FlatForwardFXCurve.java

package org.drip.state.nonlinear;

/*
 * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
 */

/*!
 * Copyright (C) 2020 Lakshmi Krishnamurthy
 * Copyright (C) 2019 Lakshmi Krishnamurthy
 * Copyright (C) 2018 Lakshmi Krishnamurthy
 * Copyright (C) 2017 Lakshmi Krishnamurthy
 * Copyright (C) 2016 Lakshmi Krishnamurthy
 * Copyright (C) 2015 Lakshmi Krishnamurthy
 * 
 *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
 *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
 *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
 *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
 *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
 *      and computational support.
 *  
 *      https://lakshmidrip.github.io/DROP/
 *  
 *  DROP is composed of three modules:
 *  
 *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
 *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
 *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
 * 
 *  DROP Product Core implements libraries for the following:
 *  - Fixed Income Analytics
 *  - Loan Analytics
 *  - Transaction Cost Analytics
 * 
 *  DROP Portfolio Core implements libraries for the following:
 *  - Asset Allocation Analytics
 *  - Asset Liability Management Analytics
 *  - Capital Estimation Analytics
 *  - Exposure Analytics
 *  - Margin Analytics
 *  - XVA Analytics
 * 
 *  DROP Computational Core implements libraries for the following:
 *  - Algorithm Support
 *  - Computation Support
 *  - Function Analysis
 *  - Model Validation
 *  - Numerical Analysis
 *  - Numerical Optimizer
 *  - Spline Builder
 *  - Statistical Learning
 * 
 *  Documentation for DROP is Spread Over:
 * 
 *  - Main                     => https://lakshmidrip.github.io/DROP/
 *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
 *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
 *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
 *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
 *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
 *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
 *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
 *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
 *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
 *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
 * 
 *  Licensed under the Apache License, Version 2.0 (the "License");
 *      you may not use this file except in compliance with the License.
 *   
 *  You may obtain a copy of the License at
 *      http://www.apache.org/licenses/LICENSE-2.0
 *  
 *  Unless required by applicable law or agreed to in writing, software
 *      distributed under the License is distributed on an "AS IS" BASIS,
 *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
 *  
 *  See the License for the specific language governing permissions and
 *      limitations under the License.
 */

/**
 * <i>FlatForwardFXCurve</i> manages the Volatility Latent State, using the Forward FX as the State Response
 * Representation.
 *
 *  <br><br>
 *  <ul>
 *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
 *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
 *      <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>
 *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/state/nonlinear/README.md">Nonlinear (i.e., Boot) Latent State Construction</a></li>
 *  </ul>
 * <br><br>
 *
 * @author Lakshmi Krishnamurthy
 */

public class FlatForwardFXCurve extends org.drip.state.fx.ExplicitBootFXCurve {
    private int[] _aiPillarDate = null;
    private double[] _adblFXForward = null;
    private double _dblFXSpot = java.lang.Double.NaN;

    private double nodeBasis (
        final int iNodeDate,
        final org.drip.param.valuation.ValuationParams valParam,
        final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
        final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
        final boolean bBasisOnDenom)
        throws java.lang.Exception
    {
        return new org.drip.product.fx.FXForwardComponent ("FXFWD_" +
            org.drip.numerical.common.StringUtil.GUID(), currencyPair(), epoch().julian(), iNodeDate, 1.,
                null).discountCurveBasis (valParam, dcNum, dcDenom, _dblFXSpot, fx (iNodeDate),
                    bBasisOnDenom);
    }

    /**
     * FlatForwardVolatilityCurve Constructor
     * 
     * @param iEpochDate Epoch Date
     * @param cp Currency Pair
     * @param dblFXSpot FX Spot
     * @param aiPillarDate Array of the Pillar Dates
     * @param adblFXForward Array of the corresponding FX Forward Nodes
     * 
     * @throws java.lang.Exception Thrown if the Inputs are Invalid
     */

    public FlatForwardFXCurve (
        final int iEpochDate,
        final org.drip.product.params.CurrencyPair cp,
        final double dblFXSpot,
        final int[] aiPillarDate,
        final double[] adblFXForward)
        throws java.lang.Exception
    {
        super (iEpochDate, cp);

        if (!org.drip.numerical.common.NumberUtil.IsValid (_dblFXSpot = dblFXSpot) || null == (_aiPillarDate =
            aiPillarDate) || null == (_adblFXForward = adblFXForward) || _aiPillarDate.length !=
                _adblFXForward.length)
            throw new java.lang.Exception ("FlatForwardFXCurve ctr => Invalid Inputs");

        int iNumPillar = _aiPillarDate.length;

        for (int i = 0; i < iNumPillar; ++i) {
            if (!org.drip.numerical.common.NumberUtil.IsValid (_adblFXForward[i]))
                throw new java.lang.Exception ("FlatForwardFXCurve ctr => Invalid Inputs");
        }
    }

    @Override public double fx (
        final int iDate)
        throws java.lang.Exception
    {
        if (iDate <= _iEpochDate) return _adblFXForward[0];

        int iNumPillar = _adblFXForward.length;

        for (int i = 1; i < iNumPillar; ++i) {
            if (_aiPillarDate[i - 1] <= iDate && _aiPillarDate[i] > iDate) return _adblFXForward[i];
        }

        return _adblFXForward[iNumPillar - 1];
    }

    /**
     * Retrieve the FX Spot
     * 
     * @return The FX Spot
     */

    public double fxSpot()
    {
        return _dblFXSpot;
    }

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

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

        if (0 == iNumBasis) return null;

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

                return null;
            }
        }

        return adblBasis;
    }

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

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

        if (0 == iNumBasis) return null;

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

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

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

        return adblImpliedNodeRate;
    }

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

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

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

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

                return null;
            }
        }

        return adblBasis;
    }

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

        if (null == adblImpliedRate) return null;

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

        if (0 == iNumDF) return null;

        int iSpotDate = valParams.valueDate();

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

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

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

        return null;
    }

    @Override public double rate (
        final int[] aiDateNode,
        final org.drip.param.valuation.ValuationParams valParams,
        final org.drip.state.discount.MergedDiscountForwardCurve dcNum,
        final org.drip.state.discount.MergedDiscountForwardCurve dcDenom,
        final int iDate,
        final boolean bBasisOnDenom)
        throws java.lang.Exception
    {
        org.drip.state.discount.MergedDiscountForwardCurve dcImplied = bootstrapBasisDC (aiDateNode, valParams, dcNum,
            dcDenom, bBasisOnDenom);

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

        return dcImplied.zero (iDate);
    }

    @Override public org.drip.numerical.differentiation.WengertJacobian jackDForwardDManifestMeasure (
        final java.lang.String strManifestMeasure,
        final int iDate)
    {
        return null;
    }

    @Override public boolean setNodeValue (
        final int iNodeIndex,
        final double dblValue)
    {
        if (!org.drip.numerical.common.NumberUtil.IsValid (dblValue) || iNodeIndex > _adblFXForward.length)
            return false;

        for (int i = iNodeIndex; i < _adblFXForward.length; ++i)
            _adblFXForward[i] = dblValue;

        return true;
    }

    @Override public boolean bumpNodeValue (
        final int iNodeIndex,
        final double dblValue)
    {
        if (!org.drip.numerical.common.NumberUtil.IsValid (dblValue) || iNodeIndex > _adblFXForward.length)
            return false;

        for (int i = iNodeIndex; i < _adblFXForward.length; ++i)
            _adblFXForward[i] += dblValue;

        return true;
    }

    @Override public boolean setFlatValue (
        final double dblValue)
    {
        if (!org.drip.numerical.common.NumberUtil.IsValid (dblValue)) return false;

        for (int i = 0; i < _adblFXForward.length; ++i)
            _adblFXForward[i] = dblValue;

        return true;
    }
}