BucketSensitivityCR.java

  1. package org.drip.simm.product;

  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>BucketSensitivityCR</i> holds the ISDA SIMM Risk Factor Tenor Bucket Sensitivities across CR Tenor
  80.  * Factors. 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/product/README.md">ISDA SIMM Risk Factor Sensitivities</a></li>
  114.  *  </ul>
  115.  * <br><br>
  116.  * 
  117.  * @author Lakshmi Krishnamurthy
  118.  */

  120. public class BucketSensitivityCR
  121. {
  122.     private org.drip.simm.product.RiskFactorTenorSensitivity _cumulativeTenorSensitivityMap = null;
  123.     private java.util.Map<java.lang.String, org.drip.simm.product.RiskFactorTenorSensitivity>
  124.         _tenorSensitivityMap = null;

  126.     private org.drip.simm.margin.BucketAggregateCR linearAggregate (
  127.         final org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettings)
  128.     {
  129.         org.drip.simm.margin.RiskFactorAggregateCR riskFactorAggregate = curveAggregate
  130.             (bucketSensitivitySettings);

  132.         if (null == riskFactorAggregate)
  133.         {
  134.             return null;
  135.         }

  137.         org.drip.simm.margin.SensitivityAggregateCR sensitivityAggregate = riskFactorAggregate.linearMargin
  138.             (bucketSensitivitySettings);

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

  145.         try
  146.         {
  147.             return new org.drip.simm.margin.BucketAggregateCR (
  148.                 riskFactorAggregate,
  149.                 sensitivityAggregate,
  150.                 sensitivityAggregate.cumulativeMarginCovariance(),
  151.                 riskFactorAggregate.cumulativeSensitivityMargin()
  152.             );
  153.         }
  154.         catch (java.lang.Exception e)
  155.         {
  156.             e.printStackTrace();
  157.         }

  159.         return null;
  160.     }

  162.     private org.drip.simm.margin.BucketAggregateCR curvatureAggregate (
  163.         final org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettings)
  164.     {
  165.         org.drip.simm.margin.RiskFactorAggregateCR riskFactorAggregate = curveAggregate
  166.             (bucketSensitivitySettings);

  168.         if (null == riskFactorAggregate)
  169.         {
  170.             return null;
  171.         }

  173.         org.drip.simm.margin.SensitivityAggregateCR sensitivityAggregate =
  174.             riskFactorAggregate.curvatureMargin (bucketSensitivitySettings);

  176.         if (null == sensitivityAggregate)
  177.         {
  178.             return null;
  179.         }

  181.         try
  182.         {
  183.             return new org.drip.simm.margin.BucketAggregateCR (
  184.                 riskFactorAggregate,
  185.                 sensitivityAggregate,
  186.                 sensitivityAggregate.cumulativeMarginCovariance(),
  187.                 riskFactorAggregate.cumulativeSensitivityMargin()
  188.             );
  189.         }
  190.         catch (java.lang.Exception e)
  191.         {
  192.             e.printStackTrace();
  193.         }

  195.         return null;
  196.     }

  198.     /**
  199.      * BucketSensitivityCR Constructor
  200.      * 
  201.      * @param tenorSensitivityMap The Risk Factor Tenor Sensitivity Map
  202.      * 
  203.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  204.      */

  206.     public BucketSensitivityCR (
  207.         final java.util.Map<java.lang.String, org.drip.simm.product.RiskFactorTenorSensitivity>
  208.             tenorSensitivityMap)
  209.         throws java.lang.Exception
  210.     {
  211.         if (null == (_tenorSensitivityMap = tenorSensitivityMap) || 0 == _tenorSensitivityMap.size())
  212.         {
  213.             throw new java.lang.Exception ("BucketSensitivityCR Constructor => Invalid Inputs");
  214.         }

  216.         java.util.Map<java.lang.String, java.lang.Double> riskFactorTenorSensitivityMap = new
  217.             org.drip.analytics.support.CaseInsensitiveHashMap<java.lang.Double>();

  219.         for (java.util.Map.Entry<java.lang.String, org.drip.simm.product.RiskFactorTenorSensitivity>
  220.             tenorSensitivityMapEntry : _tenorSensitivityMap.entrySet())
  221.         {
  222.             java.util.Map<java.lang.String, java.lang.Double> componentRiskFactorTenorSensitivityMap =
  223.                 tenorSensitivityMapEntry.getValue().sensitivityMap();

  225.             for (java.util.Map.Entry<java.lang.String, java.lang.Double>
  226.                 componentRiskFactorTenorSensitivityMapEntry :
  227.                 componentRiskFactorTenorSensitivityMap.entrySet())
  228.             {
  229.                 java.lang.String tenor = componentRiskFactorTenorSensitivityMapEntry.getKey();

  231.                 if (riskFactorTenorSensitivityMap.containsKey (tenor))
  232.                 {
  233.                     riskFactorTenorSensitivityMap.put (
  234.                         tenor,
  235.                         riskFactorTenorSensitivityMap.get (tenor) +
  236.                             componentRiskFactorTenorSensitivityMap.get (tenor)
  237.                     );
  238.                 }
  239.                 else
  240.                 {
  241.                     riskFactorTenorSensitivityMap.put (
  242.                         tenor,
  243.                         componentRiskFactorTenorSensitivityMap.get (tenor)
  244.                     );
  245.                 }
  246.             }
  247.         }

  249.         _cumulativeTenorSensitivityMap = new org.drip.simm.product.RiskFactorTenorSensitivity
  250.             (riskFactorTenorSensitivityMap);
  251.     }

  253.     /**
  254.      * Retrieve the Cumulative Risk Factor Tenor Sensitivity Map
  255.      * 
  256.      * @return The Cumulative Risk Factor Tenor Sensitivity Map
  257.      */

  259.     public org.drip.simm.product.RiskFactorTenorSensitivity cumulativeTenorSensitivityMap()
  260.     {
  261.         return _cumulativeTenorSensitivityMap;
  262.     }

  264.     /**
  265.      * Retrieve the Risk Factor Tenor Sensitivity Map
  266.      * 
  267.      * @return The Risk Factor Tenor Sensitivity Map
  268.      */

  270.     public java.util.Map<java.lang.String, org.drip.simm.product.RiskFactorTenorSensitivity>
  271.         tenorSensitivityMap()
  272.     {
  273.         return _tenorSensitivityMap;
  274.     }

  276.     /**
  277.      * Generate the Cumulative Tenor Sensitivity
  278.      * 
  279.      * @return The Cumulative Tenor Sensitivity
  280.      */

  282.     public double cumulativeTenorSensitivity()
  283.     {
  284.         return _cumulativeTenorSensitivityMap.cumulative();
  285.     }

  287.     /**
  288.      * Compute the Sensitivity Concentration Risk Factor
  289.      * 
  290.      * @param sensitivityConcentrationThreshold The Sensitivity Concentration Threshold
  291.      * 
  292.      * @return The Sensitivity Concentration Risk Factor
  293.      * 
  294.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  295.      */

  297.     public double sensitivityConcentrationRiskFactor (
  298.         final double sensitivityConcentrationThreshold)
  299.         throws java.lang.Exception
  300.     {
  301.         if (!org.drip.numerical.common.NumberUtil.IsValid (sensitivityConcentrationThreshold))
  302.         {
  303.             throw new java.lang.Exception
  304.                 ("BucketSensitivityCR::sensitivityConcentrationRiskFactor => Invalid Inputs");
  305.         }

  307.         return java.lang.Math.max (
  308.             java.lang.Math.sqrt (
  309.                 java.lang.Math.max (
  310.                     cumulativeTenorSensitivity(),
  311.                     0.
  312.                 ) / sensitivityConcentrationThreshold
  313.             ),
  314.             1.
  315.         );
  316.     }

  318.     /**
  319.      * Generate the Tenor Sensitivity Margin Map
  320.      * 
  321.      * @param bucketSensitivitySettings The Bucket Tenor Sensitivity Settings
  322.      * 
  323.      * @return The Tenor Sensitivity Margin Map
  324.      */

  326.     public java.util.Map<java.lang.String, java.lang.Double> tenorSensitivityMargin (
  327.         final org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettings)
  328.     {
  329.         if (null == bucketSensitivitySettings)
  330.         {
  331.             return null;
  332.         }

  334.         java.util.Map<java.lang.String, java.lang.Double> tenorSensitivityMargin =
  335.             _cumulativeTenorSensitivityMap.sensitivityMargin (bucketSensitivitySettings.tenorRiskWeight());

  337.         if (null == tenorSensitivityMargin)
  338.         {
  339.             return tenorSensitivityMargin;
  340.         }

  342.         double sensitivityConcentrationRiskFactor = java.lang.Double.NaN;

  344.         try
  345.         {
  346.             sensitivityConcentrationRiskFactor = sensitivityConcentrationRiskFactor
  347.                 (bucketSensitivitySettings.concentrationThreshold());
  348.         }
  349.         catch (java.lang.Exception e)
  350.         {
  351.             e.printStackTrace();

  353.             return null;
  354.         }

  356.         for (java.util.Map.Entry<java.lang.String, java.lang.Double> tenorSensitivityMarginEntry :
  357.             tenorSensitivityMargin.entrySet())
  358.         {
  359.             java.lang.String tenor = tenorSensitivityMarginEntry.getKey();

  361.             tenorSensitivityMargin.put (
  362.                 tenor,
  363.                 tenorSensitivityMargin.get (tenor) * sensitivityConcentrationRiskFactor
  364.             );
  365.         }

  367.         return tenorSensitivityMargin;
  368.     }

  370.     /**
  371.      * Generate the CR Margin Factor Curve Tenor Aggregate
  372.      * 
  373.      * @param bucketSensitivitySettings The Bucket Tenor Sensitivity Settings
  374.      * 
  375.      * @return The CR Margin Factor Curve Tenor Aggregate
  376.      */

  378.     public org.drip.simm.margin.RiskFactorAggregateCR curveAggregate (
  379.         final org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettings)
  380.     {
  381.         if (null == bucketSensitivitySettings)
  382.         {
  383.             return null;
  384.         }

  386.         java.util.Set<java.lang.String> componentNameSet = _tenorSensitivityMap.keySet();

  388.         java.util.Map<java.lang.String, java.util.Map<java.lang.String, java.lang.Double>>
  389.             componentTenorSensitivityMargin = new
  390.                 org.drip.analytics.support.CaseInsensitiveHashMap<java.util.Map<java.lang.String,
  391.                     java.lang.Double>>();

  393.         double sensitivityConcentrationRiskFactor = java.lang.Double.NaN;

  395.         try
  396.         {
  397.             sensitivityConcentrationRiskFactor = sensitivityConcentrationRiskFactor
  398.                 (bucketSensitivitySettings.concentrationThreshold());
  399.         }
  400.         catch (java.lang.Exception e)
  401.         {
  402.             e.printStackTrace();

  404.             return null;
  405.         }

  407.         for (java.lang.String componentName : componentNameSet)
  408.         {
  409.             java.util.Map<java.lang.String, java.lang.Double> tenorSensitivity = _tenorSensitivityMap.get
  410.                 (componentName).sensitivityMap();

  412.             java.util.Map<java.lang.String, java.lang.Double> tenorSensitivityMargin = new
  413.                 org.drip.analytics.support.CaseInsensitiveHashMap<java.lang.Double>();

  415.             for (java.util.Map.Entry<java.lang.String, java.lang.Double> tenorSensitivityEntry :
  416.                 tenorSensitivity.entrySet())
  417.             {
  418.                 java.lang.String tenor = tenorSensitivityEntry.getKey();

  420.                 tenorSensitivityMargin.put (
  421.                     tenor,
  422.                     tenorSensitivity.get (tenor) * sensitivityConcentrationRiskFactor
  423.                 );
  424.             }

  426.             componentTenorSensitivityMargin.put (
  427.                 componentName,
  428.                 tenorSensitivityMargin
  429.             );
  430.         }

  432.         try
  433.         {
  434.             return new org.drip.simm.margin.RiskFactorAggregateCR (
  435.                 componentTenorSensitivityMargin,
  436.                 sensitivityConcentrationRiskFactor
  437.             );
  438.         }
  439.         catch (java.lang.Exception e)
  440.         {
  441.             e.printStackTrace();
  442.         }

  444.         return null;
  445.     }

  447.     /**
  448.      * Generate the Bucket CR Sensitivity Margin Aggregate
  449.      * 
  450.      * @param bucketSensitivitySettingsCR The CR Bucket Sensitivity Settings
  451.      * 
  452.      * @return The Bucket IR Sensitivity Margin Aggregate
  453.      */

  455.     public org.drip.simm.margin.BucketAggregateCR aggregate (
  456.         final org.drip.simm.parameters.BucketSensitivitySettingsCR bucketSensitivitySettingsCR)
  457.     {
  458.         if (null == bucketSensitivitySettingsCR)
  459.         {
  460.             return null;
  461.         }

  463.         return bucketSensitivitySettingsCR instanceof org.drip.simm.parameters.BucketCurvatureSettingsCR ?
  464.             curvatureAggregate (bucketSensitivitySettingsCR) : linearAggregate (bucketSensitivitySettingsCR);
  465.     }
  466. }
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