BasisSplineFXForward.java

  1. package org.drip.state.curve;

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

  82. /**
  83.  * <i>BasisSplineFXForward</i> manages the Basis Latent State, using the Basis as the State Response
  84.  * Representation.
  85.  *
  86.  *  <br><br>
  87.  *  <ul>
  88.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  89.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  90.  *      <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>
  91.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/state/curve/README.md">Basis Spline Based Latent States</a></li>
  92.  *  </ul>
  93.  * <br><br>
  94.  *
  95.  * @author Lakshmi Krishnamurthy
  96.  */

  98. public class BasisSplineFXForward extends org.drip.state.fx.FXCurve {
  99.     private org.drip.spline.grid.Span _span = null;
  100.     private double _dblFXSpot = java.lang.Double.NaN;

  102.     private double nodeBasis (
  103.         final int iNodeDate,
  104.         final org.drip.param.valuation.ValuationParams valParam,
  105.         final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
  106.         final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
  107.         final boolean bBasisOnDenom)
  108.         throws java.lang.Exception
  109.     {
  110.         return new org.drip.product.fx.FXForwardComponent ("FXFWD_" +
  111.             org.drip.numerical.common.StringUtil.GUID(), currencyPair(), epoch().julian(), iNodeDate, 1.,
  112.                 null).discountCurveBasis (valParam, dcNum, dcDenom, _dblFXSpot, fx (iNodeDate),
  113.                     bBasisOnDenom);
  114.     }

  116.     /**
  117.      * BasisSplineFXForward constructor
  118.      * 
  119.      * @param cp The Currency Pair
  120.      * @param span The Span over which the Basis Representation is valid
  121.      * 
  122.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  123.      */

  125.     public BasisSplineFXForward (
  126.         final org.drip.product.params.CurrencyPair cp,
  127.         final org.drip.spline.grid.Span span)
  128.         throws java.lang.Exception
  129.     {
  130.         super ((int) span.left(), cp);

  132.         _span = span;

  134.         _dblFXSpot = _span.calcResponseValue (_span.left());
  135.     }

  137.     @Override public double fx (
  138.         final int iDate)
  139.         throws java.lang.Exception
  140.     {
  141.         double dblSpanLeft = _span.left();

  143.         if (iDate <= dblSpanLeft) return _span.calcResponseValue (dblSpanLeft);

  145.         double dblSpanRight = _span.right();

  147.         if (iDate >= dblSpanRight) return _span.calcResponseValue (dblSpanRight);

  149.         return _span.calcResponseValue (iDate);
  150.     }

  152.     /**
  153.      * Retrieve the FX Spot
  154.      * 
  155.      * @return The FX Spot
  156.      */

  158.     public double fxSpot()
  159.     {
  160.         return _dblFXSpot;
  161.     }

  163.     @Override public double[] zeroBasis (
  164.         final int[] aiDateNode,
  165.         final org.drip.param.valuation.ValuationParams valParams,
  166.         final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
  167.         final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
  168.         final boolean bBasisOnDenom)
  169.     {
  170.         if (null == aiDateNode) return null;

  172.         int iNumBasis = aiDateNode.length;
  173.         double[] adblBasis = new double[iNumBasis];

  175.         if (0 == iNumBasis) return null;

  177.         for (int i = 0; i < iNumBasis; ++i) {
  178.             try {
  179.                 adblBasis[i] = nodeBasis (aiDateNode[i], valParams, dcNum, dcDenom, bBasisOnDenom);
  180.             } catch (java.lang.Exception e) {
  181.                 e.printStackTrace();

  183.                 return null;
  184.             }
  185.         }

  187.         return adblBasis;
  188.     }

  190.     @Override public double[] bootstrapBasis (
  191.         final int[] aiDateNode,
  192.         final org.drip.param.valuation.ValuationParams valParams,
  193.         final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
  194.         final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
  195.         final boolean bBasisOnDenom)
  196.     {
  197.         if (null == aiDateNode) return null;

  199.         int iNumBasis = aiDateNode.length;
  200.         double[] adblBasis = new double[iNumBasis];
  201.         org.drip.state.discount.MergedDiscountForwardCurve dcBasis = bBasisOnDenom ? dcDenom : dcNum;

  203.         if (0 == iNumBasis || null == dcBasis) return null;

  205.         for (int i = 0; i < iNumBasis; ++i) {
  206.             try {
  207.                 if (bBasisOnDenom)
  208.                     adblBasis[i] = nodeBasis (aiDateNode[i], valParams, dcNum, dcBasis, true);
  209.                 else
  210.                     adblBasis[i] = nodeBasis (aiDateNode[i], valParams, dcBasis, dcDenom, false);
  211.             } catch (java.lang.Exception e) {
  212.                 e.printStackTrace();

  214.                 return null;
  215.             }
  216.         }

  218.         return adblBasis;
  219.     }

  221.     @Override public double[] impliedNodeRates (
  222.         final int[] aiDateNode,
  223.         final org.drip.param.valuation.ValuationParams valParams,
  224.         final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
  225.         final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
  226.         final boolean bBasisOnDenom)
  227.     {
  228.         if (null == aiDateNode) return null;

  230.         int iNumBasis = aiDateNode.length;
  231.         double[] adblImpliedNodeRate = new double[iNumBasis];

  233.         if (0 == iNumBasis) return null;

  235.         for (int i = 0; i < iNumBasis; ++i) {
  236.             try {
  237.                 double dblBaseImpliedRate = java.lang.Double.NaN;

  239.                 if (bBasisOnDenom)
  240.                     dblBaseImpliedRate = dcNum.zero (aiDateNode[i]);
  241.                 else
  242.                     dblBaseImpliedRate = dcDenom.zero (aiDateNode[i]);

  244.                 adblImpliedNodeRate[i] = dblBaseImpliedRate + nodeBasis (i, valParams, dcNum, dcDenom,
  245.                     bBasisOnDenom);
  246.             } catch (java.lang.Exception e) {
  247.                 e.printStackTrace();
  248.             }
  249.         }

  251.         return adblImpliedNodeRate;
  252.     }

  254.     @Override public org.drip.state.discount.MergedDiscountForwardCurve bootstrapBasisDC (
  255.         final int[] aiDateNode,
  256.         final org.drip.param.valuation.ValuationParams valParams,
  257.         final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
  258.         final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
  259.         final boolean bBasisOnDenom)
  260.     {
  261.         double[] adblImpliedRate = impliedNodeRates (aiDateNode, valParams, dcNum, dcDenom, bBasisOnDenom);

  263.         if (null == adblImpliedRate) return null;

  265.         int iNumDF = adblImpliedRate.length;
  266.         double[] adblDF = new double[iNumDF];
  267.         org.drip.state.discount.MergedDiscountForwardCurve dc = bBasisOnDenom ? dcDenom : dcNum;

  269.         if (0 == iNumDF) return null;

  271.         int iSpotDate = valParams.valueDate();

  273.         java.lang.String strCurrency = dc.currency();

  275.         for (int i = 0; i < iNumDF; ++i)
  276.             adblDF[i] = java.lang.Math.exp (-1. * adblImpliedRate[i] * (aiDateNode[i] - iSpotDate) /
  277.                 365.25);

  279.         try {
  280.             return org.drip.state.creator.ScenarioDiscountCurveBuilder.CubicPolynomialDiscountCurve
  281.                 (strCurrency + "::BASIS", new org.drip.analytics.date.JulianDate (iSpotDate), strCurrency,
  282.                     aiDateNode, adblDF);
  283.         } catch (java.lang.Exception e) {
  284.             e.printStackTrace();
  285.         }

  287.         return null;
  288.     }

  290.     @Override public double rate (
  291.         final int[] aiDateNode,
  292.         final org.drip.param.valuation.ValuationParams valParams,
  293.         final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
  294.         final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
  295.         final int iDate,
  296.         final boolean bBasisOnDenom)
  297.         throws java.lang.Exception
  298.     {
  299.         org.drip.state.discount.MergedDiscountForwardCurve dcImplied = bootstrapBasisDC (aiDateNode, valParams, dcNum,
  300.             dcDenom, bBasisOnDenom);

  302.         if (null == dcImplied)
  303.             throw new java.lang.Exception ("BasisSplineFXForward::rate: Cannot imply basis DC!");

  305.         return dcImplied.zero (iDate);
  306.     }

  308.     @Override public org.drip.numerical.differentiation.WengertJacobian jackDForwardDManifestMeasure (
  309.         final java.lang.String strManifestMeasure,
  310.         final int iDate)
  311.     {
  312.         return _span.jackDResponseDManifestMeasure (strManifestMeasure, iDate, 1);
  313.     }
  314. }
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