FlatForwardVolatilityCurve.java

  1. package org.drip.state.nonlinear;

  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>FlatForwardVolatilityCurve</i> manages the Volatility Latent State, using the Forward Volatility as the
  83.  * State Response Representation.
  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/nonlinear/README.md">Nonlinear (i.e., Boot) Latent State Construction</a></li>
  91.  *  </ul>
  92.  * <br><br>
  93.  *
  94.  * @author Lakshmi Krishnamurthy
  95.  */

  97. public class FlatForwardVolatilityCurve extends org.drip.state.volatility.ExplicitBootVolatilityCurve {
  98.     private int[] _aiPillarDate = null;
  99.     private double[] _adblImpliedVolatility = null;

  101.     /**
  102.      * FlatForwardVolatilityCurve Constructor
  103.      * 
  104.      * @param iEpochDate Epoch Date
  105.      * @param label Volatility Label
  106.      * @param strCurrency Currency
  107.      * @param aiPillarDate Array of the Pillar Dates
  108.      * @param adblImpliedVolatility Array of the corresponding Implied Volatility Nodes
  109.      * 
  110.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  111.      */

  113.     public FlatForwardVolatilityCurve (
  114.         final int iEpochDate,
  115.         final org.drip.state.identifier.VolatilityLabel label,
  116.         final java.lang.String strCurrency,
  117.         final int[] aiPillarDate,
  118.         final double[] adblImpliedVolatility)
  119.         throws java.lang.Exception
  120.     {
  121.         super (iEpochDate, label, strCurrency);

  123.         if (null == (_aiPillarDate = aiPillarDate) || null == (_adblImpliedVolatility =
  124.             adblImpliedVolatility))
  125.             throw new java.lang.Exception ("FlatForwardVolatilityCurve ctr => Invalid Inputs");

  127.         int iNumPillar = _aiPillarDate.length;

  129.         if (0 == iNumPillar || iNumPillar != _adblImpliedVolatility.length)
  130.             throw new java.lang.Exception ("FlatForwardVolatilityCurve ctr => Invalid Inputs");
  131.     }

  133.     @Override public double impliedVol (
  134.         final int iDate)
  135.         throws java.lang.Exception
  136.     {
  137.         if (iDate <= _aiPillarDate[0]) return _adblImpliedVolatility[0];

  139.         int iNumPillar = _adblImpliedVolatility.length;

  141.         for (int i = 1; i < iNumPillar; ++i) {
  142.             if (_aiPillarDate[i - 1] <= iDate && _aiPillarDate[i] >= iDate)
  143.                 return _adblImpliedVolatility[i];
  144.         }

  146.         return _adblImpliedVolatility[iNumPillar - 1];
  147.     }

  149.     @Override public double node (
  150.         final int iDate)
  151.         throws java.lang.Exception
  152.     {
  153.         return 0.;
  154.     }

  156.     @Override public double vol (
  157.         final int iDate)
  158.         throws java.lang.Exception
  159.     {
  160.         return node (iDate);
  161.     }

  163.     @Override public double nodeDerivative (
  164.         final int iDate,
  165.         final int iOrder)
  166.         throws java.lang.Exception
  167.     {
  168.         org.drip.function.definition.R1ToR1 au = new org.drip.function.definition.R1ToR1 (null) {
  169.             @Override public double evaluate (
  170.                 double dblX)
  171.                 throws java.lang.Exception
  172.             {
  173.                 return node ((int) dblX);
  174.             }
  175.         };

  177.         return au.derivative (iDate, iOrder);
  178.     }

  180.     @Override public boolean setNodeValue (
  181.         final int iNodeIndex,
  182.         final double dblValue)
  183.     {
  184.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblValue) || iNodeIndex >
  185.             _adblImpliedVolatility.length)
  186.             return false;

  188.         for (int i = iNodeIndex; i < _adblImpliedVolatility.length; ++i)
  189.             _adblImpliedVolatility[i] = dblValue;

  191.         return true;
  192.     }

  194.     @Override public boolean bumpNodeValue (
  195.         final int iNodeIndex,
  196.         final double dblValue)
  197.     {
  198.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblValue) || iNodeIndex >
  199.             _adblImpliedVolatility.length)
  200.             return false;

  202.         for (int i = iNodeIndex; i < _adblImpliedVolatility.length; ++i)
  203.             _adblImpliedVolatility[i] += dblValue;

  205.         return true;
  206.     }

  208.     @Override public boolean setFlatValue (
  209.         final double dblValue)
  210.     {
  211.         if (!org.drip.numerical.common.NumberUtil.IsValid (dblValue)) return false;

  213.         for (int i = 0; i < _adblImpliedVolatility.length; ++i)
  214.             _adblImpliedVolatility[i] = dblValue;

  216.         return true;
  217.     }
  218. }
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