BucketCurvatureSettings.java

  1. package org.drip.simm.parameters;

  3. /*
  4.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  5.  */

  7. /*!
  8.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  9.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  10.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  11.  * 
  12.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  13.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  14.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  15.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  16.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  17.  *      and computational support.
  18.  *  
  19.  *      https://lakshmidrip.github.io/DROP/
  20.  *  
  21.  *  DROP is composed of three modules:
  22.  *  
  23.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  24.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  25.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  26.  * 
  27.  *  DROP Product Core implements libraries for the following:
  28.  *  - Fixed Income Analytics
  29.  *  - Loan Analytics
  30.  *  - Transaction Cost Analytics
  31.  * 
  32.  *  DROP Portfolio Core implements libraries for the following:
  33.  *  - Asset Allocation Analytics
  34.  *  - Asset Liability Management Analytics
  35.  *  - Capital Estimation Analytics
  36.  *  - Exposure Analytics
  37.  *  - Margin Analytics
  38.  *  - XVA Analytics
  39.  * 
  40.  *  DROP Computational Core implements libraries for the following:
  41.  *  - Algorithm Support
  42.  *  - Computation Support
  43.  *  - Function Analysis
  44.  *  - Model Validation
  45.  *  - Numerical Analysis
  46.  *  - Numerical Optimizer
  47.  *  - Spline Builder
  48.  *  - Statistical Learning
  49.  * 
  50.  *  Documentation for DROP is Spread Over:
  51.  * 
  52.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  53.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  54.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  55.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  56.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  57.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  58.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  59.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  60.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  61.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  62.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  63.  * 
  64.  *  Licensed under the Apache License, Version 2.0 (the "License");
  65.  *      you may not use this file except in compliance with the License.
  66.  *   
  67.  *  You may obtain a copy of the License at
  68.  *      http://www.apache.org/licenses/LICENSE-2.0
  69.  *  
  70.  *  Unless required by applicable law or agreed to in writing, software
  71.  *      distributed under the License is distributed on an "AS IS" BASIS,
  72.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  73.  *  
  74.  *  See the License for the specific language governing permissions and
  75.  *      limitations under the License.
  76.  */

  78. /**
  79.  * <i>BucketCurvatureSettings</i> holds the ISDA SIMM Curvature Settings for Interest Rates, Qualifying and
  80.  * Non-qualifying Credit, Equity, Commodity, and Foreign Exchange. The References are:
  81.  * 
  82.  * <br><br>
  83.  *  <ul>
  84.  *      <li>
  85.  *          Andersen, L. B. G., M. Pykhtin, and A. Sokol (2017): Credit Exposure in the Presence of Initial
  86.  *              Margin https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2806156 <b>eSSRN</b>
  87.  *      </li>
  88.  *      <li>
  89.  *          Albanese, C., S. Caenazzo, and O. Frankel (2017): Regression Sensitivities for Initial Margin
  90.  *              Calculations https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2763488 <b>eSSRN</b>
  91.  *      </li>
  92.  *      <li>
  93.  *          Anfuso, F., D. Aziz, P. Giltinan, and K. Loukopoulus (2017): A Sound Modeling and Back-testing
  94.  *              Framework for Forecasting Initial Margin Requirements
  95.  *                  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2716279 <b>eSSRN</b>
  96.  *      </li>
  97.  *      <li>
  98.  *          Caspers, P., P. Giltinan, R. Lichters, and N. Nowaczyk (2017): Forecasting Initial Margin
  99.  *              Requirements - A Model Evaluation https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2911167
  100.  *                  <b>eSSRN</b>
  101.  *      </li>
  102.  *      <li>
  103.  *          International Swaps and Derivatives Association (2017): SIMM v2.0 Methodology
  104.  *              https://www.isda.org/a/oFiDE/isda-simm-v2.pdf
  105.  *      </li>
  106.  *  </ul>
  107.  * 
  108.  * <br><br>
  109.  *  <ul>
  110.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  111.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/MarginAnalyticsLibrary.md">Initial and Variation Margin Analytics</a></li>
  112.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/simm/README.md">Initial Margin Analytics based on ISDA SIMM and its Variants</a></li>
  113.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/simm/parameters/README.md">ISDA SIMM Risk Factor Parameters</a></li>
  114.  *  </ul>
  115.  * <br><br>
  116.  * 
  117.  * @author Lakshmi Krishnamurthy
  118.  */

  120. public class BucketCurvatureSettings extends org.drip.simm.parameters.BucketVegaSettings
  121. {
  122.     private double _tenorScalingFactor = java.lang.Double.NaN;

  124.     /**
  125.      * Construct the ISDA Standard BucketCurvatureSettings
  126.      * 
  127.      * @param riskWeight The Vega Risk Weight
  128.      * @param memberCorrelation The Member Correlation
  129.      * @param impliedVolatility The Implied Volatility
  130.      * @param vegaDurationDays The Bucket Vega Duration in Days
  131.      * 
  132.      * @return The ISDA Standard BucketCurvatureSettings
  133.      */

  135.     public static final BucketCurvatureSettings ISDA (
  136.         final double riskWeight,
  137.         final double memberCorrelation,
  138.         final double impliedVolatility,
  139.         final int vegaDurationDays)
  140.     {
  141.         try
  142.         {
  143.             return new BucketCurvatureSettings (
  144.                 riskWeight,
  145.                 memberCorrelation,
  146.                 impliedVolatility,
  147.                 org.drip.function.r1tor1.ISDABucketCurvatureTenorScaler.Standard().evaluate
  148.                     (vegaDurationDays)
  149.             );
  150.         }
  151.         catch (java.lang.Exception e)
  152.         {
  153.             e.printStackTrace();
  154.         }

  156.         return null;
  157.     }

  159.     /**
  160.      * Construct the Standard ISDA 2.0 EQ Bucket Curvature Settings
  161.      * 
  162.      * @param bucketIndex The Bucket Index
  163.      * @param vegaDurationDays The Vega Duration Days
  164.      * 
  165.      * @return The Standard ISDA 2.0 EQ Bucket Curvature Settings
  166.      */

  168.     public static BucketCurvatureSettings ISDA_EQ_20 (
  169.         final int bucketIndex,
  170.         final int vegaDurationDays)
  171.     {
  172.         org.drip.simm.equity.EQBucket equityBucket =
  173.             org.drip.simm.equity.EQSettingsContainer20.BucketMap().get (bucketIndex);

  175.         try
  176.         {
  177.             return null == equityBucket ? null : BucketCurvatureSettings.ISDA (
  178.                 equityBucket.vegaRiskWeight() * equityBucket.deltaRiskWeight(),
  179.                 equityBucket.memberCorrelation(),
  180.                 java.lang.Math.sqrt (365. / 14.) /
  181.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  182.                 vegaDurationDays
  183.             );
  184.         }
  185.         catch (java.lang.Exception e)
  186.         {
  187.             e.printStackTrace();
  188.         }

  190.         return null;
  191.     }

  193.     /**
  194.      * Construct the Standard ISDA 2.1 EQ Bucket Curvature Settings
  195.      * 
  196.      * @param bucketIndex The Bucket Index
  197.      * @param vegaDurationDays The Vega Duration Days
  198.      * 
  199.      * @return The Standard ISDA 2.1 EQ Bucket Curvature Settings
  200.      */

  202.     public static BucketCurvatureSettings ISDA_EQ_21 (
  203.         final int bucketIndex,
  204.         final int vegaDurationDays)
  205.     {
  206.         org.drip.simm.equity.EQBucket equityBucket =
  207.             org.drip.simm.equity.EQSettingsContainer21.BucketMap().get (bucketIndex);

  209.         try
  210.         {
  211.             return null == equityBucket ? null : BucketCurvatureSettings.ISDA (
  212.                 equityBucket.vegaRiskWeight() * equityBucket.deltaRiskWeight(),
  213.                 equityBucket.memberCorrelation(),
  214.                 java.lang.Math.sqrt (365. / 14.) /
  215.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  216.                 vegaDurationDays
  217.             );
  218.         }
  219.         catch (java.lang.Exception e)
  220.         {
  221.             e.printStackTrace();
  222.         }

  224.         return null;
  225.     }

  227.     /**
  228.      * Construct the Standard ISDA 2.0 CT Bucket Curvature Settings
  229.      * 
  230.      * @param bucketIndex The Bucket Index
  231.      * @param vegaDurationDays The Vega Duration Days
  232.      * 
  233.      * @return The Standard ISDA 2.0 CT Bucket Curvature Settings
  234.      */

  236.     public static BucketCurvatureSettings ISDA_CT_20 (
  237.         final int bucketIndex,
  238.         final int vegaDurationDays)
  239.     {
  240.         org.drip.simm.commodity.CTBucket commodityBucket =
  241.             org.drip.simm.commodity.CTSettingsContainer20.BucketMap().get (bucketIndex);

  243.         try
  244.         {
  245.             return null == commodityBucket ? null : BucketCurvatureSettings.ISDA (
  246.                 org.drip.simm.commodity.CTSystemics20.VEGA_RISK_WEIGHT * commodityBucket.deltaRiskWeight(),
  247.                 commodityBucket.memberCorrelation(),
  248.                 java.lang.Math.sqrt (365. / 14.) /
  249.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  250.                 vegaDurationDays
  251.             );
  252.         }
  253.         catch (java.lang.Exception e)
  254.         {
  255.             e.printStackTrace();
  256.         }

  258.         return null;
  259.     }

  261.     /**
  262.      * Construct the Standard ISDA 2.1 CT Bucket Curvature Settings
  263.      * 
  264.      * @param bucketIndex The Bucket Index
  265.      * @param vegaDurationDays The Vega Duration Days
  266.      * 
  267.      * @return The Standard ISDA 2.1 CT Bucket Curvature Settings
  268.      */

  270.     public static BucketCurvatureSettings ISDA_CT_21 (
  271.         final int bucketIndex,
  272.         final int vegaDurationDays)
  273.     {
  274.         org.drip.simm.commodity.CTBucket commodityBucket =
  275.             org.drip.simm.commodity.CTSettingsContainer21.BucketMap().get (bucketIndex);

  277.         try
  278.         {
  279.             return null == commodityBucket ? null : BucketCurvatureSettings.ISDA (
  280.                 org.drip.simm.commodity.CTSystemics21.VEGA_RISK_WEIGHT * commodityBucket.deltaRiskWeight(),
  281.                 commodityBucket.memberCorrelation(),
  282.                 java.lang.Math.sqrt (365. / 14.) /
  283.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  284.                 vegaDurationDays
  285.             );
  286.         }
  287.         catch (java.lang.Exception e)
  288.         {
  289.             e.printStackTrace();
  290.         }

  292.         return null;
  293.     }

  295.     /**
  296.      * Construct the Standard ISDA 2.0 FX Bucket Curvature Settings
  297.      * 
  298.      * @param vegaCategory The Vega Category
  299.      * @param vegaDurationDays The Vega Duration Days
  300.      * 
  301.      * @return The Standard ISDA 2.0 FX Bucket Curvature Settings
  302.      */

  304.     public static BucketCurvatureSettings ISDA_FX_20 (
  305.         final java.lang.String vegaCategory,
  306.         final int vegaDurationDays)
  307.     {
  308.         java.util.Map<java.lang.String, java.lang.Double> fxConcentrationCategoryVegaMap =
  309.             org.drip.simm.fx.FXRiskThresholdContainer20.CategoryVegaMap();

  311.         try {
  312.             return !fxConcentrationCategoryVegaMap.containsKey (vegaCategory) ? null :
  313.                 BucketCurvatureSettings.ISDA (
  314.                     org.drip.simm.fx.FXSystemics20.VEGA_RISK_WEIGHT *
  315.                         org.drip.simm.fx.FXSystemics20.DELTA_RISK_WEIGHT,
  316.                     org.drip.simm.fx.FXSystemics20.CORRELATION,
  317.                     java.lang.Math.sqrt (365. / 14.) /
  318.                         org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  319.                     vegaDurationDays
  320.                 );
  321.         }
  322.         catch (java.lang.Exception e)
  323.         {
  324.             e.printStackTrace();
  325.         }

  327.         return null;
  328.     }

  330.     /**
  331.      * Construct the Standard ISDA 2.1 FX Bucket Curvature Settings
  332.      * 
  333.      * @param vegaCategory The Vega Category
  334.      * @param vegaDurationDays The Vega Duration Days
  335.      * 
  336.      * @return The Standard ISDA 2.1 FX Bucket Curvature Settings
  337.      */

  339.     public static BucketCurvatureSettings ISDA_FX_21 (
  340.         final java.lang.String vegaCategory,
  341.         final int vegaDurationDays)
  342.     {
  343.         java.util.Map<java.lang.String, java.lang.Double> fxConcentrationCategoryVegaMap =
  344.             org.drip.simm.fx.FXRiskThresholdContainer21.CategoryVegaMap();

  346.         try {
  347.             return !fxConcentrationCategoryVegaMap.containsKey (vegaCategory) ? null :
  348.                 BucketCurvatureSettings.ISDA (
  349.                     org.drip.simm.fx.FXSystemics21.VEGA_RISK_WEIGHT *
  350.                         org.drip.simm.fx.FXSystemics21.DELTA_RISK_WEIGHT,
  351.                     org.drip.simm.fx.FXSystemics21.CORRELATION,
  352.                     java.lang.Math.sqrt (365. / 14.) /
  353.                         org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  354.                     vegaDurationDays
  355.                 );
  356.         }
  357.         catch (java.lang.Exception e)
  358.         {
  359.             e.printStackTrace();
  360.         }

  362.         return null;
  363.     }

  365.     /**
  366.      * BucketCurvatureSettings Constructor
  367.      * 
  368.      * @param riskWeight The Vega Risk Weight
  369.      * @param memberCorrelation The Member Correlation
  370.      * @param impliedVolatility The Implied Volatility
  371.      * @param tenorScalingFactor The Tenor Scaling Factor
  372.      * 
  373.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  374.      */

  376.     public BucketCurvatureSettings (
  377.         final double riskWeight,
  378.         final double memberCorrelation,
  379.         final double impliedVolatility,
  380.         final double tenorScalingFactor)
  381.         throws java.lang.Exception
  382.     {
  383.         super (
  384.             riskWeight,
  385.             1.,
  386.             memberCorrelation,
  387.             impliedVolatility,
  388.             1.
  389.         );

  391.         if (!org.drip.numerical.common.NumberUtil.IsValid (_tenorScalingFactor = tenorScalingFactor))
  392.         {
  393.             throw new java.lang.Exception ("BucketCurvatureSettings Constructor => Invalid Inputs");
  394.         }
  395.     }

  397.     /**
  398.      * Retrieve the Tenor Scaling Factor
  399.      * 
  400.      * @return The Tenor Scaling Factor
  401.      */

  403.     public double tenorScalingFactor()
  404.     {
  405.         return _tenorScalingFactor;
  406.     }

  408.     /**
  409.      * Retrieve the Vega Risk Weight
  410.      * 
  411.      * @return The Vega Risk Weight
  412.      */

  414.     public double vegaRiskWeight()
  415.     {
  416.         return super.riskWeight();
  417.     }

  419.     @Override public double riskWeight()
  420.     {
  421.         return super.riskWeight() * _tenorScalingFactor;
  422.     }
  423. }
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