CreditCurveScenario.java

  1. package org.drip.state.boot;

  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.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  12.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  13.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  14.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  15.  * Copyright (C) 2013 Lakshmi Krishnamurthy
  16.  * Copyright (C) 2012 Lakshmi Krishnamurthy
  17.  * Copyright (C) 2011 Lakshmi Krishnamurthy
  18.  * 
  19.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  20.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  21.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  22.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  23.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  24.  *      and computational support.
  25.  *  
  26.  *      https://lakshmidrip.github.io/DROP/
  27.  *  
  28.  *  DROP is composed of three modules:
  29.  *  
  30.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  31.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  32.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  33.  * 
  34.  *  DROP Product Core implements libraries for the following:
  35.  *  - Fixed Income Analytics
  36.  *  - Loan Analytics
  37.  *  - Transaction Cost Analytics
  38.  * 
  39.  *  DROP Portfolio Core implements libraries for the following:
  40.  *  - Asset Allocation Analytics
  41.  *  - Asset Liability Management Analytics
  42.  *  - Capital Estimation Analytics
  43.  *  - Exposure Analytics
  44.  *  - Margin Analytics
  45.  *  - XVA Analytics
  46.  * 
  47.  *  DROP Computational Core implements libraries for the following:
  48.  *  - Algorithm Support
  49.  *  - Computation Support
  50.  *  - Function Analysis
  51.  *  - Model Validation
  52.  *  - Numerical Analysis
  53.  *  - Numerical Optimizer
  54.  *  - Spline Builder
  55.  *  - Statistical Learning
  56.  * 
  57.  *  Documentation for DROP is Spread Over:
  58.  * 
  59.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  60.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  61.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  62.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  63.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  64.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  65.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  66.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  67.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  68.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  69.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  70.  * 
  71.  *  Licensed under the Apache License, Version 2.0 (the "License");
  72.  *      you may not use this file except in compliance with the License.
  73.  *   
  74.  *  You may obtain a copy of the License at
  75.  *      http://www.apache.org/licenses/LICENSE-2.0
  76.  *  
  77.  *  Unless required by applicable law or agreed to in writing, software
  78.  *      distributed under the License is distributed on an "AS IS" BASIS,
  79.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  80.  *  
  81.  *  See the License for the specific language governing permissions and
  82.  *      limitations under the License.
  83.  */

  85. /**
  86.  * <i>CreditCurveScenario</i> uses the hazard rate calibration instruments along with the component
  87.  * calibrator to produce scenario hazard rate curves. CreditCurveScenario typically first constructs the
  88.  * actual curve calibrator instance to localize the intelligence around curve construction. It then uses this
  89.  * curve calibrator instance to build individual curves or the sequence of node bumped scenario curves. The
  90.  * curves in the set may be an array, or tenor-keyed.
  91.  *
  92.  *  <br><br>
  93.  *  <ul>
  94.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  95.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  96.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/state/README.md">Latent State Inference and Creation Utilities</a></li>
  97.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/state/boot/README.md">Bootable Discount, Credit, Volatility States</a></li>
  98.  *  </ul>
  99.  * <br><br>
  100.  *
  101.  * @author Lakshmi Krishnamurthy
  102.  */

  104. public class CreditCurveScenario {
  105.     static class TranslatedQuoteMeasure {
  106.         java.lang.String _strMeasure = "";
  107.         double _dblQuote = java.lang.Double.NaN;

  109.         TranslatedQuoteMeasure (
  110.             final java.lang.String strMeasure,
  111.             final double dblQuote)
  112.         {
  113.             _dblQuote = dblQuote;
  114.             _strMeasure = strMeasure;
  115.         }
  116.     }

  118.     private static final TranslatedQuoteMeasure TranslateQuoteMeasure (
  119.         final org.drip.product.definition.CalibratableComponent comp,
  120.         final org.drip.param.valuation.ValuationParams valParams,
  121.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  122.         final org.drip.state.discount.MergedDiscountForwardCurve dc,
  123.         final org.drip.state.credit.CreditCurve cc,
  124.         final java.lang.String strMeasure,
  125.         final double dblQuote)
  126.     {
  127.         if (!(comp instanceof org.drip.product.definition.CreditDefaultSwap) ||
  128.             (!"FlatSpread".equalsIgnoreCase (strMeasure) && !"QuotedSpread".equalsIgnoreCase (strMeasure)))
  129.             return new TranslatedQuoteMeasure (strMeasure, dblQuote);

  131.         org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapQSMeasures =
  132.             ((org.drip.product.definition.CreditDefaultSwap) comp).valueFromQuotedSpread (valParams,
  133.                 pricerParams, org.drip.param.creator.MarketParamsBuilder.Credit (dc, cc), null,
  134.                     0.01, dblQuote);

  136.         return null == mapQSMeasures ? null : new TranslatedQuoteMeasure ("Upfront", mapQSMeasures.get
  137.             ("Upfront"));
  138.     }

  140.     /**
  141.      * Calibrate a Credit Curve
  142.      * 
  143.      * @param strName Credit Curve name
  144.      * @param valParams ValuationParams
  145.      * @param aCalibInst Array of Calibration Instruments
  146.      * @param adblCalibQuote Array of component quotes
  147.      * @param astrCalibMeasure Array of the calibration measures
  148.      * @param dblRecovery Component recovery
  149.      * @param bFlat Flat Calibration (True), or real bootstrapping (false)
  150.      * @param dc Base Discount Curve
  151.      * @param gc Govvie Curve
  152.      * @param lsfc Latent State Fixings Container
  153.      * @param vcp Valuation Customization Parameters
  154.      * @param cp The Calibration Parameters
  155.      * 
  156.      * @return CreditCurve Instance
  157.      */

  159.     public static final org.drip.state.credit.CreditCurve Standard (
  160.         final java.lang.String strName,
  161.         final org.drip.param.valuation.ValuationParams valParams,
  162.         final org.drip.product.definition.CalibratableComponent[] aCalibInst,
  163.         final double[] adblCalibQuote,
  164.         final java.lang.String[] astrCalibMeasure,
  165.         final double dblRecovery,
  166.         final boolean bFlat,
  167.         final org.drip.state.discount.MergedDiscountForwardCurve dc,
  168.         final org.drip.state.govvie.GovvieCurve gc,
  169.         final org.drip.param.market.LatentStateFixingsContainer lsfc,
  170.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  171.         final org.drip.param.definition.CalibrationParams cp)
  172.     {
  173.         if (null == valParams || null == aCalibInst || null == adblCalibQuote || null == astrCalibMeasure ||
  174.             null == dc)
  175.             return null;

  177.         int iNumComp = aCalibInst.length;
  178.         int aiDate[] = new int[iNumComp];
  179.         double adblHazardRate[] = new double[iNumComp];

  181.         if (0 == iNumComp || adblCalibQuote.length != iNumComp || astrCalibMeasure.length != iNumComp)
  182.             return null;

  184.         for (int i = 0; i < iNumComp; ++i) {
  185.             if (null == aCalibInst[i]) return null;

  187.             adblHazardRate[i] = java.lang.Double.NaN;

  189.             aiDate[i] = aCalibInst[i].maturityDate().julian();
  190.         }

  192.         org.drip.state.credit.ExplicitBootCreditCurve ebcc =
  193.             org.drip.state.creator.ScenarioCreditCurveBuilder.Hazard (new org.drip.analytics.date.JulianDate
  194.                 (valParams.valueDate()), strName, dc.currency(), aiDate, adblHazardRate, dblRecovery);

  196.         org.drip.param.pricer.CreditPricerParams pricerParams = new org.drip.param.pricer.CreditPricerParams
  197.             (7, null, false, org.drip.param.pricer.CreditPricerParams.PERIOD_DISCRETIZATION_DAY_STEP);

  199.         for (int i = 0; i < iNumComp; ++i) {
  200.             TranslatedQuoteMeasure tqm = TranslateQuoteMeasure (aCalibInst[i], valParams, pricerParams, dc,
  201.                 ebcc, astrCalibMeasure[i], adblCalibQuote[i]);

  203.             if (null == tqm) return null;

  205.             if (!org.drip.state.nonlinear.NonlinearCurveBuilder.CreditCurve (valParams, aCalibInst[i],
  206.                 tqm._dblQuote, tqm._strMeasure, bFlat, i, ebcc, dc, gc, pricerParams, lsfc, vcp, cp))
  207.             {
  208.                 return null;
  209.             }
  210.         }

  212.         ebcc.setInstrCalibInputs (valParams, bFlat, dc, gc, pricerParams, aCalibInst, adblCalibQuote,
  213.             astrCalibMeasure, lsfc, vcp);

  215.         return ebcc;
  216.     }

  218.     /**
  219.      * Create an array of tenor bumped credit curves
  220.      * 
  221.      * @param strName Credit Curve Name
  222.      * @param valParams ValuationParams
  223.      * @param aCalibInst Array of Calibration Instruments
  224.      * @param adblCalibQuote Array of component quotes
  225.      * @param astrCalibMeasure Array of the calibration measures
  226.      * @param dblRecovery Component recovery
  227.      * @param bFlat Flat Calibration (True), or real bootstrapping (false)
  228.      * @param dblBump Amount of bump applied to the tenor
  229.      * @param dc Base Discount Curve
  230.      * @param gc Govvie Curve
  231.      * @param lsfc Latent State Fixings Container
  232.      * @param vcp Valuation Customization Parameters
  233.      * 
  234.      * @return Array of CreditCurves
  235.      */

  237.     public static final org.drip.state.credit.CreditCurve[] Tenor (
  238.         final java.lang.String strName,
  239.         final org.drip.param.valuation.ValuationParams valParams,
  240.         final org.drip.product.definition.CalibratableComponent[] aCalibInst,
  241.         final double[] adblCalibQuote,
  242.         final java.lang.String[] astrCalibMeasure,
  243.         final double dblRecovery,
  244.         final boolean bFlat,
  245.         final double dblBump,
  246.         final org.drip.state.discount.MergedDiscountForwardCurve dc,
  247.         final org.drip.state.govvie.GovvieCurve gc,
  248.         final org.drip.param.market.LatentStateFixingsContainer lsfc,
  249.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  250.     {
  251.         if (null == valParams || null == aCalibInst || null == adblCalibQuote || null == astrCalibMeasure ||
  252.             null == dc)
  253.             return null;

  255.         int iNumComp = aCalibInst.length;
  256.         org.drip.state.credit.CreditCurve[] aCreditCurve = new org.drip.state.credit.CreditCurve[iNumComp];

  258.         if (0 == iNumComp || adblCalibQuote.length != iNumComp || astrCalibMeasure.length != iNumComp)
  259.             return null;

  261.         for (int i = 0; i < iNumComp; ++i) {
  262.             double[] adblTenorQuote = new double [iNumComp];

  264.             for (int j = 0; j < iNumComp; ++j)
  265.                 adblTenorQuote[j] += (j == i ? dblBump : 0.);

  267.             if (null == (aCreditCurve[i] = Standard (strName, valParams, aCalibInst, adblTenorQuote,
  268.                 astrCalibMeasure, dblRecovery, bFlat, dc, gc, lsfc, vcp, null)))
  269.                 return null;
  270.         }

  272.         return aCreditCurve;
  273.     }

  275.     /**
  276.      * Create an tenor named map of tenor bumped credit curves
  277.      * 
  278.      * @param strName Credit Curve name
  279.      * @param valParams ValuationParams
  280.      * @param aCalibInst Array of Calibration Instruments
  281.      * @param adblCalibQuote Array of component quotes
  282.      * @param astrCalibMeasure Array of the calibration measures
  283.      * @param dblRecovery Component recovery
  284.      * @param bFlat Flat Calibration (True), or real bootstrapping (false)
  285.      * @param dblBump Amount of bump applied to the tenor
  286.      * @param dc Base Discount Curve
  287.      * @param gc Govvie Curve
  288.      * @param lsfc Latent State Fixings Container
  289.      * @param vcp Valuation Customization Parameters
  290.      * 
  291.      * @return Tenor named map of tenor bumped credit curves
  292.      */

  294.     public static final org.drip.analytics.support.CaseInsensitiveTreeMap<org.drip.state.credit.CreditCurve>
  295.         TenorMap (
  296.             final java.lang.String strName,
  297.             final org.drip.param.valuation.ValuationParams valParams,
  298.             final org.drip.product.definition.CalibratableComponent[] aCalibInst,
  299.             final double[] adblCalibQuote,
  300.             final java.lang.String[] astrCalibMeasure,
  301.             final double dblRecovery,
  302.             final boolean bFlat,
  303.             final double dblBump,
  304.             final org.drip.state.discount.MergedDiscountForwardCurve dc,
  305.             final org.drip.state.govvie.GovvieCurve gc,
  306.             final org.drip.param.market.LatentStateFixingsContainer lsfc,
  307.             final org.drip.param.valuation.ValuationCustomizationParams vcp)
  308.     {
  309.         if (null == valParams || null == aCalibInst || null == adblCalibQuote || null == astrCalibMeasure ||
  310.             null == dc)
  311.             return null;

  313.         int iNumComp = aCalibInst.length;

  315.         if (0 == iNumComp || adblCalibQuote.length != iNumComp || astrCalibMeasure.length != iNumComp)
  316.             return null;

  318.         org.drip.analytics.support.CaseInsensitiveTreeMap<org.drip.state.credit.CreditCurve>
  319.             mapTenorCreditCurve = new
  320.                 org.drip.analytics.support.CaseInsensitiveTreeMap<org.drip.state.credit.CreditCurve>();

  322.         for (int i = 0; i < iNumComp; ++i) {
  323.             org.drip.state.credit.CreditCurve cc = null;
  324.             double[] adblTenorQuote = new double[iNumComp];

  326.             for (int j = 0; j < iNumComp; ++j)
  327.                 adblTenorQuote[j] = adblCalibQuote[j] + (j == i ? dblBump : 0.);

  329.             if (null == (cc = Standard (strName, valParams, aCalibInst, adblTenorQuote, astrCalibMeasure,
  330.                 dblRecovery, bFlat, dc, gc, lsfc, vcp, null)))
  331.                 return null;

  333.             mapTenorCreditCurve.put (org.drip.analytics.date.DateUtil.YYYYMMDD
  334.                 (aCalibInst[i].maturityDate().julian()), cc);
  335.         }

  337.         return mapTenorCreditCurve;
  338.     }
  339. }
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