BurgardKjaerExposure.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>BurgardKjaerExposure</i> holds the Credit, the Debt, and the Funding Exposures, as well as the
  81.  * Collateral Balances at each Re-hypothecation Collateral Group using the Burgard Kjaer (2014) Scheme. The
  82.  * References 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.  *          Burgard, C., and M. Kjaer (2014): In the Balance <i>Risk</i> <b>24 (11)</b> 72-75
  92.  *      </li>
  93.  *      <li>
  94.  *          Gregory, J. (2009): Being Two-faced over Counter-party Credit Risk <i>Risk</i> <b>20 (2)</b>
  95.  *              86-90
  96.  *      </li>
  97.  *      <li>
  98.  *          Li, B., and Y. Tang (2007): <i>Quantitative Analysis, Derivatives Modeling, and Trading
  99.  *              Strategies in the Presence of Counter-party Credit Risk for the Fixed Income Market</i>
  100.  *              <b>World Scientific Publishing</b> Singapore
  101.  *      </li>
  102.  *      <li>
  103.  *          Piterbarg, V. (2010): Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing
  104.  *              <i>Risk</i> <b>21 (2)</b> 97-102
  105.  *      </li>
  106.  *  </ul>
  107.  *
  108.  *  <br><br>
  109.  *  <ul>
  110.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/PortfolioCore.md">Portfolio Core Module</a></li>
  111.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/XVAAnalyticsLibrary.md">XVA Analytics Library</a></li>
  112.  *      <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>
  113.  *      <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>
  114.  *  </ul>
  115.  * <br><br>
  116.  * 
  117.  * @author Lakshmi Krishnamurthy
  118.  */

  120. public class BurgardKjaerExposure implements org.drip.xva.hypothecation.CollateralGroupVertexExposureComponent
  121. {
  122.     private double _debt = java.lang.Double.NaN;
  123.     private double _credit = java.lang.Double.NaN;
  124.     private double _funding = java.lang.Double.NaN;
  125.     private double _collateralBalance = java.lang.Double.NaN;

  127.     /**
  128.      * Generate an Initial Instance of Burgard Kjaer Vertex Exposure
  129.      * 
  130.      * @param uncollateralizedExposure The Uncollateralized Exposure
  131.      * @param collateralGroupVertexCloseOut Collateral Group Vertex Close Out
  132.      * 
  133.      * @return Initial Instance of Burgard Kjaer Vertex Exposure
  134.      */

  136.     public static final BurgardKjaerExposure Initial (
  137.         final double uncollateralizedExposure,
  138.         final org.drip.xva.hypothecation.CollateralGroupVertexCloseOut collateralGroupVertexCloseOut)
  139.     {
  140.         if (!org.drip.numerical.common.NumberUtil.IsValid (uncollateralizedExposure) ||
  141.             null == collateralGroupVertexCloseOut)
  142.         {
  143.             return null;
  144.         }

  146.         try
  147.         {
  148.             return new BurgardKjaerExposure (
  149.                 uncollateralizedExposure - collateralGroupVertexCloseOut.client(),
  150.                 uncollateralizedExposure - collateralGroupVertexCloseOut.dealer(),
  151.                 0.,
  152.                 0.
  153.             );
  154.         }
  155.         catch (java.lang.Exception e)
  156.         {
  157.             e.printStackTrace();
  158.         }

  160.         return null;
  161.     }

  163.     /**
  164.      * BurgardKjaerExposure Constructor
  165.      * 
  166.      * @param credit The Credit Exposure of the Collateral Group
  167.      * @param debt The Debt Exposure of the Collateral Group
  168.      * @param funding The Funding Exposure of the Collateral Group
  169.      * @param collateralBalance The Collateral Balance of the Collateral Group
  170.      * 
  171.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  172.      */

  174.     public BurgardKjaerExposure (
  175.         final double credit,
  176.         final double debt,
  177.         final double funding,
  178.         final double collateralBalance)
  179.         throws java.lang.Exception
  180.     {
  181.         if (!org.drip.numerical.common.NumberUtil.IsValid (_credit = credit) ||
  182.             !org.drip.numerical.common.NumberUtil.IsValid (_debt = debt) ||
  183.             !org.drip.numerical.common.NumberUtil.IsValid (_funding = funding) ||
  184.             !org.drip.numerical.common.NumberUtil.IsValid (_collateralBalance = collateralBalance))
  185.         {
  186.             throw new java.lang.Exception ("BurgardKjaerExposure Constructor => Invalid Inputs");
  187.         }
  188.     }

  190.     @Override public double credit()
  191.     {
  192.         return _credit;
  193.     }

  195.     @Override public double debt()
  196.     {
  197.         return _debt;
  198.     }

  200.     @Override public double funding()
  201.     {
  202.         return _funding;
  203.     }

  205.     @Override public double variationMarginPosting()
  206.     {
  207.         return _collateralBalance;
  208.     }
  209. }
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