OvernightState.java

  1. package org.drip.template.state;

  3. import org.drip.analytics.date.*;
  4. import org.drip.numerical.common.FormatUtil;
  5. import org.drip.service.env.EnvManager;
  6. import org.drip.service.template.LatentMarketStateBuilder;
  7. import org.drip.state.discount.MergedDiscountForwardCurve;

  9. /*
  10.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  11.  */

  13. /*!
  14.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  15.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  16.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  17.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  18.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  19.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  20.  * 
  21.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  22.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  23.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  24.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  25.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  26.  *      and computational support.
  27.  *  
  28.  *      https://lakshmidrip.github.io/DROP/
  29.  *  
  30.  *  DROP is composed of three modules:
  31.  *  
  32.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  33.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  34.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  35.  * 
  36.  *  DROP Product Core implements libraries for the following:
  37.  *  - Fixed Income Analytics
  38.  *  - Loan Analytics
  39.  *  - Transaction Cost Analytics
  40.  * 
  41.  *  DROP Portfolio Core implements libraries for the following:
  42.  *  - Asset Allocation Analytics
  43.  *  - Asset Liability Management Analytics
  44.  *  - Capital Estimation Analytics
  45.  *  - Exposure Analytics
  46.  *  - Margin Analytics
  47.  *  - XVA Analytics
  48.  * 
  49.  *  DROP Computational Core implements libraries for the following:
  50.  *  - Algorithm Support
  51.  *  - Computation Support
  52.  *  - Function Analysis
  53.  *  - Model Validation
  54.  *  - Numerical Analysis
  55.  *  - Numerical Optimizer
  56.  *  - Spline Builder
  57.  *  - Statistical Learning
  58.  * 
  59.  *  Documentation for DROP is Spread Over:
  60.  * 
  61.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  62.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  63.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  64.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  65.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  66.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  67.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  68.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  69.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  70.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  71.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  72.  * 
  73.  *  Licensed under the Apache License, Version 2.0 (the "License");
  74.  *      you may not use this file except in compliance with the License.
  75.  *   
  76.  *  You may obtain a copy of the License at
  77.  *      http://www.apache.org/licenses/LICENSE-2.0
  78.  *  
  79.  *  Unless required by applicable law or agreed to in writing, software
  80.  *      distributed under the License is distributed on an "AS IS" BASIS,
  81.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  82.  *  
  83.  *  See the License for the specific language governing permissions and
  84.  *      limitations under the License.
  85.  */

  87. /**
  88.  * <i>OvernightState</i> sets up the Calibration and the Construction of the Overnight Latent State and
  89.  * examine the Emitted Metrics.
  90.  *
  91.  *  <br><br>
  92.  *  <ul>
  93.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  94.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  95.  *      <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>
  96.  *      <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>
  97.  *  </ul>
  98.  * <br><br>
  99.  * 
  100.  * @author Lakshmi Krishnamurthy
  101.  */

  103. public class OvernightState {

  105.     public static final void main (
  106.         final String[] astrArgs)
  107.         throws Exception
  108.     {
  109.         EnvManager.InitEnv ("");

  111.         String strCurrency = "EUR";

  113.         JulianDate dtSpot = DateUtil.CreateFromYMD (
  114.             2017,
  115.             DateUtil.DECEMBER,
  116.             21
  117.         );

  119.         String[] astrDepositMaturityTenor = new String[] {
  120.             "1D",
  121.             // "2D",
  122.             "3D"
  123.         };

  125.         double[] adblDepositQuote = new double[] {
  126.             0.0004,     // 1D
  127.             // 0.0004,      // 2D
  128.             0.0004      // 3D
  129.         };

  131.         String[] astrShortEndOISMaturityTenor = new String[] {
  132.             "1W",
  133.             "2W",
  134.             "3W",
  135.             "1M"
  136.         };

  138.         double[] adblShortEndOISQuote = new double[] {
  139.             0.00070,    //   1W
  140.             0.00069,    //   2W
  141.             0.00078,    //   3W
  142.             0.00074     //   1M
  143.         };

  145.         String[] astrOISFuturesEffectiveTenor = new String[] {
  146.             "1M",
  147.             "2M",
  148.             "3M",
  149.             "4M",
  150.             "5M"
  151.         };

  153.         String[] astrOISFuturesMaturityTenor = new String[] {
  154.             "1M",
  155.             "1M",
  156.             "1M",
  157.             "1M",
  158.             "1M"
  159.         };

  161.         double[] adblOISFuturesQuote = new double[] {
  162.              0.00046,    //   1M x 1M
  163.              0.00016,    //   2M x 1M
  164.             -0.00007,    //   3M x 1M
  165.             -0.00013,    //   4M x 1M
  166.             -0.00014     //   5M x 1M
  167.         };

  169.         String[] astrLongEndOISMaturityTenor = new String[] {
  170.             "15M",
  171.             "18M",
  172.             "21M",
  173.             "02Y",
  174.             "03Y",
  175.             "04Y",
  176.             "05Y",
  177.             "06Y",
  178.             "07Y",
  179.             "08Y",
  180.             "09Y",
  181.             "10Y",
  182.             "11Y",
  183.             "12Y",
  184.             "15Y",
  185.             "20Y",
  186.             "25Y",
  187.             "30Y"
  188.         };

  190.         double[] adblLongEndOISQuote = new double[] {
  191.             0.00002,    //  15M
  192.             0.00008,    //  18M
  193.             0.00021,    //  21M
  194.             0.00036,    //   2Y
  195.             0.00127,    //   3Y
  196.             0.00274,    //   4Y
  197.             0.00456,    //   5Y
  198.             0.00647,    //   6Y
  199.             0.00827,    //   7Y
  200.             0.00996,    //   8Y
  201.             0.01147,    //   9Y
  202.             0.01280,    //  10Y
  203.             0.01404,    //  11Y
  204.             0.01516,    //  12Y
  205.             0.01764,    //  15Y
  206.             0.01939,    //  20Y
  207.             0.02003,    //  25Y
  208.             0.02038     //  30Y
  209.         };

  211.         MergedDiscountForwardCurve dcOvernight = LatentMarketStateBuilder.SmoothOvernightCurve (
  212.             dtSpot,
  213.             strCurrency,
  214.             astrDepositMaturityTenor,
  215.             adblDepositQuote,
  216.             "Rate",
  217.             astrShortEndOISMaturityTenor,
  218.             adblShortEndOISQuote,
  219.             "SwapRate",
  220.             astrOISFuturesEffectiveTenor,
  221.             astrOISFuturesMaturityTenor,
  222.             adblOISFuturesQuote,
  223.             "SwapRate",
  224.             astrLongEndOISMaturityTenor,
  225.             adblLongEndOISQuote,
  226.             "SwapRate"
  227.         );

  229.         String strLatentStateLabel = dcOvernight.label().fullyQualifiedName();

  231.         System.out.println ("\n\n\t||------------------------------------------------------------------||");

  233.         for (int i = 0; i < adblDepositQuote.length; ++i)
  234.             System.out.println (
  235.                 "\t||  " + strLatentStateLabel +
  236.                 " |  DEPOSIT  | " + astrDepositMaturityTenor[i] + "  | " +
  237.                 FormatUtil.FormatDouble (adblDepositQuote[i], 1, 4, 1.) +
  238.                 " | Forward Rate | " +
  239.                 FormatUtil.FormatDouble (dcOvernight.df (astrDepositMaturityTenor[i]), 1, 10, 1.) +
  240.                 "  ||"
  241.             );

  243.         System.out.println ("\t||------------------------------------------------------------------||");

  245.         System.out.println ("\n\n\t||------------------------------------------------------------------||");

  247.         for (int i = 0; i < adblShortEndOISQuote.length; ++i)
  248.             System.out.println (
  249.                 "\t||  " + strLatentStateLabel + " |  SHORT END OIS  | " +
  250.                 astrShortEndOISMaturityTenor[i] + "  | " + FormatUtil.FormatDouble (adblShortEndOISQuote[i], 1, 5, 1.) +
  251.                 " | Swap Rate | " +
  252.                 FormatUtil.FormatDouble (dcOvernight.df (astrShortEndOISMaturityTenor[i]), 1, 6, 1.) +
  253.                 "  ||"
  254.             );

  256.         System.out.println ("\t||------------------------------------------------------------------||");

  258.         System.out.println ("\n\n\t||---------------------------------------------------------------------||");

  260.         for (int i = 0; i < adblOISFuturesQuote.length; ++i)
  261.             System.out.println (
  262.                 "\t||  " + strLatentStateLabel + " |  OIS FUTURES  | " +
  263.                 FormatUtil.FormatDouble (adblOISFuturesQuote[i], 1, 6, 1.) +
  264.                 " | " + astrOISFuturesEffectiveTenor[i] + " x " + astrOISFuturesMaturityTenor[i] +
  265.                 " | Swap Rate | " +
  266.                 FormatUtil.FormatDouble (
  267.                     dcOvernight.df (dtSpot.addTenor (astrOISFuturesEffectiveTenor[i]).addTenor (astrOISFuturesMaturityTenor[i])
  268.                 ), 1, 6, 1.) +
  269.                 "  ||"
  270.             );

  272.         System.out.println ("\t||---------------------------------------------------------------------||");

  274.         System.out.println ("\n\n\t||---------------------------------------------------------------||");

  276.         for (int i = 0; i < adblLongEndOISQuote.length; ++i)
  277.             System.out.println (
  278.                 "\t||  " + strLatentStateLabel + " |  LONG END OIS  | " +
  279.                 astrLongEndOISMaturityTenor[i] + " | " + FormatUtil.FormatDouble (adblLongEndOISQuote[i], 1, 5, 1.) +
  280.                 " | Swap Rate | " +
  281.                 FormatUtil.FormatDouble (dcOvernight.df (astrLongEndOISMaturityTenor[i]), 1, 4, 1.) +
  282.                 "  ||"
  283.             );

  285.         System.out.println ("\t||---------------------------------------------------------------||\n");
  286.     }
  287. }
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