ReferenceForwardState.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.*;
  8. import org.drip.state.forward.ForwardCurve;
  9. import org.drip.state.identifier.ForwardLabel;

  11. /*
  12.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  13.  */

  15. /*!
  16.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  17.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  18.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  19.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  20.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  21.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  22.  * 
  23.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  24.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  25.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  26.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  27.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  28.  *      and computational support.
  29.  *  
  30.  *      https://lakshmidrip.github.io/DROP/
  31.  *  
  32.  *  DROP is composed of three modules:
  33.  *  
  34.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  35.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  36.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  37.  * 
  38.  *  DROP Product Core implements libraries for the following:
  39.  *  - Fixed Income Analytics
  40.  *  - Loan Analytics
  41.  *  - Transaction Cost Analytics
  42.  * 
  43.  *  DROP Portfolio Core implements libraries for the following:
  44.  *  - Asset Allocation Analytics
  45.  *  - Asset Liability Management Analytics
  46.  *  - Capital Estimation Analytics
  47.  *  - Exposure Analytics
  48.  *  - Margin Analytics
  49.  *  - XVA Analytics
  50.  * 
  51.  *  DROP Computational Core implements libraries for the following:
  52.  *  - Algorithm Support
  53.  *  - Computation Support
  54.  *  - Function Analysis
  55.  *  - Model Validation
  56.  *  - Numerical Analysis
  57.  *  - Numerical Optimizer
  58.  *  - Spline Builder
  59.  *  - Statistical Learning
  60.  * 
  61.  *  Documentation for DROP is Spread Over:
  62.  * 
  63.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  64.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  65.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  66.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  67.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  68.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  69.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  70.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  71.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  72.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  73.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  74.  * 
  75.  *  Licensed under the Apache License, Version 2.0 (the "License");
  76.  *      you may not use this file except in compliance with the License.
  77.  *   
  78.  *  You may obtain a copy of the License at
  79.  *      http://www.apache.org/licenses/LICENSE-2.0
  80.  *  
  81.  *  Unless required by applicable law or agreed to in writing, software
  82.  *      distributed under the License is distributed on an "AS IS" BASIS,
  83.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  84.  *  
  85.  *  See the License for the specific language governing permissions and
  86.  *      limitations under the License.
  87.  */

  89. /**
  90.  * <i>ReferenceForwardState</i> sets up the Calibration of the Reference Forward Latent State and examine the
  91.  * Emitted Metrics.
  92.  *
  93.  *  <br><br>
  94.  *  <ul>
  95.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  96.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  97.  *      <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>
  98.  *      <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>
  99.  *  </ul>
  100.  * <br><br>
  101.  * 
  102.  * @author Lakshmi Krishnamurthy
  103.  */

  105. public class ReferenceForwardState {

  107.     private static final MergedDiscountForwardCurve OvernightCurve (
  108.         final JulianDate dtSpot,
  109.         final String strCurrency)
  110.         throws Exception
  111.     {
  112.         EnvManager.InitEnv ("");

  114.         String[] astrDepositMaturityTenor = new String[] {
  115.             "1D",
  116.             // "2D",
  117.             "3D"
  118.         };

  120.         double[] adblDepositQuote = new double[] {
  121.             0.0004,     // 1D
  122.             // 0.0004,      // 2D
  123.             0.0004      // 3D
  124.         };

  126.         String[] astrShortEndOISMaturityTenor = new String[] {
  127.             "1W",
  128.             "2W",
  129.             "3W",
  130.             "1M"
  131.         };

  133.         double[] adblShortEndOISQuote = new double[] {
  134.             0.00070,    //   1W
  135.             0.00069,    //   2W
  136.             0.00078,    //   3W
  137.             0.00074     //   1M
  138.         };

  140.         String[] astrOISFuturesEffectiveTenor = new String[] {
  141.             "1M",
  142.             "2M",
  143.             "3M",
  144.             "4M",
  145.             "5M"
  146.         };

  148.         String[] astrOISFuturesMaturityTenor = new String[] {
  149.             "1M",
  150.             "1M",
  151.             "1M",
  152.             "1M",
  153.             "1M"
  154.         };

  156.         double[] adblOISFuturesQuote = new double[] {
  157.              0.00046,    //   1M x 1M
  158.              0.00016,    //   2M x 1M
  159.             -0.00007,    //   3M x 1M
  160.             -0.00013,    //   4M x 1M
  161.             -0.00014     //   5M x 1M
  162.         };

  164.         String[] astrLongEndOISMaturityTenor = new String[] {
  165.             "15M",
  166.             "18M",
  167.             "21M",
  168.             "02Y",
  169.             "03Y",
  170.             "04Y",
  171.             "05Y",
  172.             "06Y",
  173.             "07Y",
  174.             "08Y",
  175.             "09Y",
  176.             "10Y",
  177.             "11Y",
  178.             "12Y",
  179.             "15Y",
  180.             "20Y",
  181.             "25Y",
  182.             "30Y"
  183.         };

  185.         double[] adblLongEndOISQuote = new double[] {
  186.             0.00002,    //  15M
  187.             0.00008,    //  18M
  188.             0.00021,    //  21M
  189.             0.00036,    //   2Y
  190.             0.00127,    //   3Y
  191.             0.00274,    //   4Y
  192.             0.00456,    //   5Y
  193.             0.00647,    //   6Y
  194.             0.00827,    //   7Y
  195.             0.00996,    //   8Y
  196.             0.01147,    //   9Y
  197.             0.01280,    //  10Y
  198.             0.01404,    //  11Y
  199.             0.01516,    //  12Y
  200.             0.01764,    //  15Y
  201.             0.01939,    //  20Y
  202.             0.02003,    //  25Y
  203.             0.02038     //  30Y
  204.         };

  206.         return LatentMarketStateBuilder.SmoothOvernightCurve (
  207.             dtSpot,
  208.             strCurrency,
  209.             astrDepositMaturityTenor,
  210.             adblDepositQuote,
  211.             "Rate",
  212.             astrShortEndOISMaturityTenor,
  213.             adblShortEndOISQuote,
  214.             "SwapRate",
  215.             astrOISFuturesEffectiveTenor,
  216.             astrOISFuturesMaturityTenor,
  217.             adblOISFuturesQuote,
  218.             "SwapRate",
  219.             astrLongEndOISMaturityTenor,
  220.             adblLongEndOISQuote,
  221.             "SwapRate"
  222.         );
  223.     }

  225.     public static final void main (
  226.         final String[] astrArgs)
  227.         throws Exception
  228.     {
  229.         /*
  230.          * Initialize the Credit Analytics Library
  231.          */

  233.         EnvManager.InitEnv ("");

  235.         String strCurrency = "GBP";
  236.         String strForwardTenor = "6M";

  238.         JulianDate dtSpot = DateUtil.CreateFromYMD (
  239.             2017,
  240.             DateUtil.DECEMBER,
  241.             21
  242.         );

  244.         MergedDiscountForwardCurve dcOvernight = OvernightCurve (
  245.             dtSpot,
  246.             strCurrency
  247.         );

  249.         ForwardLabel forwardLabel = ForwardLabel.Create (
  250.             strCurrency,
  251.             strForwardTenor
  252.         );

  254.         String[] astrDepositMaturityTenor = new String[] {
  255.             "1D",
  256.             "1W",
  257.             "2W",
  258.             "3W",
  259.             "1M",
  260.             "2M",
  261.             "3M",
  262.             "4M",
  263.             "5M"
  264.         };

  266.         double[] adblDepositQuote = new double[] {
  267.             0.003565,   // 1D
  268.             0.003858,   // 1W
  269.             0.003840,   // 2W
  270.             0.003922,   // 3W
  271.             0.003869,   // 1M
  272.             0.003698,   // 2M
  273.             0.003527,   // 3M
  274.             0.003342,   // 4M
  275.             0.003225    // 5M
  276.         };

  278.         String[] astrFRAExerciseTenor = new String[] {
  279.             "00D",
  280.             "01M",
  281.             "02M",
  282.             "03M",
  283.             "04M",
  284.             "05M",
  285.             "06M",
  286.             "07M",
  287.             "08M",
  288.             "09M",
  289.             "10M",
  290.             "11M",
  291.             "12M",
  292.             "13M",
  293.             "14M",
  294.             "15M",
  295.             "16M",
  296.             "17M",
  297.             "18M"
  298.         };

  300.         double[] adblFRAQuote = new double[] {
  301.             0.003120,   //  0D
  302.             0.002930,   //  1M
  303.             0.002720,   //  2M
  304.             0.002600,   //  3M
  305.             0.002560,   //  4M
  306.             0.002520,   //  5M
  307.             0.002480,   //  6M
  308.             0.002540,   //  7M
  309.             0.002610,   //  8M
  310.             0.002670,   //  9M
  311.             0.002790,   // 10M
  312.             0.002910,   // 11M
  313.             0.003030,   // 12M
  314.             0.003180,   // 13M
  315.             0.003350,   // 14M
  316.             0.003520,   // 15M
  317.             0.003710,   // 16M
  318.             0.003890,   // 17M
  319.             0.004090    // 18M
  320.         };

  322.         String[] astrFixFloatMaturityTenor = new String[] {
  323.             "03Y",
  324.             "04Y",
  325.             "05Y",
  326.             "06Y",
  327.             "07Y",
  328.             "08Y",
  329.             "09Y",
  330.             "10Y",
  331.             "12Y",
  332.             "15Y",
  333.             "20Y",
  334.             "25Y",
  335.             "30Y",
  336.             "35Y",
  337.             "40Y",
  338.             "50Y",
  339.             "60Y"
  340.         };

  342.         double[] adblFixFloatQuote = new double[] {
  343.             0.004240,   //  3Y
  344.             0.005760,   //  4Y          
  345.             0.007620,   //  5Y
  346.             0.009540,   //  6Y
  347.             0.011350,   //  7Y
  348.             0.013030,   //  8Y
  349.             0.014520,   //  9Y
  350.             0.015840,   // 10Y
  351.             0.018090,   // 12Y
  352.             0.020370,   // 15Y
  353.             0.021870,   // 20Y
  354.             0.022340,   // 25Y
  355.             0.022560,   // 30Y
  356.             0.022950,   // 35Y
  357.             0.023480,   // 40Y
  358.             0.024210,   // 50Y
  359.             0.024630    // 60Y
  360.         };

  362.         ForwardCurve fcReference = LatentMarketStateBuilder.SmoothForwardCurve (
  363.             dtSpot,
  364.             forwardLabel,
  365.             astrDepositMaturityTenor,
  366.             adblDepositQuote,
  367.             "ForwardRate",
  368.             astrFRAExerciseTenor,
  369.             adblFRAQuote,
  370.             "ParForwardRate",
  371.             astrFixFloatMaturityTenor,
  372.             adblFixFloatQuote,
  373.             "SwapRate",
  374.             null,
  375.             null,
  376.             "DerivedParBasisSpread",
  377.             null,
  378.             null,
  379.             "DerivedParBasisSpread",
  380.             dcOvernight,
  381.             null
  382.         );

  384.         String strLatentStateLabel = fcReference.label().fullyQualifiedName();

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

  388.         for (int i = 0; i < adblDepositQuote.length; ++i)
  389.             System.out.println (
  390.                 "\t||  " + strLatentStateLabel +
  391.                 " |  DEPOSIT  | " + astrDepositMaturityTenor[i] + "  | " +
  392.                 FormatUtil.FormatDouble (adblDepositQuote[i], 1, 4, 100.) +
  393.                 "% | Forward Rate | " +
  394.                 FormatUtil.FormatDouble (fcReference.forward (astrDepositMaturityTenor[i]), 1, 4, 100.) +
  395.                 "%  ||"
  396.             );

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

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

  402.         for (int i = 0; i < adblFRAQuote.length; ++i)
  403.             System.out.println (
  404.                 "\t||  " + strLatentStateLabel +
  405.                 " |  FRA  | " + astrFRAExerciseTenor[i] + "  | " +
  406.                 FormatUtil.FormatDouble (adblFRAQuote[i], 1, 4, 100.) +
  407.                 "% | Par Forward Rate | " +
  408.                 FormatUtil.FormatDouble (fcReference.forward (dtSpot.addTenor (astrFRAExerciseTenor[i]).addTenor (strForwardTenor)), 1, 4, 100.) +
  409.                 "%  ||"
  410.             );

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

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

  416.         for (int i = 0; i < adblFixFloatQuote.length; ++i)
  417.             System.out.println (
  418.                 "\t||  " + strLatentStateLabel +
  419.                 " |  FIX FLOAT  | " + astrFixFloatMaturityTenor[i] + "  | " +
  420.                 FormatUtil.FormatDouble (adblFixFloatQuote[i], 1, 4, 100.) +
  421.                 "% | Swap Rate | " +
  422.                 FormatUtil.FormatDouble (fcReference.forward (astrFixFloatMaturityTenor[i]), 1, 4, 100.) +
  423.                 "%  ||"
  424.             );

  426.         System.out.println ("\t||-------------------------------------------------------------------------||");
  427.     }
  428. }
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