DerivedForwardState.java
package org.drip.template.state;
import org.drip.analytics.date.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.service.env.EnvManager;
import org.drip.service.template.LatentMarketStateBuilder;
import org.drip.state.discount.*;
import org.drip.state.forward.ForwardCurve;
import org.drip.state.identifier.ForwardLabel;
/*
* -*- 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>DerivedForwardState</i> sets up the Calibration of the Derived Forward Latent State and examine the
* Emitted Metrics.
*
* <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/template/README.md">Pricing/Risk Templates for Fixed Income Component Products</a></li>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/template/state/README.md">Standard Latent State Construction Template</a></li>
* </ul>
* <br><br>
*
* @author Lakshmi Krishnamurthy
*/
public class DerivedForwardState {
private static final MergedDiscountForwardCurve OvernightCurve (
final JulianDate dtSpot,
final String strCurrency)
throws Exception
{
String[] astrDepositMaturityTenor = new String[] {
"1D",
// "2D",
"3D"
};
double[] adblDepositQuote = new double[] {
0.0004, // 1D
// 0.0004, // 2D
0.0004 // 3D
};
String[] astrShortEndOISMaturityTenor = new String[] {
"1W",
"2W",
"3W",
"1M"
};
double[] adblShortEndOISQuote = new double[] {
0.00070, // 1W
0.00069, // 2W
0.00078, // 3W
0.00074 // 1M
};
String[] astrOISFuturesEffectiveTenor = new String[] {
"1M",
"2M",
"3M",
"4M",
"5M"
};
String[] astrOISFuturesMaturityTenor = new String[] {
"1M",
"1M",
"1M",
"1M",
"1M"
};
double[] adblOISFuturesQuote = new double[] {
0.00046, // 1M x 1M
0.00016, // 2M x 1M
-0.00007, // 3M x 1M
-0.00013, // 4M x 1M
-0.00014 // 5M x 1M
};
String[] astrLongEndOISMaturityTenor = new String[] {
"15M",
"18M",
"21M",
"02Y",
"03Y",
"04Y",
"05Y",
"06Y",
"07Y",
"08Y",
"09Y",
"10Y",
"11Y",
"12Y",
"15Y",
"20Y",
"25Y",
"30Y"
};
double[] adblLongEndOISQuote = new double[] {
0.00002, // 15M
0.00008, // 18M
0.00021, // 21M
0.00036, // 2Y
0.00127, // 3Y
0.00274, // 4Y
0.00456, // 5Y
0.00647, // 6Y
0.00827, // 7Y
0.00996, // 8Y
0.01147, // 9Y
0.01280, // 10Y
0.01404, // 11Y
0.01516, // 12Y
0.01764, // 15Y
0.01939, // 20Y
0.02003, // 25Y
0.02038 // 30Y
};
return LatentMarketStateBuilder.SmoothOvernightCurve (
dtSpot,
strCurrency,
astrDepositMaturityTenor,
adblDepositQuote,
"Rate",
astrShortEndOISMaturityTenor,
adblShortEndOISQuote,
"SwapRate",
astrOISFuturesEffectiveTenor,
astrOISFuturesMaturityTenor,
adblOISFuturesQuote,
"SwapRate",
astrLongEndOISMaturityTenor,
adblLongEndOISQuote,
"SwapRate"
);
}
private static final ForwardCurve Reference (
final JulianDate dtSpot,
final MergedDiscountForwardCurve dcOvernight,
final String strReferenceForwardTenor)
throws Exception
{
ForwardLabel forwardLabel = ForwardLabel.Create (
dcOvernight.currency(),
strReferenceForwardTenor
);
String[] astrDepositMaturityTenor = new String[] {
"1D",
"1W",
"2W",
"3W",
"1M",
"2M",
"3M",
"4M",
"5M"
};
double[] adblDepositQuote = new double[] {
0.003565, // 1D
0.003858, // 1W
0.003840, // 2W
0.003922, // 3W
0.003869, // 1M
0.003698, // 2M
0.003527, // 3M
0.003342, // 4M
0.003225 // 5M
};
String[] astrFRAMaturityTenor = new String[] {
"00D",
"01M",
"02M",
"03M",
"04M",
"05M",
"06M",
"07M",
"08M",
"09M",
"10M",
"11M",
"12M",
"13M",
"14M",
"15M",
"16M",
"17M",
"18M"
};
double[] adblFRAQuote = new double[] {
0.003120, // 0D
0.002930, // 1M
0.002720, // 2M
0.002600, // 3M
0.002560, // 4M
0.002520, // 5M
0.002480, // 6M
0.002540, // 7M
0.002610, // 8M
0.002670, // 9M
0.002790, // 10M
0.002910, // 11M
0.003030, // 12M
0.003180, // 13M
0.003350, // 14M
0.003520, // 15M
0.003710, // 16M
0.003890, // 17M
0.004090 // 18M
};
String[] astrFixFloatMaturityTenor = new String[] {
"03Y",
"04Y",
"05Y",
"06Y",
"07Y",
"08Y",
"09Y",
"10Y",
"12Y",
"15Y",
"20Y",
"25Y",
"30Y",
"35Y",
"40Y",
"50Y",
"60Y"
};
double[] adblFixFloatQuote = new double[] {
0.004240, // 3Y
0.005760, // 4Y
0.007620, // 5Y
0.009540, // 6Y
0.011350, // 7Y
0.013030, // 8Y
0.014520, // 9Y
0.015840, // 10Y
0.018090, // 12Y
0.020370, // 15Y
0.021870, // 20Y
0.022340, // 25Y
0.022560, // 30Y
0.022950, // 35Y
0.023480, // 40Y
0.024210, // 50Y
0.024630 // 60Y
};
return LatentMarketStateBuilder.SmoothForwardCurve (
dtSpot,
forwardLabel,
astrDepositMaturityTenor,
adblDepositQuote,
"ForwardRate",
astrFRAMaturityTenor,
adblFRAQuote,
"ParForwardRate",
astrFixFloatMaturityTenor,
adblFixFloatQuote,
"SwapRate",
null,
null,
"DerivedParBasisSpread",
null,
null,
"DerivedParBasisSpread",
dcOvernight,
null
);
}
public static final void main (
final String[] astrArgs)
throws Exception
{
/*
* Initialize the Credit Analytics Library
*/
EnvManager.InitEnv ("");
String strCurrency = "EUR";
String strDerivedForwardTenor = "3M";
String strReferenceForwardTenor = "6M";
JulianDate dtSpot = DateUtil.CreateFromYMD (
2017,
DateUtil.DECEMBER,
21
);
MergedDiscountForwardCurve dcOvernight = OvernightCurve (
dtSpot,
strCurrency
);
ForwardCurve fcReference = Reference (
dtSpot,
dcOvernight,
strReferenceForwardTenor
);
ForwardLabel forwardLabel = ForwardLabel.Create (
strCurrency,
strDerivedForwardTenor
);
String[] astrDepositMaturityTenor = new String[] {
"2W",
"3W",
"1M",
"2M"
};
double[] adblDepositQuote = new double[] {
0.001865, // 2W
0.001969, // 3W
0.001951, // 1M
0.001874 // 2M
};
String[] astrFRAMaturityTenor = new String[] {
"00D",
"01M",
"03M",
"06M",
"09M",
"12M",
"15M",
"18M",
"21M"
};
double[] adblFRAQuote = new double[] {
0.001790, // 0D
0.001775, // 1M
0.001274, // 3M
0.001222, // 6M
0.001269, // 9M
0.001565, // 12M
0.001961, // 15M
0.002556, // 18M
0.003101 // 21M
};
String[] astrFixFloatMaturityTenor = new String[] {
"03Y",
"04Y",
"05Y",
"06Y",
"07Y",
"08Y",
"09Y",
"10Y",
"12Y",
"15Y",
"20Y",
"25Y",
"30Y"
};
double[] adblFixFloatQuote = new double[] {
0.002850, // 3Y
0.004370, // 4Y
0.006230, // 5Y
0.008170, // 6Y
0.010000, // 7Y
0.011710, // 8Y
0.013240, // 9Y
0.014590, // 10Y
0.016920, // 12Y
0.019330, // 15Y
0.020990, // 20Y
0.021560, // 25Y
0.021860 // 30Y
};
String[] astrSyntheticFloatFloatMaturityTenor = new String[] {
"35Y",
"40Y",
"50Y",
"60Y"
};
double[] adblSyntheticFloatFloatQuote = new double[] {
0.00065, // 35Y
0.00060, // 40Y
0.00054, // 50Y
0.00050 // 60Y
};
ForwardCurve fcDerived = LatentMarketStateBuilder.SmoothForwardCurve (
dtSpot,
forwardLabel,
astrDepositMaturityTenor,
adblDepositQuote,
"ForwardRate",
astrFRAMaturityTenor,
adblFRAQuote,
"ParForwardRate",
astrFixFloatMaturityTenor,
adblFixFloatQuote,
"SwapRate",
null,
null,
"DerivedParBasisSpread",
astrSyntheticFloatFloatMaturityTenor,
adblSyntheticFloatFloatQuote,
"DerivedParBasisSpread",
dcOvernight,
fcReference
);
String strLatentStateLabel = fcDerived.label().fullyQualifiedName();
System.out.println ("\n\n\t||-------------------------------------------------------------------------||");
for (int i = 0; i < adblDepositQuote.length; ++i)
System.out.println (
"\t|| " + strLatentStateLabel +
" | DEPOSIT | " + astrDepositMaturityTenor[i] + " | " +
FormatUtil.FormatDouble (adblDepositQuote[i], 1, 4, 100.) +
"% | Forward Rate | " +
FormatUtil.FormatDouble (fcDerived.forward (astrDepositMaturityTenor[i]), 1, 4, 100.) +
"% ||"
);
System.out.println ("\t||-------------------------------------------------------------------------||");
System.out.println ("\n\n\t||--------------------------------------------------------------------------||");
for (int i = 0; i < adblFRAQuote.length; ++i)
System.out.println (
"\t|| " + strLatentStateLabel +
" | FRA | " + astrFRAMaturityTenor[i] + " | " +
FormatUtil.FormatDouble (adblFRAQuote[i], 1, 4, 100.) +
"% | Par Forward Rate | " +
FormatUtil.FormatDouble (fcDerived.forward (dtSpot.addTenor (astrFRAMaturityTenor[i]).addTenor (strDerivedForwardTenor)), 1, 4, 100.) +
"% ||"
);
System.out.println ("\t||--------------------------------------------------------------------------||");
System.out.println ("\n\n\t||-------------------------------------------------------------------------||");
for (int i = 0; i < adblFixFloatQuote.length; ++i)
System.out.println (
"\t|| " + strLatentStateLabel +
" | FIX FLOAT | " + astrFixFloatMaturityTenor[i] + " | " +
FormatUtil.FormatDouble (adblFixFloatQuote[i], 1, 4, 100.) +
"% | Swap Rate | " +
FormatUtil.FormatDouble (fcDerived.forward (astrFixFloatMaturityTenor[i]), 1, 4, 100.) +
"% ||"
);
System.out.println ("\t||-------------------------------------------------------------------------||");
System.out.println ("\n\n\t||----------------------------------------------------------------------------------------------------||");
for (int i = 0; i < adblSyntheticFloatFloatQuote.length; ++i)
System.out.println (
"\t|| " + strLatentStateLabel +
" | SYNTHETIC FLOAT FLOAT | " + astrSyntheticFloatFloatMaturityTenor[i] + " | " +
FormatUtil.FormatDouble (adblSyntheticFloatFloatQuote[i], 1, 2, 10000.) +
" bp | Derived Par Basis Spread | " +
FormatUtil.FormatDouble (fcDerived.forward (astrSyntheticFloatFloatMaturityTenor[i]), 1, 4, 100.) +
"% ||"
);
System.out.println ("\t||----------------------------------------------------------------------------------------------------||\n");
}
}