SurvivalRecoveryStateShifted.java

  1. package org.drip.template.statebump;

  3. import java.util.Map;

  5. import org.drip.analytics.date.*;
  6. import org.drip.numerical.common.FormatUtil;
  7. import org.drip.param.market.CurveSurfaceQuoteContainer;
  8. import org.drip.param.valuation.ValuationParams;
  9. import org.drip.product.definition.Component;
  10. import org.drip.service.env.EnvManager;
  11. import org.drip.service.template.*;
  12. import org.drip.state.credit.CreditCurve;
  13. import org.drip.state.discount.MergedDiscountForwardCurve;

  15. /*
  16.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  17.  */

  19. /*!
  20.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  21.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  22.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  23.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  24.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  25.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  26.  * 
  27.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  28.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  29.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  30.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  31.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  32.  *      and computational support.
  33.  *  
  34.  *      https://lakshmidrip.github.io/DROP/
  35.  *  
  36.  *  DROP is composed of three modules:
  37.  *  
  38.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  39.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  40.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  41.  * 
  42.  *  DROP Product Core implements libraries for the following:
  43.  *  - Fixed Income Analytics
  44.  *  - Loan Analytics
  45.  *  - Transaction Cost Analytics
  46.  * 
  47.  *  DROP Portfolio Core implements libraries for the following:
  48.  *  - Asset Allocation Analytics
  49.  *  - Asset Liability Management Analytics
  50.  *  - Capital Estimation Analytics
  51.  *  - Exposure Analytics
  52.  *  - Margin Analytics
  53.  *  - XVA Analytics
  54.  * 
  55.  *  DROP Computational Core implements libraries for the following:
  56.  *  - Algorithm Support
  57.  *  - Computation Support
  58.  *  - Function Analysis
  59.  *  - Model Validation
  60.  *  - Numerical Analysis
  61.  *  - Numerical Optimizer
  62.  *  - Spline Builder
  63.  *  - Statistical Learning
  64.  * 
  65.  *  Documentation for DROP is Spread Over:
  66.  * 
  67.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  68.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  69.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  70.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  71.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  72.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  73.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  74.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  75.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  76.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  77.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  78.  * 
  79.  *  Licensed under the Apache License, Version 2.0 (the "License");
  80.  *      you may not use this file except in compliance with the License.
  81.  *   
  82.  *  You may obtain a copy of the License at
  83.  *      http://www.apache.org/licenses/LICENSE-2.0
  84.  *  
  85.  *  Unless required by applicable law or agreed to in writing, software
  86.  *      distributed under the License is distributed on an "AS IS" BASIS,
  87.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  88.  *  
  89.  *  See the License for the specific language governing permissions and
  90.  *      limitations under the License.
  91.  */

  93. /**
  94.  * <i>SurvivalRecoveryStateShifted</i> demonstrates the Generation of the Tenor Bumped Credit Curves.
  95.  *
  96.  *  <br><br>
  97.  *  <ul>
  98.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  99.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  100.  *      <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>
  101.  *      <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>
  102.  *  </ul>
  103.  * <br><br>
  104.  * 
  105.  * @author Lakshmi Krishnamurthy
  106.  */

  108. public class SurvivalRecoveryStateShifted {

  110.     private static final MergedDiscountForwardCurve OvernightCurve (
  111.         final JulianDate dtSpot,
  112.         final String strCurrency)
  113.         throws Exception
  114.     {
  115.         String[] astrDepositMaturityTenor = new String[] {
  116.             "1D",
  117.             // "2D",
  118.             "3D"
  119.         };

  121.         double[] adblDepositQuote = new double[] {
  122.             0.0004,     // 1D
  123.             // 0.0004,      // 2D
  124.             0.0004      // 3D
  125.         };

  127.         String[] astrShortEndOISMaturityTenor = new String[] {
  128.             "1W",
  129.             "2W",
  130.             "3W",
  131.             "1M"
  132.         };

  134.         double[] adblShortEndOISQuote = new double[] {
  135.             0.00070,    //   1W
  136.             0.00069,    //   2W
  137.             0.00078,    //   3W
  138.             0.00074     //   1M
  139.         };

  141.         String[] astrOISFuturesEffectiveTenor = new String[] {
  142.             "1M",
  143.             "2M",
  144.             "3M",
  145.             "4M",
  146.             "5M"
  147.         };

  149.         String[] astrOISFuturesMaturityTenor = new String[] {
  150.             "1M",
  151.             "1M",
  152.             "1M",
  153.             "1M",
  154.             "1M"
  155.         };

  157.         double[] adblOISFuturesQuote = new double[] {
  158.              0.00046,    //   1M x 1M
  159.              0.00016,    //   2M x 1M
  160.             -0.00007,    //   3M x 1M
  161.             -0.00013,    //   4M x 1M
  162.             -0.00014     //   5M x 1M
  163.         };

  165.         String[] astrLongEndOISMaturityTenor = new String[] {
  166.             "15M",
  167.             "18M",
  168.             "21M",
  169.             "02Y",
  170.             "03Y",
  171.             "04Y",
  172.             "05Y",
  173.             "06Y",
  174.             "07Y",
  175.             "08Y",
  176.             "09Y",
  177.             "10Y",
  178.             "11Y",
  179.             "12Y",
  180.             "15Y",
  181.             "20Y",
  182.             "25Y",
  183.             "30Y"
  184.         };

  186.         double[] adblLongEndOISQuote = new double[] {
  187.             0.00002,    //  15M
  188.             0.00008,    //  18M
  189.             0.00021,    //  21M
  190.             0.00036,    //   2Y
  191.             0.00127,    //   3Y
  192.             0.00274,    //   4Y
  193.             0.00456,    //   5Y
  194.             0.00647,    //   6Y
  195.             0.00827,    //   7Y
  196.             0.00996,    //   8Y
  197.             0.01147,    //   9Y
  198.             0.01280,    //  10Y
  199.             0.01404,    //  11Y
  200.             0.01516,    //  12Y
  201.             0.01764,    //  15Y
  202.             0.01939,    //  20Y
  203.             0.02003,    //  25Y
  204.             0.02038     //  30Y
  205.         };

  207.         return LatentMarketStateBuilder.SmoothOvernightCurve (
  208.             dtSpot,
  209.             strCurrency,
  210.             astrDepositMaturityTenor,
  211.             adblDepositQuote,
  212.             "Rate",
  213.             astrShortEndOISMaturityTenor,
  214.             adblShortEndOISQuote,
  215.             "SwapRate",
  216.             astrOISFuturesEffectiveTenor,
  217.             astrOISFuturesMaturityTenor,
  218.             adblOISFuturesQuote,
  219.             "SwapRate",
  220.             astrLongEndOISMaturityTenor,
  221.             adblLongEndOISQuote,
  222.             "SwapRate"
  223.         );
  224.     }

  226.     public static final void main (
  227.         final String[] astrArgs)
  228.         throws Exception
  229.     {
  230.         /*
  231.          * Initialize the Credit Analytics Library
  232.          */

  234.         EnvManager.InitEnv ("");

  236.         String strCurrency = "EUR";
  237.         double dblBump = 1.0;
  238.         boolean bIsBumpProportional = false;

  240.         JulianDate dtSpot = DateUtil.CreateFromYMD (
  241.             2017,
  242.             DateUtil.DECEMBER,
  243.             21
  244.         );

  246.         MergedDiscountForwardCurve dcOvernight = OvernightCurve (
  247.             dtSpot,
  248.             strCurrency
  249.         );

  251.         String[] astrCDSMaturityTenor = new String[] {
  252.             "06M",
  253.             "01Y",
  254.             "02Y",
  255.             "03Y",
  256.             "04Y",
  257.             "05Y",
  258.             "07Y",
  259.             "10Y"
  260.         };

  262.         double[] adblCDSParSpread = new double[] {
  263.              60.,   //  6M
  264.              68.,   //  1Y
  265.              88.,   //  2Y
  266.             102.,   //  3Y
  267.             121.,   //  4Y
  268.             138.,   //  5Y
  269.             168.,   //  7Y
  270.             188.    // 10Y
  271.         };

  273.         Map<String, CreditCurve> mapBumpedCreditCurve = LatentMarketStateBuilder.BumpedCreditCurve (
  274.             dtSpot,
  275.             "QTX",
  276.             astrCDSMaturityTenor,
  277.             adblCDSParSpread,
  278.             adblCDSParSpread,
  279.             "FairPremium",
  280.             dcOvernight,
  281.             dblBump,
  282.             bIsBumpProportional
  283.         );

  285.         Component[] aCDS = OTCInstrumentBuilder.CDS (
  286.             dtSpot,
  287.             astrCDSMaturityTenor,
  288.             adblCDSParSpread,
  289.             strCurrency,
  290.             "QTX"
  291.         );

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

  295.         ValuationParams valParams = ValuationParams.Spot (dtSpot.julian());

  297.         for (Map.Entry<String, CreditCurve> meCredit : mapBumpedCreditCurve.entrySet()) {
  298.             String strKey = meCredit.getKey();

  300.             if (!strKey.startsWith ("cds")) continue;

  302.             CurveSurfaceQuoteContainer csqc = new CurveSurfaceQuoteContainer();

  304.             csqc.setFundingState (dcOvernight);

  306.             csqc.setCreditState (meCredit.getValue());

  308.             System.out.print ("\t|  [" + meCredit.getKey() + "] => ");

  310.             for (Component comp : aCDS)
  311.                 System.out.print (FormatUtil.FormatDouble (comp.measureValue (
  312.                     valParams,
  313.                     null,
  314.                     csqc,
  315.                     null,
  316.                     "FairPremium"
  317.                 ), 1, 1, 1.) + " |");

  319.             System.out.print ("|\n");
  320.         }

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

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

  326.         CurveSurfaceQuoteContainer csqcBase = new CurveSurfaceQuoteContainer();

  328.         csqcBase.setFundingState (dcOvernight);

  330.         csqcBase.setCreditState (mapBumpedCreditCurve.get ("Base"));

  332.         CurveSurfaceQuoteContainer csqcBump = new CurveSurfaceQuoteContainer();

  334.         csqcBump.setFundingState (dcOvernight);

  336.         csqcBump.setCreditState (mapBumpedCreditCurve.get ("Bump"));

  338.         for (Component comp : aCDS)
  339.             System.out.println (
  340.                 "\t| FAIR PREMIUM => " +
  341.                 comp.maturityDate() + " |" +
  342.                 FormatUtil.FormatDouble (comp.measureValue (
  343.                     valParams,
  344.                     null,
  345.                     csqcBase,
  346.                     null,
  347.                     "FairPremium"
  348.                 ), 3, 1, 1.) + " |" +
  349.                 FormatUtil.FormatDouble (comp.measureValue (
  350.                     valParams,
  351.                     null,
  352.                     csqcBump,
  353.                     null,
  354.                     "FairPremium"
  355.                 ), 3, 1, 1.) + " ||"
  356.             );

  358.         System.out.println ("\t|--------------------------------------------||");
  359.     }
  360. }
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