PortfolioCollateralEstimate.java
package org.drip.sample.xva;
import org.drip.analytics.date.*;
import org.drip.exposure.mpor.CollateralAmountEstimator;
import org.drip.exposure.mpor.CollateralAmountEstimatorOutput;
import org.drip.measure.bridge.BrokenDateInterpolatorLinearT;
import org.drip.measure.discrete.SequenceGenerator;
import org.drip.measure.dynamics.DiffusionEvaluatorLinear;
import org.drip.measure.process.DiffusionEvolver;
import org.drip.measure.realization.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
import org.drip.xva.proto.*;
import org.drip.xva.settings.*;
/*
* -*- 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.
*/
/**
* PortfolioCollateralEstimate illustrates the Estimation of the Collateral Amount on a Single Trade Collateral
* Portfolio. The References are:
*
* - Burgard, C., and M. Kjaer (2014): PDE Representations of Derivatives with Bilateral Counter-party Risk
* and Funding Costs, Journal of Credit Risk, 7 (3) 1-19.
*
* - Burgard, C., and M. Kjaer (2014): In the Balance, Risk, 24 (11) 72-75.
*
* - Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk, Risk 20 (2) 86-90.
*
* - Li, B., and Y. Tang (2007): Quantitative Analysis, Derivatives Modeling, and Trading Strategies in the
* Presence of Counter-party Credit Risk for the Fixed Income Market, World Scientific Publishing,
* Singapore.
*
* - Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing, Risk
* 21 (2) 97-102.
*
* @author Lakshmi Krishnamurthy
*/
public class PortfolioCollateralEstimate {
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv ("");
int iNumStep = 40;
double dblTime = 10.;
double dblPortfolioDrift = 0.0;
double dblPortfolioVolatility = 0.15;
double dblPortfolioValueStart = 0.;
double dblBankThreshold = -0.1;
double dblCounterPartyThreshold = 0.1;
JulianDate dtSpot = DateUtil.Today();
JulianDate dtStart = dtSpot;
double dblTimeWidth = dblTime / iNumStep;
double[] adblTimeWidth = new double[iNumStep];
for (int i = 0; i < iNumStep; ++i)
adblTimeWidth[i] = dblTimeWidth;
PositionGroupSpecification positionGroupSpecification = PositionGroupSpecification.FixedThreshold (
"FIXEDTHRESHOLD",
dblCounterPartyThreshold,
dblBankThreshold,
PositionReplicationScheme.ALBANESE_ANDERSEN_VERTEX,
BrokenDateScheme.SQUARE_ROOT_OF_TIME,
0.,
CloseOutScheme.ISDA_92
);
DiffusionEvolver dePortfolio = new DiffusionEvolver (
DiffusionEvaluatorLinear.Standard (
dblPortfolioDrift,
dblPortfolioVolatility
)
);
JumpDiffusionEdge[] aJDESwapRate = dePortfolio.incrementSequence (
new JumpDiffusionVertex (
dblTime,
dblPortfolioValueStart,
0.,
false
),
JumpDiffusionEdgeUnit.Diffusion (
adblTimeWidth,
SequenceGenerator.Gaussian (iNumStep)
),
dblTimeWidth
);
System.out.println();
System.out.println ("\t||--------------------------------------------------------------------------------------------------------------------------||");
System.out.println ("\t|| COLLATERAL AMOUNT ESTIMATION OUTPUT METRICS ||");
System.out.println ("\t||--------------------------------------------------------------------------------------------------------------------------||");
System.out.println ("\t|| L -> R: ||");
System.out.println ("\t|| - Forward Date ||");
System.out.println ("\t|| - Forward Value ||");
System.out.println ("\t|| - Bank Margin Date ||");
System.out.println ("\t|| - Counter Party Margin Date ||");
System.out.println ("\t|| - Bank Window Margin Value ||");
System.out.println ("\t|| - Counter Party Window Margin Value ||");
System.out.println ("\t|| - Bank Collateral Threshold ||");
System.out.println ("\t|| - Counter Party Collateral Threshold ||");
System.out.println ("\t|| - Bank Posting Requirement ||");
System.out.println ("\t|| - Counter Party Posting Requirement ||");
System.out.println ("\t|| - Gross Posting Requirement ||");
System.out.println ("\t||--------------------------------------------------------------------------------------------------------------------------||");
for (int i = 0; i < iNumStep; ++i) {
JulianDate dtEnd = dtStart.addMonths (3);
double dblPortfolioValueFinish = dblTimeWidth * (iNumStep - i) * aJDESwapRate[i].finish();
CollateralAmountEstimator hae = new CollateralAmountEstimator (
positionGroupSpecification,
new BrokenDateInterpolatorLinearT (
dtStart.julian(),
dtEnd.julian(),
dblPortfolioValueStart,
dblPortfolioValueFinish
),
Double.NaN
);
CollateralAmountEstimatorOutput haeo = hae.output (dtEnd);
System.out.println (
"\t|| " +
dtEnd + " => " +
FormatUtil.FormatDouble (dblPortfolioValueFinish, 1, 4, 1.) + " | " +
haeo.dealerMarginDate() + " | " +
haeo.clientMarginDate() + " | " +
FormatUtil.FormatDouble (haeo.dealerWindowMarginValue(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (haeo.clientWindowMarginValue(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (haeo.dealerCollateralThreshold(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (haeo.clientCollateralThreshold(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (haeo.dealerPostingRequirement(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (haeo.clientPostingRequirement(), 1, 4, 1.) + " | " +
FormatUtil.FormatDouble (haeo.postingRequirement(), 1, 4, 1.) + " ||"
);
dtStart = dtEnd;
dblPortfolioValueStart = dblPortfolioValueFinish;
}
System.out.println ("\t||--------------------------------------------------------------------------------------------------------------------------||");
System.out.println();
EnvManager.TerminateEnv();
}
}