BurgardKjaerEdgeAttribution.java

  1. package org.drip.xva.pde;

  3. /*
  4.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  5.  */

  7. /*!
  8.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  9.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  10.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  11.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  12.  * 
  13.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  14.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  15.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  16.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  17.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  18.  *      and computational support.
  19.  *  
  20.  *      https://lakshmidrip.github.io/DROP/
  21.  *  
  22.  *  DROP is composed of three modules:
  23.  *  
  24.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  25.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  26.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  27.  * 
  28.  *  DROP Product Core implements libraries for the following:
  29.  *  - Fixed Income Analytics
  30.  *  - Loan Analytics
  31.  *  - Transaction Cost Analytics
  32.  * 
  33.  *  DROP Portfolio Core implements libraries for the following:
  34.  *  - Asset Allocation Analytics
  35.  *  - Asset Liability Management Analytics
  36.  *  - Capital Estimation Analytics
  37.  *  - Exposure Analytics
  38.  *  - Margin Analytics
  39.  *  - XVA Analytics
  40.  * 
  41.  *  DROP Computational Core implements libraries for the following:
  42.  *  - Algorithm Support
  43.  *  - Computation Support
  44.  *  - Function Analysis
  45.  *  - Model Validation
  46.  *  - Numerical Analysis
  47.  *  - Numerical Optimizer
  48.  *  - Spline Builder
  49.  *  - Statistical Learning
  50.  * 
  51.  *  Documentation for DROP is Spread Over:
  52.  * 
  53.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  54.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  55.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  56.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  57.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  58.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  59.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  60.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  61.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  62.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  63.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  64.  * 
  65.  *  Licensed under the Apache License, Version 2.0 (the "License");
  66.  *      you may not use this file except in compliance with the License.
  67.  *   
  68.  *  You may obtain a copy of the License at
  69.  *      http://www.apache.org/licenses/LICENSE-2.0
  70.  *  
  71.  *  Unless required by applicable law or agreed to in writing, software
  72.  *      distributed under the License is distributed on an "AS IS" BASIS,
  73.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  74.  *  
  75.  *  See the License for the specific language governing permissions and
  76.  *      limitations under the License.
  77.  */

  79. /**
  80.  * <i>BurgardKjaerEdgeAttribution</i> collects the Attribution Components of the Burgard Kjaer PDE based on
  81.  * the Risk-Neutral Ito Evolution of the Derivative, as laid out in Burgard and Kjaer (2014). The References
  82.  * are:
  83.  *
  84.  *  <br><br>
  85.  *  <ul>
  86.  *      <li>
  87.  *          Burgard, C., and M. Kjaer (2014): PDE Representations of Derivatives with Bilateral Counter-party
  88.  *              Risk and Funding Costs <i>Journal of Credit Risk</i> <b>7 (3)</b> 1-19
  89.  *      </li>
  90.  *      <li>
  91.  *          Cesari, G., J. Aquilina, N. Charpillon, X. Filipovic, G. Lee, and L. Manda (2009): <i>Modeling,
  92.  *              Pricing, and Hedging Counter-party Credit Exposure - A Technical Guide</i> <b>Springer
  93.  *              Finance</b> New York
  94.  *      </li>
  95.  *      <li>
  96.  *          Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk <i>Risk</i> <b>20 (2)</b>
  97.  *              86-90
  98.  *      </li>
  99.  *      <li>
  100.  *          Li, B., and Y. Tang (2007): <i>Quantitative Analysis, Derivatives Modeling, and Trading
  101.  *              Strategies in the Presence of Counter-party Credit Risk for the Fixed Income Market</i>
  102.  *              <b>World Scientific Publishing</b> Singapore
  103.  *      </li>
  104.  *      <li>
  105.  *          Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing
  106.  *              <i>Risk</i> <b>21 (2)</b> 97-102
  107.  *      </li>
  108.  *  </ul>
  109.  *
  110.  *  <br><br>
  111.  *  <ul>
  112.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  113.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/XVAAnalyticsLibrary.md">XVA Analytics Library</a></li>
  114.  *      <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>
  115.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/xva/pde/README.md">Burgard Kjaer PDE Evolution Scheme</a></li>
  116.  *  </ul>
  117.  * <br><br>
  118.  * 
  119.  * @author Lakshmi Krishnamurthy
  120.  */

  122. public class BurgardKjaerEdgeAttribution extends org.drip.xva.pde.BurgardKjaerEdge
  123. {
  124.     private double _derivativeXVAFundingGrowth = java.lang.Double.NaN;
  125.     private double _derivativeXVAClientDefaultGrowth = java.lang.Double.NaN;
  126.     private double _derivativeXVADealerDefaultGrowth = java.lang.Double.NaN;
  127.     private double _derivativeXVAEarlyTerminationGrowth = java.lang.Double.NaN;

  129.     /**
  130.      * BurgardKjaerEdgeAttribution Constructor
  131.      * 
  132.      * @param positionValueBump The Bump in the Position Value
  133.      * @param derivativeXVAStochasticGrowthDown The Stochastic Down Component of the Derivative XVA Value
  134.      *      Growth
  135.      * @param derivativeXVAStochasticGrowth The Stochastic Component of the Derivative XVA Value Growth
  136.      * @param derivativeXVAStochasticGrowthUp The Stochastic Up Component of the Derivative XVA Value
  137.      *      Growth
  138.      * @param derivativeXVACollateralGrowth The Collateral Component of the Derivative XVA Value Growth
  139.      * @param derivativeXVAEarlyTerminationGrowth The Early Termination Component of the Derivative XVA
  140.      *      Value Growth
  141.      * @param derivativeXVAFundingGrowth The Funding Component of the Derivative XVA Value Growth
  142.      * @param derivativeXVADealerDefaultGrowth The Dealer Default Component of the Derivative Value XVA
  143.      *      Growth
  144.      * @param derivativeXVAClientDefaultGrowth The Client Default Component of the Derivative XVA Value
  145.      *      Growth
  146.      * 
  147.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  148.      */

  150.     public BurgardKjaerEdgeAttribution (
  151.         final double positionValueBump,
  152.         final double derivativeXVAStochasticGrowthDown,
  153.         final double derivativeXVAStochasticGrowth,
  154.         final double derivativeXVAStochasticGrowthUp,
  155.         final double derivativeXVACollateralGrowth,
  156.         final double derivativeXVAEarlyTerminationGrowth,
  157.         final double derivativeXVAFundingGrowth,
  158.         final double derivativeXVADealerDefaultGrowth,
  159.         final double derivativeXVAClientDefaultGrowth)
  160.         throws java.lang.Exception
  161.     {
  162.         super (
  163.             positionValueBump,
  164.             derivativeXVAStochasticGrowthDown,
  165.             derivativeXVAStochasticGrowth,
  166.             derivativeXVAStochasticGrowthUp,
  167.             derivativeXVACollateralGrowth
  168.         );

  170.         if (!org.drip.numerical.common.NumberUtil.IsValid (_derivativeXVAEarlyTerminationGrowth =
  171.                 derivativeXVAEarlyTerminationGrowth) ||
  172.             !org.drip.numerical.common.NumberUtil.IsValid (_derivativeXVAFundingGrowth =
  173.                 derivativeXVAFundingGrowth) ||
  174.             !org.drip.numerical.common.NumberUtil.IsValid (_derivativeXVADealerDefaultGrowth =
  175.                 derivativeXVADealerDefaultGrowth) ||
  176.             !org.drip.numerical.common.NumberUtil.IsValid (_derivativeXVAClientDefaultGrowth =
  177.                 derivativeXVAClientDefaultGrowth))
  178.         {
  179.             throw new java.lang.Exception ("BurgardKjaerEdgeAttribution Constructor => Invalid Inputs");
  180.         }
  181.     }

  183.     /**
  184.      * Retrieve the Early Termination Component of the Derivative XVA Value Growth
  185.      * 
  186.      * @return The Early Termination Component of the Derivative XVA Value Growth
  187.      */

  189.     public double derivativeXVAEarlyTerminationGrowth()
  190.     {
  191.         return _derivativeXVAEarlyTerminationGrowth;
  192.     }

  194.     /**
  195.      * Retrieve the Funding Component of the Derivative XVA Value Growth
  196.      * 
  197.      * @return The Funding Component of the Derivative XVA Value Growth
  198.      */

  200.     public double derivativeXVAFundingGrowth()
  201.     {
  202.         return _derivativeXVAFundingGrowth;
  203.     }

  205.     /**
  206.      * Retrieve the Dealer Default Component of the Derivative XVA Value Growth
  207.      * 
  208.      * @return The Dealer Default Component of the Derivative XVA Value Growth
  209.      */

  211.     public double derivativeXVADealerDefaultGrowth()
  212.     {
  213.         return _derivativeXVADealerDefaultGrowth;
  214.     }

  216.     /**
  217.      * Retrieve the Client Default Component of the Derivative XVA Value Growth
  218.      * 
  219.      * @return The Client Default Component of the Derivative XVA Value Growth
  220.      */

  222.     public double derivativeXVAClientDefaultGrowth()
  223.     {
  224.         return _derivativeXVAClientDefaultGrowth;
  225.     }

  227.     @Override public double thetaPositionValueDown()
  228.     {
  229.         return super.derivativeXVAStochasticGrowthDown() + super.derivativeXVACollateralGrowth() +
  230.             _derivativeXVAEarlyTerminationGrowth + _derivativeXVAFundingGrowth +
  231.                 _derivativeXVADealerDefaultGrowth + _derivativeXVAClientDefaultGrowth;
  232.     }

  234.     @Override public double theta()
  235.     {
  236.         return super.derivativeXVAStochasticGrowth() + super.derivativeXVACollateralGrowth() +
  237.             _derivativeXVAEarlyTerminationGrowth + _derivativeXVAFundingGrowth +
  238.                 _derivativeXVADealerDefaultGrowth + _derivativeXVAClientDefaultGrowth;
  239.     }

  241.     @Override public double thetaPositionValueUp()
  242.     {
  243.         return super.derivativeXVAStochasticGrowthUp() + super.derivativeXVACollateralGrowth() +
  244.             _derivativeXVAEarlyTerminationGrowth + _derivativeXVAFundingGrowth +
  245.                 _derivativeXVADealerDefaultGrowth + _derivativeXVAClientDefaultGrowth;
  246.     }
  247. }
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