PathSimulator.java
package org.drip.xva.dynamics;
/*
* -*- 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
*
* 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>PathSimulator</i> drives the Simulation for various Latent States and Exposures. The References are:
*
* <br><br>
* <ul>
* <li>
* Albanese, C., and L. Andersen (2014): Accounting for OTC Derivatives: Funding Adjustments and the
* Re-Hypothecation Option https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482955
* <b>eSSRN</b>
* </li>
* <li>
* Burgard, C., and M. Kjaer (2014): PDE Representations of Derivatives with Bilateral Counter-party
* Risk and Funding Costs <i>Journal of Credit Risk</i> <b>7 (3)</b> 1-19
* </li>
* <li>
* Burgard, C., and M. Kjaer (2014): In the Balance <i>Risk</i> <b>24 (11)</b> 72-75
* </li>
* <li>
* Burgard, C., and M. Kjaer (2017): Derivatives Funding, Netting, and Accounting
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2534011 <b>eSSRN</b>
* </li>
* <li>
* Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing
* <i>Risk</i> <b>21 (2)</b> 97-102
* </li>
* </ul>
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/XVAAnalyticsLibrary.md">XVA Analytics Library</a></li>
* <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/xva/README.md">Valuation Adjustments that account for Collateral, CC Credit/Debt and Funding Overhead</a></li>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/xva/dynamics/README.md">XVA Dynamics - Settings and Evolution</a></li>
* </ul>
* <br><br>
*
* @author Lakshmi Krishnamurthy
*/
public class PathSimulator
{
private int _iCount = -1;
private int _adjustmentDigestScheme = -1;
private org.drip.exposure.universe.MarketVertexGenerator _marketVertexGenerator = null;
private org.drip.exposure.holdings.PositionGroupContainer _positionGroupContainer = null;
private double[][] positionGroupValueArray (
final org.drip.exposure.universe.MarketPath marketPath)
{
org.drip.exposure.holdings.PositionGroup[] positionGroupArray =
_positionGroupContainer.positionGroupArray();
org.drip.analytics.date.JulianDate[] vertexDateArray = marketPath.anchorDates();
int vertexCount = vertexDateArray.length;
int positionGroupCount = positionGroupArray.length;
double[][] positionGroupValueArray = new double[positionGroupCount][vertexCount];
for (int positionGroupIndex = 0; positionGroupIndex < positionGroupCount; ++positionGroupIndex)
{
for (int vertexIndex = 0; vertexIndex < vertexCount; ++vertexIndex)
{
int forwardDate = vertexDateArray[vertexIndex].julian();
try {
positionGroupValueArray[positionGroupIndex][vertexIndex] =
null == positionGroupArray[positionGroupIndex].positionGroupEstimator() ? 1. :
positionGroupArray[positionGroupIndex].positionGroupEstimator().variationMarginEstimate (
forwardDate,
marketPath
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
return null;
}
}
}
return positionGroupValueArray;
}
private boolean collateralGroupPathArray (
final org.drip.exposure.universe.MarketPath marketPath)
{
org.drip.xva.dynamics.PositionGroupTrajectory collateralGroup = null;
try
{
collateralGroup = new org.drip.xva.dynamics.PositionGroupTrajectory (
_positionGroupContainer.positionGroupArray()[0].positionGroupSpecification().positionGroupSpecification(),
marketPath,
positionGroupValueArray (marketPath)
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
return false;
}
org.drip.xva.hypothecation.CollateralGroupVertex[][] collateralGroupVertexArray =
collateralGroup.positionGroupVertexArray();
if (null == collateralGroupVertexArray)
{
return false;
}
int positionGroupCount = collateralGroupVertexArray.length;
try
{
for (int positionGroupIndex = 0; positionGroupIndex < positionGroupCount; ++positionGroupIndex)
{
if (!_positionGroupContainer.setCollateralGroupPath (
positionGroupIndex,
new org.drip.xva.netting.CollateralGroupPath (
collateralGroupVertexArray[positionGroupIndex],
marketPath
)))
return false;
}
return true;
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return false;
}
/**
* Generate a PathSimulator Instance with the corresponding Position Group Value
*
* @param iPathCount Path Count
* @param marketVertexGenerator Market Vertex Generator
* @param positionGroupContainer Container of Position Groups
*
* @return The PathSimulator Instance
*/
public static final PathSimulator UnitPositionGroupValue (
final int iPathCount,
final org.drip.exposure.universe.MarketVertexGenerator marketVertexGenerator,
final org.drip.exposure.holdings.PositionGroupContainer positionGroupContainer)
{
try
{
return new PathSimulator (
iPathCount,
marketVertexGenerator,
org.drip.xva.settings.AdjustmentDigestScheme.ALBANESE_ANDERSEN_METRICS_POINTER,
positionGroupContainer
);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* PathSimulator Constructor
*
* @param iCount Path Count
* @param marketVertexGenerator Market Vertex Generator
* @param adjustmentDigestScheme Adjustment Digest Scheme
* @param positionGroupContainer Container of Position Groups
*
* @throws java.lang.Exception Thrown if the Inputs are Invalid
*/
public PathSimulator (
final int iCount,
final org.drip.exposure.universe.MarketVertexGenerator marketVertexGenerator,
final int adjustmentDigestScheme,
final org.drip.exposure.holdings.PositionGroupContainer positionGroupContainer)
throws java.lang.Exception
{
if (0 >= (_iCount = iCount) ||
null == (_marketVertexGenerator = marketVertexGenerator) ||
null == (_positionGroupContainer = positionGroupContainer))
{
throw new java.lang.Exception ("PathSimulator Constructor => Invalid Inputs");
}
_adjustmentDigestScheme = adjustmentDigestScheme;
}
/**
* Retrieve the Path Count
*
* @return The Path Count
*/
public int count()
{
return _iCount;
}
/**
* Retrieve the Market Vertex Generator
*
* @return The Market Vertex Generator
*/
public org.drip.exposure.universe.MarketVertexGenerator marketVertexGenerator()
{
return _marketVertexGenerator;
}
/**
* Retrieve the Adjustment Digest Scheme
*
* @return The Adjustment Digest Scheme
*/
public int adjustmentDigestScheme()
{
return _adjustmentDigestScheme;
}
/**
* Retrieve the Position Group Container
*
* @return Position Group Container
*/
public org.drip.exposure.holdings.PositionGroupContainer positionGroupContainer()
{
return _positionGroupContainer;
}
/**
* Generate a Single Trajectory from the Specified Initial Market Vertex and the Evolver Sequence
*
* @param initialMarketVertex The Initial Market Vertex
* @param latentStateWeiner The Latent State Weiner Instance
*
* @return Single Trajectory Path Exposure Adjustment
*/
public org.drip.xva.gross.PathExposureAdjustment singleTrajectory (
final org.drip.exposure.universe.MarketVertex initialMarketVertex,
final org.drip.exposure.universe.LatentStateWeiner latentStateWeiner)
{
try
{
org.drip.exposure.universe.MarketPath marketPath = new org.drip.exposure.universe.MarketPath (
_marketVertexGenerator.marketVertex (
initialMarketVertex,
latentStateWeiner
)
);
if (!collateralGroupPathArray (marketPath))
{
return null;
}
org.drip.xva.netting.CollateralGroupPath[][] positionFundingGroupPath =
_positionGroupContainer.fundingSegmentPaths();
org.drip.xva.netting.CollateralGroupPath[][] positionCreditDebtGroupPath =
_positionGroupContainer.creditDebtSegmentPaths();
int positionFundingGroupCount = positionFundingGroupPath.length;
org.drip.xva.netting.FundingGroupPath[] fundingGroupPathArray = new
org.drip.xva.strategy.AlbaneseAndersenFundingGroupPath[positionFundingGroupCount];
if (org.drip.xva.settings.AdjustmentDigestScheme.ALBANESE_ANDERSEN_METRICS_POINTER ==
_adjustmentDigestScheme)
{
int positionCreditDebtGroupCount = positionCreditDebtGroupPath.length;
org.drip.xva.netting.CreditDebtGroupPath[] creditDebtGroupPathArray = new
org.drip.xva.strategy.AlbaneseAndersenNettingGroupPath[positionCreditDebtGroupCount];
for (int positionCreditDebtGroupIndex = 0; positionCreditDebtGroupIndex <
positionCreditDebtGroupCount; ++positionCreditDebtGroupIndex)
{
creditDebtGroupPathArray[positionCreditDebtGroupIndex] =
new org.drip.xva.strategy.AlbaneseAndersenNettingGroupPath (
positionCreditDebtGroupPath[positionCreditDebtGroupIndex],
marketPath
);
}
for (int positionFundingGroupIndex = 0; positionFundingGroupIndex <
positionFundingGroupCount; ++positionFundingGroupIndex)
{
fundingGroupPathArray[positionFundingGroupIndex] =
new org.drip.xva.strategy.AlbaneseAndersenFundingGroupPath (
creditDebtGroupPathArray,
marketPath
);
}
}
return new org.drip.xva.gross.MonoPathExposureAdjustment (fundingGroupPathArray);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
/**
* Simulate the Realized State/Entity Values and their Aggregates over the Paths
*
* @param latentStateLabelList Latent State Label List
* @param initialMarketVertex The Initial Market Vertex
* @param correlatedPathVertexDimension Path Vertex Dimension Generator
*
* @return The Exposure Adjustment Aggregator - Simulation Result
*/
public org.drip.xva.gross.ExposureAdjustmentAggregator simulate (
final java.util.List<org.drip.state.identifier.LatentStateLabel> latentStateLabelList,
final org.drip.exposure.universe.MarketVertex initialMarketVertex,
final org.drip.measure.discrete.CorrelatedPathVertexDimension correlatedPathVertexDimension)
{
if (null == correlatedPathVertexDimension)
{
return null;
}
org.drip.xva.gross.PathExposureAdjustment[] pathExposureAdjustmentArray = new
org.drip.xva.gross.PathExposureAdjustment[_iCount];
for (int pathIndex = 0; pathIndex < _iCount; ++pathIndex)
{
if (null == (pathExposureAdjustmentArray[pathIndex] = singleTrajectory (
initialMarketVertex,
org.drip.exposure.universe.LatentStateWeiner.FromUnitRandom (
latentStateLabelList,
org.drip.numerical.linearalgebra.Matrix.Transpose
(org.drip.numerical.linearalgebra.Matrix.Transpose
(correlatedPathVertexDimension.straightPathVertexRd().flatform()))))))
{
return null;
}
}
try
{
return new org.drip.xva.gross.ExposureAdjustmentAggregator (pathExposureAdjustmentArray);
}
catch (java.lang.Exception e)
{
e.printStackTrace();
}
return null;
}
}