ForwardVolatilityStateShifted.java
package org.drip.template.statebump;
import java.util.Map;
import org.drip.analytics.date.*;
import org.drip.numerical.common.FormatUtil;
import org.drip.param.market.CurveSurfaceQuoteContainer;
import org.drip.param.valuation.ValuationParams;
import org.drip.product.definition.Component;
import org.drip.product.fra.FRAStandardCapFloor;
import org.drip.service.env.EnvManager;
import org.drip.service.template.*;
import org.drip.state.discount.MergedDiscountForwardCurve;
import org.drip.state.forward.ForwardCurve;
import org.drip.state.identifier.ForwardLabel;
import org.drip.state.volatility.VolatilityCurve;
/*
* -*- 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>ForwardVolatilityStateShifted</i> demonstrates the Generation and the Usage of Tenor Bumped Forward
* Volatility Curves.
*
* <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/statebump/README.md">Shifted Latent State Construction Template</a></li>
* </ul>
* <br><br>
*
* @author Lakshmi Krishnamurthy
*/
public class ForwardVolatilityStateShifted {
public static final void main (
final String[] astrArgs)
throws Exception
{
EnvManager.InitEnv ("");
String strFRATenor = "3M";
String strCurrency = "GBP";
double dblBump = 0.0000001;
boolean bIsBumpProportional = false;
JulianDate dtSpot = DateUtil.CreateFromYMD (
2017,
DateUtil.DECEMBER,
21
);
ForwardLabel forwardLabel = ForwardLabel.Create (
strCurrency,
strFRATenor
);
MergedDiscountForwardCurve dcFunding = LatentMarketStateBuilder.SmoothFundingCurve (
dtSpot,
strCurrency,
new String[] {
"30D",
"60D",
"91D",
"182D",
"273D"
},
new double[] {
0.0668750, // 30D
0.0675000, // 60D
0.0678125, // 91D
0.0712500, // 182D
0.0750000 // 273D
},
"ForwardRate",
null,
"ForwardRate",
new String[] {
"2Y",
"3Y",
"4Y",
"5Y",
"7Y",
"10Y"
},
new double[] {
0.08265, // 2Y
0.08550, // 3Y
0.08655, // 4Y
0.08770, // 5Y
0.08910, // 7Y
0.08920 // 10Y
},
"SwapRate"
);
String[] astrMaturityTenor = new String[] {
"01Y",
"02Y",
"03Y",
"04Y",
"05Y",
"07Y",
"10Y"
};
double[] adblStrike = new double[] {
0.0788, // "1Y",
0.0839, // "2Y",
0.0864, // "3Y",
0.0869, // "4Y",
0.0879, // "5Y",
0.0890, // "7Y",
0.0889 // "10Y"
};
double[] adblPrice = new double[] {
0.0017, // "1Y",
0.0132, // "2Y",
0.0234, // "3Y",
0.0343, // "4Y",
0.0491, // "5Y",
0.0968, // "7Y"
0.1625 // "10Y"
};
ForwardCurve fc = dcFunding.nativeForwardCurve (strFRATenor);
Map<String, VolatilityCurve> bumpedForwardVolatilityCurve = LatentMarketStateBuilder.BumpedForwardVolatilityCurve (
dtSpot,
forwardLabel,
true,
astrMaturityTenor,
adblStrike,
adblPrice,
"Price",
dcFunding,
fc,
dblBump,
bIsBumpProportional
);
FRAStandardCapFloor[] aFRACapFloor = OTCInstrumentBuilder.CapFloor (
dtSpot,
forwardLabel,
astrMaturityTenor,
adblStrike,
true
);
System.out.println ("\n\t|---------------------------------------------------------------------------------------------------------------||");
ValuationParams valParams = ValuationParams.Spot (dtSpot.julian());
for (Map.Entry<String, VolatilityCurve> meForwardVolatility : bumpedForwardVolatilityCurve.entrySet()) {
String strKey = meForwardVolatility.getKey();
if (!strKey.startsWith ("capfloor")) continue;
CurveSurfaceQuoteContainer csqc = new CurveSurfaceQuoteContainer();
csqc.setFundingState (dcFunding);
csqc.setForwardState (fc);
csqc.setForwardVolatility (meForwardVolatility.getValue());
System.out.print ("\t| [" + meForwardVolatility.getKey() + "] => ");
for (Component comp : aFRACapFloor)
System.out.print (FormatUtil.FormatDouble (comp.measureValue (
valParams,
null,
csqc,
null,
"Price"
), 1, 8, 1.) + " |");
System.out.print ("|\n");
}
System.out.println ("\t|---------------------------------------------------------------------------------------------------------------||");
System.out.println ("\n\t|-------------------------------------------------||");
CurveSurfaceQuoteContainer csqcBase = new CurveSurfaceQuoteContainer();
csqcBase.setFundingState (dcFunding);
csqcBase.setForwardState (fc);
csqcBase.setForwardVolatility (bumpedForwardVolatilityCurve.get ("Base"));
CurveSurfaceQuoteContainer csqcBump = new CurveSurfaceQuoteContainer();
csqcBump.setFundingState (dcFunding);
csqcBump.setForwardState (fc);
csqcBump.setForwardVolatility (bumpedForwardVolatilityCurve.get ("Bump"));
for (Component comp : aFRACapFloor)
System.out.println (
"\t| PRICE => " +
comp.maturityDate() + " | " +
FormatUtil.FormatDouble (comp.measureValue (
valParams,
null,
csqcBase,
null,
"Price"
), 1, 8, 1.) + " | " +
FormatUtil.FormatDouble (comp.measureValue (
valParams,
null,
csqcBump,
null,
"Price"
), 1, 8, 1.) + " ||"
);
System.out.println ("\t|-------------------------------------------------||");
}
}