BurgardKjaerBuilder.java

  1. package org.drip.xva.vertex;

  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>BurgardKjaerBuilder</i> contains the Builders that construct the Burgard Kjaer Vertex using a Variant
  81.  * of the Generalized Burgard Kjaer (2013) Scheme. The References are:
  82.  *
  83.  *  <br><br>
  84.  *  <ul>
  85.  *      <li>
  86.  *          Burgard, C., and M. Kjaer (2014): PDE Representations of Derivatives with Bilateral Counter-party
  87.  *              Risk and Funding Costs <i>Journal of Credit Risk</i> <b>7 (3)</b> 1-19
  88.  *      </li>
  89.  *      <li>
  90.  *          Burgard, C., and M. Kjaer (2014): In the Balance <i>Risk</i> <b>24 (11)</b> 72-75
  91.  *      </li>
  92.  *      <li>
  93.  *          Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk <i>Risk</i> <b>20 (2)</b>
  94.  *              86-90
  95.  *      </li>
  96.  *      <li>
  97.  *          Li, B., and Y. Tang (2007): <i>Quantitative Analysis, Derivatives Modeling, and Trading
  98.  *              Strategies in the Presence of Counter-party Credit Risk for the Fixed Income Market</i>
  99.  *              <b>World Scientific Publishing</b> Singapore
  100.  *      </li>
  101.  *      <li>
  102.  *          Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing
  103.  *              <i>Risk</i> <b>21 (2)</b> 97-102
  104.  *      </li>
  105.  *  </ul>
  106.  *
  107.  *  <br><br>
  108.  *  <ul>
  109.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  110.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/XVAAnalyticsLibrary.md">XVA Analytics Library</a></li>
  111.  *      <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>
  112.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/xva/vertex/README.md">XVA Hypothecation Group Vertex Generators</a></li>
  113.  *  </ul>
  114.  * <br><br>
  115.  * 
  116.  * @author Lakshmi Krishnamurthy
  117.  */

  119. public class BurgardKjaerBuilder
  120. {

  122.     /**
  123.      * Construct the Initial Dynamic Dealer Portfolio
  124.      * 
  125.      * @param anchorDate The Anchor Date
  126.      * @param forward The Unrealized Forward Exposure
  127.      * @param marketVertex The Market Vertex
  128.      * @param closeOutScheme The Generic Close Out Instance
  129.      * 
  130.      * @return The Burgard Kjaer Dealer Portfolio Vertex
  131.      */

  133.     public static final org.drip.xva.vertex.BurgardKjaer Initial (
  134.         final org.drip.analytics.date.JulianDate anchorDate,
  135.         final double forward,
  136.         final org.drip.exposure.universe.MarketVertex marketVertex,
  137.         final org.drip.xva.definition.CloseOut closeOutScheme)
  138.     {
  139.         if (null == marketVertex)
  140.         {
  141.             return null;
  142.         }

  144.         org.drip.xva.hypothecation.CollateralGroupVertexCloseOut collateralGroupVertexCloseOut =
  145.             org.drip.xva.hypothecation.CollateralGroupVertexCloseOut.Standard (
  146.                 closeOutScheme,
  147.                 forward,
  148.                 0.
  149.             );

  151.         org.drip.xva.vertex.BurgardKjaerExposure burgardKjaerVertexExposure =
  152.             org.drip.xva.vertex.BurgardKjaerExposure.Initial (
  153.                 forward,
  154.                 collateralGroupVertexCloseOut
  155.             );

  157.         if (null == burgardKjaerVertexExposure)
  158.         {
  159.             return null;
  160.         }

  162.         double fundingExposure = burgardKjaerVertexExposure.funding();

  164.         double dealerDefaultCloseOut = collateralGroupVertexCloseOut.dealer();

  166.         org.drip.exposure.universe.MarketVertexEntity dealerMarketVertex = marketVertex.dealer();

  168.         double dealerSubordinateFundingMarketVertex = dealerMarketVertex.subordinateFundingReplicator();

  170.         double dealerSurvival = dealerMarketVertex.survivalProbability();

  172.         double dealerSeniorRecoveryRate = dealerMarketVertex.seniorRecoveryRate();

  174.         double dealerSubordinateRecoveryRate = dealerMarketVertex.subordinateRecoveryRate();

  176.         double clientSurvival = marketVertex.client().survivalProbability();

  178.         double incrementalDealerSurvival = dealerSurvival - 1.;

  180.         double adjustedExposure =
  181.             forward + dealerSurvival * (clientSurvival - 1.) * burgardKjaerVertexExposure.credit() +
  182.             clientSurvival * incrementalDealerSurvival * burgardKjaerVertexExposure.debt() +
  183.             clientSurvival * incrementalDealerSurvival * fundingExposure -
  184.             dealerSurvival * clientSurvival * marketVertex.csaSpread() *
  185.                 burgardKjaerVertexExposure.variationMarginPosting();

  187.         try
  188.         {
  189.             return new org.drip.xva.vertex.BurgardKjaer (
  190.                 anchorDate,
  191.                 forward,
  192.                 0.,
  193.                 burgardKjaerVertexExposure,
  194.                 collateralGroupVertexCloseOut,
  195.                 new org.drip.xva.derivative.ReplicationPortfolioVertexDealer (
  196.                     (fundingExposure + dealerSubordinateRecoveryRate * adjustedExposure - dealerDefaultCloseOut) /
  197.                         (dealerSeniorRecoveryRate - dealerSubordinateRecoveryRate) / dealerMarketVertex.seniorFundingReplicator(),
  198.                     (fundingExposure + dealerSeniorRecoveryRate * adjustedExposure - dealerDefaultCloseOut) /
  199.                         (dealerSubordinateRecoveryRate - dealerSeniorRecoveryRate) / dealerSubordinateFundingMarketVertex
  200.                 )
  201.             );
  202.         }
  203.         catch (java.lang.Exception e)
  204.         {
  205.             e.printStackTrace();
  206.         }

  208.         return null;
  209.     }

  211.     /**
  212.      * Construct a Path-wise Dynamic Dealer Portfolio
  213.      * 
  214.      * @param anchorDate The Anchor Date
  215.      * @param collateralGroupVertexExposure The Raw Collateral Group Vertex Exposure
  216.      * @param marketEdge The Market Edge
  217.      * @param collateralGroupVertexCloseOut The Collateral Group Vertex Close Out
  218.      * @param burgardKjaerVertexExposure The Collateral Group Vertex Exposure Decomposition
  219.      * 
  220.      * @return The Burgard Kjaer Dealer Portfolio Vertex
  221.      */

  223.     public static final org.drip.xva.vertex.BurgardKjaer DealerPortfolioBuilder (
  224.         final org.drip.analytics.date.JulianDate anchorDate,
  225.         final org.drip.xva.hypothecation.CollateralGroupVertexExposure collateralGroupVertexExposure,
  226.         final org.drip.exposure.universe.MarketEdge marketEdge,
  227.         final org.drip.xva.hypothecation.CollateralGroupVertexCloseOut collateralGroupVertexCloseOut,
  228.         final org.drip.xva.vertex.BurgardKjaerExposure burgardKjaerVertexExposure)
  229.     {
  230.         if (null == collateralGroupVertexExposure ||
  231.             null == marketEdge ||
  232.             null == collateralGroupVertexCloseOut ||
  233.             null == burgardKjaerVertexExposure)
  234.         {
  235.             return null;
  236.         }

  238.         double fundingExposure = burgardKjaerVertexExposure.funding();

  240.         double dealerDefaultCloseOut = collateralGroupVertexCloseOut.dealer();

  242.         org.drip.exposure.universe.MarketVertex marketVertexStart = marketEdge.start();

  244.         org.drip.exposure.universe.MarketVertex marketVertexFinish = marketEdge.finish();

  246.         org.drip.exposure.universe.MarketVertexEntity dealerMarketVertexFinish = marketVertexFinish.dealer();

  248.         double dealerSubordinateFundingMarketVertexFinish = dealerMarketVertexFinish.subordinateFundingReplicator();

  250.         double dealerSurvivalFinish = dealerMarketVertexFinish.survivalProbability();

  252.         double dealerSeniorRecoveryRateFinish = dealerMarketVertexFinish.seniorRecoveryRate();

  254.         double dealerSubordinateRecoveryRateFinish = dealerMarketVertexFinish.subordinateRecoveryRate();

  256.         double clientSurvivalFinish = marketVertexFinish.client().survivalProbability();

  258.         double incrementalDealerSurvival = dealerSurvivalFinish -
  259.             (null == marketVertexStart ? 1. : marketVertexStart.dealer().survivalProbability());

  261.         double adjustedExposure =
  262.             collateralGroupVertexExposure.uncollateralized() +
  263.             dealerSurvivalFinish *
  264.                 (clientSurvivalFinish -
  265.                     (null == marketVertexStart ? 1. : marketVertexStart.client().survivalProbability())) *
  266.                 burgardKjaerVertexExposure.credit() +
  267.             clientSurvivalFinish * incrementalDealerSurvival * burgardKjaerVertexExposure.debt() +
  268.             clientSurvivalFinish * incrementalDealerSurvival * fundingExposure -
  269.             dealerSurvivalFinish * clientSurvivalFinish * marketVertexFinish.csaSpread() *
  270.                 burgardKjaerVertexExposure.variationMarginPosting();

  272.         try
  273.         {
  274.             return new org.drip.xva.vertex.BurgardKjaer (
  275.                 anchorDate,
  276.                 collateralGroupVertexExposure.variationMarginEstimate(),
  277.                 collateralGroupVertexExposure.tradePayment(),
  278.                 burgardKjaerVertexExposure,
  279.                 collateralGroupVertexCloseOut,
  280.                 new org.drip.xva.derivative.ReplicationPortfolioVertexDealer (
  281.                     (fundingExposure + dealerSubordinateRecoveryRateFinish * adjustedExposure -
  282.                         dealerDefaultCloseOut) / (dealerSeniorRecoveryRateFinish -
  283.                         dealerSubordinateRecoveryRateFinish) /
  284.                         dealerMarketVertexFinish.seniorFundingReplicator(),
  285.                     (fundingExposure + dealerSeniorRecoveryRateFinish * adjustedExposure - dealerDefaultCloseOut)
  286.                         / (dealerSubordinateRecoveryRateFinish - dealerSeniorRecoveryRateFinish) /
  287.                         dealerSubordinateFundingMarketVertexFinish
  288.                 )
  289.             );
  290.         }
  291.         catch (java.lang.Exception e)
  292.         {
  293.             e.printStackTrace();
  294.         }

  296.         return null;
  297.     }

  299.     /**
  300.      * Construct a Standard Instance of BurgardKjaerVertex using the specified Hedge Error with Two Dealer
  301.      *  Bonds
  302.      * 
  303.      * @param anchorDate The Vertex Date Anchor
  304.      * @param exposure The Exposure at the Path Vertex Time Node
  305.      * @param realizedCashFlow The Default Window Realized Cash-flow at the Path Vertex Time Node
  306.      * @param collateralBalance The Collateral Balance at the Path Vertex Time Node
  307.      * @param hedgeError The Hedge Error
  308.      * @param marketEdge The Market Edge
  309.      * @param closeOutScheme The Generic Close-Out Evaluator Instance
  310.      * 
  311.      * @return The Standard Instance of BurgardKjaerVertex using the specified Hedge Error with Two Dealer
  312.      *  Bonds
  313.      */

  315.     public static final org.drip.xva.vertex.BurgardKjaer HedgeErrorDualBond (
  316.         final org.drip.analytics.date.JulianDate anchorDate,
  317.         final double exposure,
  318.         final double realizedCashFlow,
  319.         final double collateralBalance,
  320.         final double hedgeError,
  321.         final org.drip.exposure.universe.MarketEdge marketEdge,
  322.         final org.drip.xva.definition.CloseOut closeOutScheme)
  323.     {
  324.         if (!org.drip.numerical.common.NumberUtil.IsValid (exposure) ||
  325.             !org.drip.numerical.common.NumberUtil.IsValid (realizedCashFlow) ||
  326.             !org.drip.numerical.common.NumberUtil.IsValid (collateralBalance) ||
  327.             !org.drip.numerical.common.NumberUtil.IsValid (hedgeError))
  328.         {
  329.             return null;
  330.         }

  332.         double uncollateralizedExposure = exposure + realizedCashFlow;
  333.         double collateralizedExposure = uncollateralizedExposure - collateralBalance;

  335.         org.drip.xva.hypothecation.CollateralGroupVertexCloseOut collateralGroupVertexCloseOut =
  336.             org.drip.xva.hypothecation.CollateralGroupVertexCloseOut.Standard (
  337.                 closeOutScheme,
  338.                 uncollateralizedExposure,
  339.                 collateralBalance
  340.             );

  342.         if (null == collateralGroupVertexCloseOut)
  343.         {
  344.             return null;
  345.         }

  347.         try
  348.         {
  349.             return DealerPortfolioBuilder (
  350.                 anchorDate,
  351.                 new org.drip.xva.hypothecation.CollateralGroupVertexExposure (
  352.                     exposure,
  353.                     realizedCashFlow
  354.                 ),
  355.                 marketEdge,
  356.                 collateralGroupVertexCloseOut,
  357.                 new org.drip.xva.vertex.BurgardKjaerExposure (
  358.                     collateralizedExposure - collateralGroupVertexCloseOut.client(),
  359.                     collateralizedExposure - collateralGroupVertexCloseOut.dealer(),
  360.                     hedgeError,
  361.                     collateralBalance
  362.                 )
  363.             );
  364.         }
  365.         catch (java.lang.Exception e)
  366.         {
  367.             e.printStackTrace();
  368.         }

  370.         return null;
  371.     }

  373.     /**
  374.      * Construct a Standard Instance of BurgardKjaerVertex using semi-replication with no Short-fall at own
  375.      *  Default using Two Bonds
  376.      * 
  377.      * @param anchorDate The Vertex Date Anchor
  378.      * @param exposure The Exposure at the Path Vertex Time Node
  379.      * @param realizedCashFlow The Default Window Realized Cash-flow at the Path Vertex Time Node
  380.      * @param collateralBalance The Collateral Balance at the Path Vertex Time Node
  381.      * @param marketEdge The Market Edge
  382.      * @param closeOutScheme The Generic Close-Out Evaluator Instance
  383.      * 
  384.      * @return The Standard Instance of BurgardKjaerVertex using semi-replication with no Short-fall at own
  385.      *  Default using Two Bonds
  386.      */

  388.     public static final org.drip.xva.vertex.BurgardKjaer SemiReplicationDualBond (
  389.         final org.drip.analytics.date.JulianDate anchorDate,
  390.         final double exposure,
  391.         final double realizedCashFlow,
  392.         final double collateralBalance,
  393.         final org.drip.exposure.universe.MarketEdge marketEdge,
  394.         final org.drip.xva.definition.CloseOut closeOutScheme)
  395.     {
  396.         if (!org.drip.numerical.common.NumberUtil.IsValid (exposure) ||
  397.             !org.drip.numerical.common.NumberUtil.IsValid (realizedCashFlow) ||
  398.             !org.drip.numerical.common.NumberUtil.IsValid (collateralBalance))
  399.         {
  400.             return null;
  401.         }

  403.         double uncollateralizedExposure = exposure + realizedCashFlow;
  404.         double collateralizedExposure = uncollateralizedExposure - collateralBalance;

  406.         try
  407.         {
  408.             return DealerPortfolioBuilder (
  409.                 anchorDate,
  410.                 new org.drip.xva.hypothecation.CollateralGroupVertexExposure (
  411.                     exposure,
  412.                     realizedCashFlow
  413.                 ),
  414.                 marketEdge,
  415.                 org.drip.xva.hypothecation.CollateralGroupVertexCloseOut.Standard (
  416.                     closeOutScheme,
  417.                     uncollateralizedExposure,
  418.                     collateralBalance
  419.                 ),
  420.                 new org.drip.xva.vertex.BurgardKjaerExposure (
  421.                     0. < collateralizedExposure ? collateralizedExposure : 0.,
  422.                     0. > collateralizedExposure ? collateralizedExposure : 0.,
  423.                     0. < collateralizedExposure ? collateralizedExposure : 0.,
  424.                     collateralBalance
  425.                 )
  426.             );
  427.         }
  428.         catch (java.lang.Exception e)
  429.         {
  430.             e.printStackTrace();
  431.         }

  433.         return null;
  434.     }

  436.     /**
  437.      * Construct a Standard Instance of BurgardKjaerVertex using a Fully Collateralized Strategy, i.e., also
  438.      *  referred to as the 2 Way Gold Plated CSA
  439.      * 
  440.      * @param anchorDate The Vertex Date Anchor
  441.      * @param exposure The Exposure at the Path Vertex Time Node
  442.      * @param realizedCashFlow The Default Window Realized Cash-flow at the Path Vertex Time Node
  443.      * @param marketEdge The Market Edge
  444.      * @param closeOutScheme The Generic Close-Out Evaluator Instance
  445.      * 
  446.      * @return The Standard Instance of BurgardKjaerVertex using using a Fully Collateralized Strategy
  447.      */

  449.     public static final org.drip.xva.vertex.BurgardKjaer GoldPlatedTwoWayCSA (
  450.         final org.drip.analytics.date.JulianDate anchorDate,
  451.         final double exposure,
  452.         final double realizedCashFlow,
  453.         final org.drip.exposure.universe.MarketEdge marketEdge,
  454.         final org.drip.xva.definition.CloseOut closeOutScheme)
  455.     {
  456.         if (!org.drip.numerical.common.NumberUtil.IsValid (exposure) ||
  457.             !org.drip.numerical.common.NumberUtil.IsValid (realizedCashFlow))
  458.         {
  459.             return null;
  460.         }

  462.         double uncollateralizedExposure = exposure + realizedCashFlow;

  464.         try
  465.         {
  466.             return DealerPortfolioBuilder (
  467.                 anchorDate,
  468.                 new org.drip.xva.hypothecation.CollateralGroupVertexExposure (
  469.                     exposure,
  470.                     realizedCashFlow
  471.                 ),
  472.                 marketEdge,
  473.                 org.drip.xva.hypothecation.CollateralGroupVertexCloseOut.Standard (
  474.                     closeOutScheme,
  475.                     uncollateralizedExposure,
  476.                     uncollateralizedExposure
  477.                 ),
  478.                 new org.drip.xva.vertex.BurgardKjaerExposure (
  479.                     0.,
  480.                     0.,
  481.                     0.,
  482.                     uncollateralizedExposure
  483.                 )
  484.             );
  485.         }
  486.         catch (java.lang.Exception e)
  487.         {
  488.             e.printStackTrace();
  489.         }

  491.         return null;
  492.     }

  494.     /**
  495.      * Construct a Standard Instance of BurgardKjaerVertex using One Way CSA
  496.      * 
  497.      * @param anchorDate The Vertex Date Anchor
  498.      * @param exposure The Exposure at the Path Vertex Time Node
  499.      * @param realizedCashFlow The Default Window Realized Cash-flow at the Path Vertex Time Node
  500.      * @param marketEdge The Market Edge
  501.      * @param closeOutScheme The Generic Close-Out Evaluator Instance
  502.      * 
  503.      * @return The Standard Instance of BurgardKjaerVertex using One Way CSA
  504.      */

  506.     public static final org.drip.xva.vertex.BurgardKjaer OneWayCSA (
  507.         final org.drip.analytics.date.JulianDate anchorDate,
  508.         final double exposure,
  509.         final double realizedCashFlow,
  510.         final org.drip.exposure.universe.MarketEdge marketEdge,
  511.         final org.drip.xva.definition.CloseOut closeOutScheme)
  512.     {
  513.         if (!org.drip.numerical.common.NumberUtil.IsValid (exposure) ||
  514.             !org.drip.numerical.common.NumberUtil.IsValid (realizedCashFlow))
  515.         {
  516.             return null;
  517.         }

  519.         double uncollateralizedExposure = exposure + realizedCashFlow;
  520.         double collateralBalance = 0. > uncollateralizedExposure ? uncollateralizedExposure : 0.;

  522.         try
  523.         {
  524.             return DealerPortfolioBuilder (
  525.                 anchorDate,
  526.                 new org.drip.xva.hypothecation.CollateralGroupVertexExposure (
  527.                     exposure,
  528.                     realizedCashFlow
  529.                 ),
  530.                 marketEdge,
  531.                 org.drip.xva.hypothecation.CollateralGroupVertexCloseOut.Standard (
  532.                     closeOutScheme,
  533.                     uncollateralizedExposure,
  534.                     collateralBalance
  535.                 ),
  536.                 new org.drip.xva.vertex.BurgardKjaerExposure (
  537.                     0. < uncollateralizedExposure ? uncollateralizedExposure : 0.,
  538.                     0.,
  539.                     0. < uncollateralizedExposure ? uncollateralizedExposure : 0.,
  540.                     collateralBalance
  541.                 )
  542.             );
  543.         }
  544.         catch (java.lang.Exception e)
  545.         {
  546.             e.printStackTrace();
  547.         }

  549.         return null;
  550.     }

  552.     /**
  553.      * Construct a Standard Instance of BurgardKjaerVertex using the "Set Off" Legal Agreement Scheme
  554.      * 
  555.      * @param anchorDate The Vertex Date Anchor
  556.      * @param exposure The Exposure at the Path Vertex Time Node
  557.      * @param realizedCashFlow The Default Window Realized Cash-flow at the Path Vertex Time Node
  558.      * @param collateralBalance The Collateral Balance at the Path Vertex Time Node
  559.      * @param marketEdge The Market Edge
  560.      * 
  561.      * @return The Standard Instance of BurgardKjaerVertex using the "Set Off" Legal Agreement Scheme
  562.      */

  564.     public static final org.drip.xva.vertex.BurgardKjaer SetOff (
  565.         final org.drip.analytics.date.JulianDate anchorDate,
  566.         final double exposure,
  567.         final double realizedCashFlow,
  568.         final double collateralBalance,
  569.         final org.drip.exposure.universe.MarketEdge marketEdge)
  570.     {
  571.         if (!org.drip.numerical.common.NumberUtil.IsValid (exposure) ||
  572.             !org.drip.numerical.common.NumberUtil.IsValid (realizedCashFlow) ||
  573.             !org.drip.numerical.common.NumberUtil.IsValid (collateralBalance))
  574.         {
  575.             return null;
  576.         }

  578.         org.drip.exposure.universe.MarketVertex marketVertexFinish = marketEdge.finish();

  580.         double dealerSeniorRecoveryRateFinish = marketVertexFinish.dealer().seniorRecoveryRate();

  582.         double clientRecoveryFinish = marketVertexFinish.client().seniorRecoveryRate();

  584.         double collateralizedExposure = exposure + realizedCashFlow - collateralBalance;

  586.         try
  587.         {
  588.             return DealerPortfolioBuilder (
  589.                 anchorDate,
  590.                 new org.drip.xva.hypothecation.CollateralGroupVertexExposure (
  591.                     exposure,
  592.                     realizedCashFlow
  593.                 ),
  594.                 marketEdge,
  595.                 new org.drip.xva.hypothecation.CollateralGroupVertexCloseOut (
  596.                     collateralizedExposure * dealerSeniorRecoveryRateFinish,
  597.                     collateralizedExposure * clientRecoveryFinish
  598.                 ),
  599.                 new org.drip.xva.vertex.BurgardKjaerExposure (
  600.                     collateralizedExposure * (1. - clientRecoveryFinish),
  601.                     collateralizedExposure * (1. - dealerSeniorRecoveryRateFinish),
  602.                     0.,
  603.                     collateralBalance
  604.                 )
  605.             );
  606.         }
  607.         catch (java.lang.Exception e)
  608.         {
  609.             e.printStackTrace();
  610.         }

  612.         return null;
  613.     }
  614. }
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