BucketVegaSettingsCR.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>BucketVegaSettingsCR</i> holds the Vega Risk Weights, Concentration Thresholds, and Cross-Tenor
  80.  * Correlations for each Credit Curve and its Tenor. 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 BucketVegaSettingsCR extends org.drip.simm.parameters.BucketSensitivitySettingsCR
  121. {
  122.     private double _vegaScaler = java.lang.Double.NaN;
  123.     private double _historicalVolatilityRatio = java.lang.Double.NaN;
  124.     private java.util.Map<java.lang.String, java.lang.Double> _tenorDeltaRiskWeight = null;

  126.     /**
  127.      * Retrieve the ISDA 2.0 Credit Qualifying Bucket Vega Settings
  128.      * 
  129.      * @param bucketNumber The Bucket Number
  130.      * 
  131.      * @return The ISDA 2.0 Credit Qualifying Bucket Vega Settings
  132.      */

  134.     public static BucketVegaSettingsCR ISDA_CRQ_20 (
  135.         final int bucketNumber)
  136.     {
  137.         org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettingsCR =
  138.             org.drip.simm.parameters.BucketSensitivitySettingsCR.ISDA_CRQ_DELTA_20 (bucketNumber);

  140.         if (null == bucketSensitivitySettingsCR)
  141.         {
  142.             return null;
  143.         }

  145.         try
  146.         {
  147.             return new BucketVegaSettingsCR (
  148.                 TenorRiskWeightMap (org.drip.simm.credit.CRQSystemics20.VEGA_RISK_WEIGHT),
  149.                 bucketSensitivitySettingsCR.intraFamilyCrossTenorCorrelation(),
  150.                 bucketSensitivitySettingsCR.extraFamilyCrossTenorCorrelation(),
  151.                 org.drip.simm.credit.CRThresholdContainer20.QualifyingThreshold (bucketNumber).vega(),
  152.                 java.lang.Math.sqrt (365. / 14.) /
  153.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  154.                 1.,
  155.                 bucketSensitivitySettingsCR.tenorRiskWeight()
  156.             );
  157.         }
  158.         catch (java.lang.Exception e)
  159.         {
  160.             e.printStackTrace();
  161.         }

  163.         return null;
  164.     }

  166.     /**
  167.      * Retrieve the ISDA 2.0 Credit Non-Qualifying Bucket Vega Settings
  168.      * 
  169.      * @param bucketNumber The Bucket Number
  170.      * 
  171.      * @return The ISDA 2.0 Credit Non-Qualifying Bucket Vega Settings
  172.      */

  174.     public static BucketVegaSettingsCR ISDA_CRNQ_20 (
  175.         final int bucketNumber)
  176.     {
  177.         org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettingsCR =
  178.             org.drip.simm.parameters.BucketSensitivitySettingsCR.ISDA_CRNQ_DELTA_20 (bucketNumber);

  180.         if (null == bucketSensitivitySettingsCR)
  181.         {
  182.             return null;
  183.         }

  185.         try
  186.         {
  187.             return new BucketVegaSettingsCR (
  188.                 TenorRiskWeightMap (org.drip.simm.credit.CRNQSystemics20.VEGA_RISK_WEIGHT),
  189.                 bucketSensitivitySettingsCR.intraFamilyCrossTenorCorrelation(),
  190.                 bucketSensitivitySettingsCR.extraFamilyCrossTenorCorrelation(),
  191.                 org.drip.simm.credit.CRThresholdContainer20.NonQualifyingThreshold (bucketNumber).vega(),
  192.                 java.lang.Math.sqrt (365. / 14.) /
  193.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  194.                 1.,
  195.                 bucketSensitivitySettingsCR.tenorRiskWeight()
  196.             );
  197.         }
  198.         catch (java.lang.Exception e)
  199.         {
  200.             e.printStackTrace();
  201.         }

  203.         return null;
  204.     }

  206.     /**
  207.      * Retrieve the ISDA 2.1 Credit Qualifying Bucket Vega Settings
  208.      * 
  209.      * @param bucketNumber The Bucket Number
  210.      * 
  211.      * @return The ISDA 2.1 Credit Qualifying Bucket Vega Settings
  212.      */

  214.     public static BucketVegaSettingsCR ISDA_CRQ_21 (
  215.         final int bucketNumber)
  216.     {
  217.         org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettingsCR =
  218.             org.drip.simm.parameters.BucketSensitivitySettingsCR.ISDA_CRQ_DELTA_21 (bucketNumber);

  220.         if (null == bucketSensitivitySettingsCR)
  221.         {
  222.             return null;
  223.         }

  225.         try
  226.         {
  227.             return new BucketVegaSettingsCR (
  228.                 TenorRiskWeightMap (org.drip.simm.credit.CRQSystemics21.VEGA_RISK_WEIGHT),
  229.                 bucketSensitivitySettingsCR.intraFamilyCrossTenorCorrelation(),
  230.                 bucketSensitivitySettingsCR.extraFamilyCrossTenorCorrelation(),
  231.                 org.drip.simm.credit.CRThresholdContainer21.QualifyingThreshold (bucketNumber).vega(),
  232.                 java.lang.Math.sqrt (365. / 14.) /
  233.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  234.                 1.,
  235.                 bucketSensitivitySettingsCR.tenorRiskWeight()
  236.             );
  237.         }
  238.         catch (java.lang.Exception e)
  239.         {
  240.             e.printStackTrace();
  241.         }

  243.         return null;
  244.     }

  246.     /**
  247.      * Retrieve the ISDA 2.1 Credit Non-Qualifying Bucket Vega Settings
  248.      * 
  249.      * @param bucketNumber The Bucket Number
  250.      * 
  251.      * @return The ISDA 2.1 Credit Non-Qualifying Bucket Vega Settings
  252.      */

  254.     public static BucketVegaSettingsCR ISDA_CRNQ_21 (
  255.         final int bucketNumber)
  256.     {
  257.         org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettingsCR =
  258.             org.drip.simm.parameters.BucketSensitivitySettingsCR.ISDA_CRNQ_DELTA_21 (bucketNumber);

  260.         if (null == bucketSensitivitySettingsCR)
  261.         {
  262.             return null;
  263.         }

  265.         try
  266.         {
  267.             return new BucketVegaSettingsCR (
  268.                 TenorRiskWeightMap (org.drip.simm.credit.CRNQSystemics21.VEGA_RISK_WEIGHT),
  269.                 bucketSensitivitySettingsCR.intraFamilyCrossTenorCorrelation(),
  270.                 bucketSensitivitySettingsCR.extraFamilyCrossTenorCorrelation(),
  271.                 org.drip.simm.credit.CRThresholdContainer21.NonQualifyingThreshold (bucketNumber).vega(),
  272.                 java.lang.Math.sqrt (365. / 14.) /
  273.                     org.drip.measure.gaussian.NormalQuadrature.InverseCDF (0.99),
  274.                 1.,
  275.                 bucketSensitivitySettingsCR.tenorRiskWeight()
  276.             );
  277.         }
  278.         catch (java.lang.Exception e)
  279.         {
  280.             e.printStackTrace();
  281.         }

  283.         return null;
  284.     }

  286.     /**
  287.      * BucketVegaSettingsCR Constructor
  288.      * 
  289.      * @param tenorVegaRiskWeight The Tenor Vega Risk Weight Map
  290.      * @param sameIssuerSeniorityCorrelation Same Issuer/Seniority Correlation
  291.      * @param differentIssuerSeniorityCorrelation Different Issuer/Seniority Correlation
  292.      * @param concentrationThreshold The Concentration Threshold
  293.      * @param vegaScaler The Vega Scaler
  294.      * @param historicalVolatilityRatio The Historical Volatility Ratio
  295.      * @param tenorDeltaRiskWeight The Credit Tenor Delta Risk Weight
  296.      * 
  297.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  298.      */

  300.     public BucketVegaSettingsCR (
  301.         final java.util.Map<java.lang.String, java.lang.Double> tenorVegaRiskWeight,
  302.         final double sameIssuerSeniorityCorrelation,
  303.         final double differentIssuerSeniorityCorrelation,
  304.         final double concentrationThreshold,
  305.         final double vegaScaler,
  306.         final double historicalVolatilityRatio,
  307.         final java.util.Map<java.lang.String, java.lang.Double> tenorDeltaRiskWeight)
  308.         throws java.lang.Exception
  309.     {
  310.         super (
  311.             tenorVegaRiskWeight,
  312.             sameIssuerSeniorityCorrelation,
  313.             differentIssuerSeniorityCorrelation,
  314.             concentrationThreshold
  315.         );

  317.         if (!org.drip.numerical.common.NumberUtil.IsValid (_vegaScaler = vegaScaler) ||
  318.             !org.drip.numerical.common.NumberUtil.IsValid (_historicalVolatilityRatio =
  319.                 historicalVolatilityRatio) ||
  320.             null == (_tenorDeltaRiskWeight = tenorDeltaRiskWeight))
  321.         {
  322.             throw new java.lang.Exception ("BucketVegaSettingsIR Constructor => Invalid Inputs");
  323.         }
  324.     }

  326.     /**
  327.      * Retrieve the Vega Scaler
  328.      * 
  329.      * @return The Vega Scaler
  330.      */

  332.     public double vegaScaler()
  333.     {
  334.         return _vegaScaler;
  335.     }

  337.     /**
  338.      * Retrieve the Historical Volatility Ratio
  339.      * 
  340.      * @return The Historical Volatility Ratio
  341.      */

  343.     public double historicalVolatilityRatio()
  344.     {
  345.         return _historicalVolatilityRatio;
  346.     }

  348.     /**
  349.      * Retrieve the Tenor Delta Risk Weight
  350.      * 
  351.      * @return The Tenor Delta Risk Weight
  352.      */

  354.     public java.util.Map<java.lang.String, java.lang.Double> tenorDeltaRiskWeight()
  355.     {
  356.         return _tenorDeltaRiskWeight;
  357.     }

  359.     /**
  360.      * Retrieve the Tenor Vega Risk Weight
  361.      * 
  362.      * @return The Tenor Vega Risk Weight
  363.      */

  365.     public java.util.Map<java.lang.String, java.lang.Double> tenorVegaRiskWeight()
  366.     {
  367.         return super.tenorRiskWeight();
  368.     }

  370.     @Override public java.util.Map<java.lang.String, java.lang.Double> tenorRiskWeight()
  371.     {
  372.         java.util.Map<java.lang.String, java.lang.Double> tenorVegaRiskWeight = tenorVegaRiskWeight();

  374.         java.util.Map<java.lang.String, java.lang.Double> tenorRiskWeight = new
  375.             java.util.HashMap<java.lang.String, java.lang.Double>();

  377.         for (java.util.Map.Entry<java.lang.String, java.lang.Double> tenorVegaRiskWeightEntry :
  378.             tenorVegaRiskWeight.entrySet())
  379.         {
  380.             java.lang.String tenor = tenorVegaRiskWeightEntry.getKey();

  382.             if (!tenorVegaRiskWeight.containsKey (tenor))
  383.             {
  384.                 return null;
  385.             }

  387.             tenorRiskWeight.put (
  388.                 tenor,
  389.                 tenorVegaRiskWeightEntry.getValue() * _tenorDeltaRiskWeight.get (tenor) * _vegaScaler *
  390.                     _historicalVolatilityRatio
  391.             );
  392.         }

  394.         return tenorRiskWeight;
  395.     }
  396. }
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