuote,
			"ForwardRate",
			adblFuturesQuote,
			"ForwardRate",
			astrFixFloatMaturityTenor,
			adblFixFloatQuote,
			"SwapRate"
		);

		Component[] aDepositComp = OTCInstrumentBuilder.FundingDeposit (
			dtSpot,
			strCurrency,
			astrDepositMaturityTenor
		);

		Component[] aFuturesComp = ExchangeInstrumentBuilder.ForwardRateFuturesPack (
			dtSpot,
			adblFuturesQuote.length,
			strCurrency
		);

		Component[] aFixFloatComp = OTCInstrumentBuilder.FixFloatStandard (
			dtSpot,
			strCurrency,
			"ALL",
			astrFixFloatMaturityTenor,
			"MAIN",
			0.
		);

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

		CurveSurfaceQuoteContainer csqc = MarketParamsBuilder.Create (
			dcFunding,
			null,
			null,
			null,
			null,
			null,
			null
		);

		System.out.println();

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

		System.out.println ("\t|        DEPOSIT INPUT vs. CALC       ||");

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

		for (int i = 0; i < aDepositComp.length; ++i)
			System.out.println ("\t| [" + aDepositComp[i].maturityDate() + "] =" +
				FormatUtil.FormatDouble (aDepositComp[i].measureValue (
					valParams,
					null,
					csqc,
					null,
					"ForwardRate"
				), 1, 6, 1.) + " |" +
				FormatUtil.FormatDouble (adblDepositQuote[i], 1, 6, 1.) + " ||"
			);

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

		System.out.println();

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

		System.out.println ("\t|        FUTURES INPUT vs. CALC       ||");

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

		for (int i = 0; i < aFuturesComp.length; ++i)
			System.out.println ("\t| [" + aFuturesComp[i].maturityDate() + "] =" +
				FormatUtil.FormatDouble (aFuturesComp[i].measureValue (
					valParams,
					null,
					csqc,
					null,
					"ForwardRate"
				), 1, 6, 1.) + " |" +
				FormatUtil.FormatDouble (adblFuturesQuote[i], 1, 6, 1.) + " ||"
			);

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

		System.out.println();

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

		System.out.println ("\t|          FIX-FLOAT INPUTS vs CALIB             ||");

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

		for (int i = 0; i < aFixFloatComp.length; ++i)
			System.out.println ("\t| [" + aFixFloatComp[i].maturityDate() + "] =" +
				FormatUtil.FormatDouble (aFixFloatComp[i].measureValue (
					valParams,
					null,
					csqc,
					null,
					"CalibSwapRate"
				), 1, 6, 1.) + " |" +
				FormatUtil.FormatDouble (adblFixFloatQuote[i], 1, 6, 1.) + " |" +
				FormatUtil.FormatDouble (aFixFloatComp[i].measureValue (
					valParams,
					null,
					csqc,
					null,
					"FairPremium"
				), 1, 6, 1.) + " ||"
			);

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

		System.out.println();

		return dcFunding;
	}

	private static final GovvieCurve GovvieCurve (
		final JulianDate dtSpot,
		final String strCode,
		final double[] adblCoupon,
		final double[] adblYield)
		throws Exception
	{
		JulianDate[] adtEffective = new JulianDate[] {
			dtSpot,
			dtSpot,
			dtSpot,
			dtSpot,
			dtSpot,
			dtSpot,
			dtSpot,
			dtSpot
		};

		JulianDate[] adtMaturity = new JulianDate[] {
			dtSpot.addTenor ("1Y"),
			dtSpot.addTenor ("2Y"),
			dtSpot.addTenor ("3Y"),
			dtSpot.addTenor ("5Y"),
			dtSpot.addTenor ("7Y"),
			dtSpot.addTenor ("10Y"),
			dtSpot.addTenor ("20Y"),
			dtSpot.addTenor ("30Y")
		};

		GovvieCurve gc = LatentMarketStateBuilder.GovvieCurve (
			strCode,
			dtSpot,
			adtEffective,
			adtMaturity,
			adblCoupon,
			adblYield,
			"Yield",
			LatentMarketStateBuilder.SHAPE_PRESERVING
		);

		BondComponent[] aComp = TreasuryBuilder.FromCode (
			strCode,
			adtEffective,
			adtMaturity,
			adblCoupon
		);

		ValuationParams valParams = ValuationParams.Spot (dtSpot.julian());

		CurveSurfaceQuoteContainer csqc = new CurveSurfaceQuoteContainer();

		csqc.setGovvieState (gc);

		System.out.println();

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

		System.out.println ("\t|       TREASURY INPUT vs CALIB YIELD       ||");

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

		for (int i = 0; i < aComp.length; ++i)
			System.out.println ("\t| " + aComp[i].name() + " | " +
				FormatUtil.FormatDouble (adblYield[i], 1, 3, 100.) + "% | " +
				FormatUtil.FormatDouble (aComp[i].yieldFromPrice (
					valParams,
					null,
					null,
					aComp[i].maturityDate().julian(),
					1.,
					aComp[i].priceFromYield (
						valParams,
						null,
						null,
						gc.yield (aComp[i].maturityDate().julian())
					)
				), 1, 3, 100.) + "% ||"
			);

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

		return gc;
	}

	private static final BondComponent Zero (
		final String strCUSIP,
		final JulianDate dtEffective,
		final JulianDate dtMaturity,
		final String strDayCount)
		throws Exception
	{
		return BondBuilder.CreateSimpleFixed (
			strCUSIP,
			"USD",
			"",
			0.,
			2,
			strDayCount,
			dtEffective,
			dtMaturity,
			null,
			null
		);
	}

	private static final void RVMeasures (
		final BondComponent[] aBond,
		final JulianDate dtValue,
		final CurveSurfaceQuoteContainer csqc,
		final double[] adblCleanPrice)
		throws Exception
	{
		JulianDate dtSettle = dtValue.addBusDays (
			3,
			aBond[0].currency()
		);

		ValuationParams valParams = new ValuationParams (
			dtValue,
			dtSettle,
			aBond[0].currency()
		);

		System.out.println();

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

		System.out.println ("\t| Trade Date       : " + dtValue + " ||");

		System.out.println ("\t| Cash Settle Date : " + dtSettle + " ||");

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

		System.out.println();

		String strSecularMetrics = "";

		for (int i = 0; i < aBond.length; ++i) {
			double dblOAS = Double.NaN;
			double dblYTM = Double.NaN;
			double dblYTW = Double.NaN;
			double dblWALTM = Double.NaN;
			double dblWALTW = Double.NaN;
			double dblDiscountMargin = Double.NaN;
			double dblModifiedDurationTW = Double.NaN;

			try {
				WorkoutInfo wi = aBond[i].exerciseYieldFromPrice (
					valParams,
					csqc,
					null,
					adblCleanPrice[i]
				);

				dblYTW = wi.yield();

				dblYTM = aBond[i].yieldFromPrice (
					valParams,
					csqc,
					null,
					aBond[i].maturityDate().julian(),
					1.,
					adblCleanPrice[i]
				);

				dblWALTW = aBond[i].weightedAverageLife (
					valParams,
					csqc,
					wi.date(),
					wi.factor()
				);

				dblWALTM = aBond[i].weightedAverageLife (
					valParams,
					csqc,
					aBond[i].maturityDate().julian(),
					1.
				);

				dblDiscountMargin = aBond[i].discountMarginFromYield (
					valParams,
					csqc,
					null,
					wi.date(),
					wi.factor(),
					wi.yield()
				);

				dblOAS = aBond[i].oasFromYield (
					valParams,
					csqc,
					null,
					wi.date(),
					wi.factor(),
					wi.yield()
				);

				dblModifiedDurationTW = aBond[i].modifiedDurationFromPrice (
					valParams,
					csqc,
					null,
					wi.date(),
					wi.factor(),
					adblCleanPrice[i]
				);
			} catch (Exception e) {
				// e.printStackTrace();
			}

			strSecularMetrics +=
				aBond[i].name() + "," +
				aBond[i].effectiveDate() + "," +
				aBond[i].maturityDate() + "," +
				FormatUtil.FormatDouble (adblCleanPrice[i], 3, 3, 100.) + "," +
				FormatUtil.FormatDouble (0., 1, 4, 100.) + "," +
				FormatUtil.FormatDouble (dblYTW, 1, 3, 100.) + "%," +
				FormatUtil.FormatDouble (dblYTM, 1, 3, 100.) + "%," +
				FormatUtil.FormatDouble (dblWALTW, 1, 3, 1.) + "," +
				FormatUtil.FormatDouble (dblWALTM, 1, 3, 1.) + "," +
				FormatUtil.FormatDouble (dblModifiedDurationTW, 1, 4, 10000.) + "," +
				FormatUtil.FormatDouble (dblDiscountMargin, 1, 3, 10000.) + "," +
				FormatUtil.FormatDouble (dblOAS, 1, 3, 10000.) + "\n";
		}

		System.out.println
			("Bond, Issue, Maturity, Clean Price, Accrued, Yield TW, Yield TM, WAL TW, WAL TM, Duration TW, Discount Margin TW, OAS TW");

		System.out.print (strSecularMetrics);
	}

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

		JulianDate dtSpot = DateUtil.CreateFromYMD (
			2017,
			DateUtil.MARCH,
			10
		);

		String strCurrency = "USD";
		String strTreasuryCode = "UST";

		double[] adblTreasuryCoupon = new double[] {
			0.0100,
			0.0100,
			0.0125,
			0.0150,
			0.0200,
			0.0225,
			0.0250,
			0.0300
		};

		double[] adblTreasuryYield = new double[] {
			0.0083,	//  1Y
			0.0122, //  2Y
			0.0149, //  3Y
			0.0193, //  5Y
			0.0227, //  7Y
			0.0248, // 10Y
			0.0280, // 20Y
			0.0308  // 30Y
		};

		BondComponent[] aZeroBond = new BondComponent[] {
			Zero ("20772GF78", DateUtil.CreateFromYMD (2008,  4, 30), DateUtil.CreateFromYMD (2022,  3, 15), "US MUNI: 30/360"),
			Zero ("20772GF86", DateUtil.CreateFromYMD (2008,  4, 30), DateUtil.CreateFromYMD (2023,  3, 15), "US MUNI: 30/360"),
			Zero ("20772GF94", DateUtil.CreateFromYMD (2008,  4, 30), DateUtil.CreateFromYMD (2024,  3, 15), "US MUNI: 30/360"),
			Zero ("20772GG28", DateUtil.CreateFromYMD (2008,  4, 30), DateUtil.CreateFromYMD (2025,  3, 15), "US MUNI: 30/360"),
			Zero ("646136ES6", DateUtil.CreateFromYMD (2006,  6,  1), DateUtil.CreateFromYMD (2029, 12, 15), "US MUNI: 30/360"),
			Zero ("646136EV9", DateUtil.CreateFromYMD (2006,  6,  1), DateUtil.CreateFromYMD (2032, 12, 15), "US MUNI: 30/360"),
			Zero ("70870EBM0", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2033,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EBM0", DateUtil.CreateFromYMD (2008,  6, 26), DateUtil.CreateFromYMD (2033,  2,  1), "US MUNI: 30/360"),
			Zero ("646136EW7", DateUtil.CreateFromYMD (2006,  6,  1), DateUtil.CreateFromYMD (2033, 12, 15), "US MUNI: 30/360"),
			Zero ("66285WCA2", DateUtil.CreateFromYMD (2008,  4,  3), DateUtil.CreateFromYMD (2035,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EBS7", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2038,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EBT5", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2039,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EBU2", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2040,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EBZ1", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2045,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EDF3", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2045,  1,  1), "US MUNI: 30/360"),
			Zero ("70870ECA5", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2046,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EDG1", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2046,  1,  1), "US MUNI: 30/360"),
			Zero ("70870EDJ5", DateUtil.CreateFromYMD (2013, 12, 23), DateUtil.CreateFromYMD (2047,  1,  1), "US MUNI: 30/360"),
		};

		double[] adblCleanPrice = new double[] {
			0.8738610,	// (2022,  3, 15)
			0.8387205,	// (2023,  3, 15)
			0.8018810,	// (2024,  3, 15)
			0.7643810,	// (2025,  3, 15)
			0.5618700,	// (2029, 12, 15)
			0.4881200,	// (2032, 12, 15)
			0.5024810,	// (2033,  1,  1)
			0.5292085,	// (2033,  2,  1)
			0.4538885,	// (2033, 12, 15)
			0.4689745,	// (2035,  1,  1)
			0.3785930,	// (2038,  1,  1)
			0.3588700,	// (2039,  1,  1)
			0.3395470,	// (2040,  1,  1)
			0.2573115,	// (2045,  1,  1)
			0.2728445,	// (2045,  1,  1)
			0.2433560,	// (2046,  1,  1)
			0.2593310,	// (2046,  1,  1)
			0.2298805,	// (2047,  1,  1)
		};

		RVMeasures (
			aZeroBond,
			dtSpot,
			MarketParamsBuilder.Create (
				FundingCurve (
					dtSpot,
					strCurrency,
					0.
				),
				GovvieCurve (
					dtSpot,
					strTreasuryCode,
					adblTreasuryCoupon,
					adblTreasuryYield
				),
				null,
				null,
				null,
				null,
				null
			),
			adblCleanPrice
		);

		System.out.println();
	}
}