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

  81. /**
  82.  * <i>VolatilityCurveScenario</i> uses the Volatility calibration instruments along with the component
  83.  * calibrator to produce scenario Volatility curves.
  84.  *
  85.  *  <br><br>
  86.  *  <ul>
  87.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  88.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  89.  *      <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>
  90.  *      <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>
  91.  *  </ul>
  92.  * <br><br>
  93.  *
  94.  * @author Lakshmi Krishnamurthy
  95.  */

  97. public class VolatilityCurveScenario {

  99.     /**
  100.      * Calibrate a Volatility Curve
  101.      * 
  102.      * @param strName Volatility Curve name
  103.      * @param valParams ValuationParams
  104.      * @param lslUnderlying Underlying Latent State Label
  105.      * @param aFRACapFloor Array of the FRA Cap Floor Instruments
  106.      * @param adblCalibQuote Array of component quotes
  107.      * @param astrCalibMeasure Array of the calibration measures
  108.      * @param bFlat Flat Calibration (True), or real bootstrapping (false)
  109.      * @param dc Discount Curve
  110.      * @param fc Forward Curve
  111.      * @param lsfc Latent State Fixings Container
  112.      * @param vcp Valuation Customization Parameters
  113.      * 
  114.      * @return VolatilityCurve Instance
  115.      */

  117.     public static final org.drip.state.volatility.VolatilityCurve Standard (
  118.         final java.lang.String strName,
  119.         final org.drip.param.valuation.ValuationParams valParams,
  120.         final org.drip.state.identifier.LatentStateLabel lslUnderlying,
  121.         final org.drip.product.fra.FRAStandardCapFloor[] aFRACapFloor,
  122.         final double[] adblCalibQuote,
  123.         final java.lang.String[] astrCalibMeasure,
  124.         final boolean bFlat,
  125.         final org.drip.state.discount.MergedDiscountForwardCurve dc,
  126.         final org.drip.state.forward.ForwardCurve fc,
  127.         final org.drip.param.market.LatentStateFixingsContainer lsfc,
  128.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  129.     {
  130.         if (null == valParams || null == aFRACapFloor || null == adblCalibQuote || null == astrCalibMeasure
  131.             || null == dc)
  132.             return null;

  134.         int iNumComp = aFRACapFloor.length;
  135.         int aiPillarDate[] = new int[iNumComp];
  136.         double adblVolatility[] = new double[iNumComp];
  137.         org.drip.state.volatility.ExplicitBootVolatilityCurve ebvc = null;

  139.         if (0 == iNumComp || adblCalibQuote.length != iNumComp || astrCalibMeasure.length != iNumComp)
  140.             return null;

  142.         for (int i = 0; i < iNumComp; ++i) {
  143.             if (null == aFRACapFloor[i]) return null;

  145.             adblVolatility[i] = 0.001;

  147.             aiPillarDate[i] = aFRACapFloor[i].stream().maturity().julian();
  148.         }

  150.         try {
  151.             ebvc = new org.drip.state.nonlinear.FlatForwardVolatilityCurve (dc.epoch().julian(),
  152.                 org.drip.state.identifier.VolatilityLabel.Standard (lslUnderlying), dc.currency(),
  153.                     aiPillarDate, adblVolatility);
  154.         } catch (java.lang.Exception e) {
  155.             e.printStackTrace();

  157.             return null;
  158.         }

  160.         for (int i = 0; i < iNumComp; ++i) {
  161.             try {
  162.                 org.drip.state.nonlinear.NonlinearCurveBuilder.VolatilityCurveNode (valParams,
  163.                     aFRACapFloor[i], adblCalibQuote[i], astrCalibMeasure[i], bFlat, i, ebvc, dc, fc, lsfc,
  164.                         vcp);
  165.             } catch (java.lang.Exception e) {
  166.                 e.printStackTrace();

  168.                 return null;
  169.             }
  170.         }

  172.         return ebvc;
  173.     }

  175.     /**
  176.      * Create an array of tenor bumped Volatility curves
  177.      * 
  178.      * @param strName Volatility Curve Name
  179.      * @param valParams ValuationParams
  180.      * @param lslUnderlying Underlying Latent State Label
  181.      * @param aFRACapFloor Array of the FRA Cap Floor Instruments
  182.      * @param adblCalibQuote Array of component quotes
  183.      * @param astrCalibMeasure Array of the calibration measures
  184.      * @param bFlat Flat Calibration (True), or real bootstrapping (false)
  185.      * @param dblBump Amount of bump applied to the tenor
  186.      * @param dc Base Discount Curve
  187.      * @param fc Forward Curve
  188.      * @param lsfc Latent State Fixings Container
  189.      * @param vcp Valuation Customization Parameters
  190.      * 
  191.      * @return Array of Volatility Curves
  192.      */

  194.     public static final org.drip.state.volatility.VolatilityCurve[] Tenor (
  195.         final java.lang.String strName,
  196.         final org.drip.param.valuation.ValuationParams valParams,
  197.         final org.drip.state.identifier.LatentStateLabel lslUnderlying,
  198.         final org.drip.product.fra.FRAStandardCapFloor[] aFRACapFloor,
  199.         final double[] adblCalibQuote,
  200.         final java.lang.String[] astrCalibMeasure,
  201.         final boolean bFlat,
  202.         final double dblBump,
  203.         final org.drip.state.discount.MergedDiscountForwardCurve dc,
  204.         final org.drip.state.forward.ForwardCurve fc,
  205.         final org.drip.param.market.LatentStateFixingsContainer lsfc,
  206.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  207.     {
  208.         if (null == aFRACapFloor || !org.drip.numerical.common.NumberUtil.IsValid (dblBump)) return null;

  210.         int iNumComp = aFRACapFloor.length;
  211.         org.drip.state.volatility.VolatilityCurve[] aVolatilityCurve = new
  212.             org.drip.state.volatility.VolatilityCurve[iNumComp];

  214.         if (0 == iNumComp) return null;

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

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

  222.             if (null == (aVolatilityCurve[i] = Standard (strName, valParams, lslUnderlying, aFRACapFloor,
  223.                 adblTenorQuote, astrCalibMeasure, bFlat, dc, fc, lsfc, vcp)))
  224.                 return null;
  225.         }

  227.         return aVolatilityCurve;
  228.     }

  230.     /**
  231.      * Create an tenor named map of tenor bumped Volatility curves
  232.      * 
  233.      * @param strName Volatility Curve name
  234.      * @param valParams ValuationParams
  235.      * @param lslUnderlying Underlying Latent State Label
  236.      * @param aFRACapFloor Array of the FRA Cap Floor Instruments
  237.      * @param adblCalibQuote Array of component quotes
  238.      * @param astrCalibMeasure Array of the calibration measures
  239.      * @param bFlat Flat Calibration (True), or real bootstrapping (false)
  240.      * @param dblBump Amount of bump applied to the tenor
  241.      * @param dc Base Discount Curve
  242.      * @param fc Forward Curve
  243.      * @param lsfc Latent State Fixings Container
  244.      * @param vcp Valuation Customization Parameters
  245.      * 
  246.      * @return Tenor named map of tenor bumped Volatility curves
  247.      */

  249.     public org.drip.analytics.support.CaseInsensitiveTreeMap<org.drip.state.volatility.VolatilityCurve>
  250.         TenorMap (
  251.             final java.lang.String strName,
  252.             final org.drip.param.valuation.ValuationParams valParams,
  253.             final org.drip.state.identifier.LatentStateLabel lslUnderlying,
  254.             final org.drip.product.fra.FRAStandardCapFloor[] aFRACapFloor,
  255.             final double[] adblCalibQuote,
  256.             final java.lang.String[] astrCalibMeasure,
  257.             final boolean bFlat,
  258.             final double dblBump,
  259.             final org.drip.state.discount.MergedDiscountForwardCurve dc,
  260.             final org.drip.state.forward.ForwardCurve fc,
  261.             final org.drip.param.market.LatentStateFixingsContainer lsfc,
  262.             final org.drip.param.valuation.ValuationCustomizationParams vcp)
  263.     {
  264.         if (null == aFRACapFloor || !org.drip.numerical.common.NumberUtil.IsValid (dblBump)) return null;

  266.         int iNumComp = aFRACapFloor.length;

  268.         if (0 == iNumComp) return null;

  270.         org.drip.analytics.support.CaseInsensitiveTreeMap<org.drip.state.volatility.VolatilityCurve>
  271.             mapTenorVolatilityCurve = new
  272.                 org.drip.analytics.support.CaseInsensitiveTreeMap<org.drip.state.volatility.VolatilityCurve>();

  274.         for (int i = 0; i < iNumComp; ++i) {
  275.             double[] adblTenorQuote = new double[iNumComp];
  276.             org.drip.state.volatility.VolatilityCurve volCurve = null;

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

  281.             if (null == (volCurve = Standard (strName, valParams, lslUnderlying, aFRACapFloor, adblTenorQuote,
  282.                 astrCalibMeasure, bFlat, dc, fc, lsfc, vcp)))
  283.                 return null;

  285.             mapTenorVolatilityCurve.put (org.drip.analytics.date.DateUtil.YYYYMMDD
  286.                 (aFRACapFloor[i].maturityDate().julian()), volCurve);
  287.         }

  289.         return mapTenorVolatilityCurve;
  290.     }
  291. }
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