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finmath lib is a Mathematical Finance Library in Java.
It provides algorithms and methodologies related to mathematical finance.
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/*
* (c) Copyright Christian P. Fries, Germany. Contact: [email protected].
*
* Created on 14.06.2015
*/
package net.finmath.marketdata.model.curves;
import java.time.LocalDate;
import java.util.ArrayList;
import java.util.Collections;
import java.util.List;
import java.util.Map;
import net.finmath.marketdata.model.curves.CurveInterpolation.ExtrapolationMethod;
import net.finmath.marketdata.model.curves.CurveInterpolation.InterpolationEntity;
import net.finmath.marketdata.model.curves.CurveInterpolation.InterpolationMethod;
import net.finmath.time.FloatingpointDate;
import net.finmath.time.daycount.DayCountConvention_30E_360;
import net.finmath.time.daycount.DayCountConvention_ACT_365;
/**
* A collection of convenient methods constructing some more specialized curves.
*
* @author Christian Fries
* @version 1.0
*/
public class CurveFactory {
private static DayCountConvention_ACT_365 modelDcc = new DayCountConvention_ACT_365();
private CurveFactory() {
}
/**
* Creates a monthly index curve with seasonality and past fixings.
*
* This methods creates an index curve (e.g. for a CPI index) using provided annualizedZeroRates
* for the forwards (expected future CPI values) and indexFixings for the past
* fixings.
*
* It may also "overlay" the future values with a seasonality adjustment. The seasonality adjustment
* is either taken from adjustment factors provided in seasonalityAdjustments or
* (if that argument is null) estimated from the indexFixings. The the latter case
* use seasonalAveragingNumerOfYears to specify the number of years which should be used
* to estimate the seasonality adjustments.
*
* @param name The name of the curve.
* @param referenceDate The reference date of the curve.
* @param indexFixings A Map<LocalDate, Double> of past fixings.
* @param seasonalityAdjustments A Map<String, Double> of seasonality adjustments (annualized continuously compounded rates for the given month, i.e., the seasonality factor is exp(seasonalityAdjustment/12)), where the String keys are "january", "february", "march", "april", "may", "june", "july", "august", "september", "october", "november", "december".
* @param seasonalAveragingNumberOfYears If seasonalityAdjustments is null you may provide an integer representing a number of years to have the seasonality estimated from the past fixings in indexFixings.
* @param annualizedZeroRates Map<LocalDate, Double> of annualized zero rates for given maturities.
* @param forwardsFixingLag The fixing lag (e.g. "-3M" for -3 month)
* @param forwardsFixingType The fixing type (e.g. "endOfMonth")
* @return An index curve.
*/
public static Curve createIndexCurveWithSeasonality(final String name, final LocalDate referenceDate, final Map indexFixings, final Map seasonalityAdjustments, final Integer seasonalAveragingNumberOfYears, final Map annualizedZeroRates, final String forwardsFixingLag, final String forwardsFixingType) {
/*
* Create a curve containing past fixings (using picewise constant interpolation)
*/
final double[] fixingTimes = new double[indexFixings.size()];
final double[] fixingValue = new double[indexFixings.size()];
int i = 0;
final List fixingDates = new ArrayList<>(indexFixings.keySet());
Collections.sort(fixingDates);
for(final LocalDate fixingDate : fixingDates) {
fixingTimes[i] = modelDcc.getDaycountFraction(referenceDate, fixingDate);
fixingValue[i] = indexFixings.get(fixingDate).doubleValue();
i++;
}
final Curve curveOfFixings = new CurveInterpolation(name, referenceDate, InterpolationMethod.PIECEWISE_CONSTANT_RIGHTPOINT, ExtrapolationMethod.CONSTANT, InterpolationEntity.VALUE, fixingTimes, fixingValue);
/*
* Create a curve modeling the seasonality
*/
Curve seasonCurve = null;
if(seasonalityAdjustments != null && seasonalityAdjustments.size() > 0 && seasonalAveragingNumberOfYears == null) {
final String[] monthList = { "january", "february", "march", "april", "may", "june", "july", "august", "september", "october", "november", "december" };
final double[] seasonTimes = new double[12];
final double[] seasonValue = new double[12];
double seasonValueCummulated = 1.0;
for(int j=0; j<12; j++) {
seasonValueCummulated *= Math.exp(seasonalityAdjustments.get(monthList[j]));
seasonTimes[j] = j/12.0;
seasonValue[j] = seasonValueCummulated;
}
seasonCurve = new SeasonalCurve(name + "-seasonal", referenceDate,new CurveInterpolation(name + "-seasonal-base", referenceDate, InterpolationMethod.PIECEWISE_CONSTANT_LEFTPOINT, ExtrapolationMethod.CONSTANT, InterpolationEntity.VALUE, seasonTimes, seasonValue));
}
else if(seasonalAveragingNumberOfYears != null && seasonalityAdjustments == null) {
seasonCurve = new SeasonalCurve(name + "-seasonal", referenceDate, indexFixings, seasonalAveragingNumberOfYears);
}
else if(seasonalAveragingNumberOfYears != null && seasonalityAdjustments != null) {
throw new IllegalArgumentException("Specified seasonal factors and seasonal averaging at the same time.");
}
/*
* Create the index curve from annualized zero rates.
*/
final double[] times = new double[annualizedZeroRates.size()];
final double[] givenDiscountFactors = new double[annualizedZeroRates.size()];
int index = 0;
final List dates = new ArrayList<>(annualizedZeroRates.keySet());
Collections.sort(dates);
for(final LocalDate forwardDate : dates) {
LocalDate cpiDate = forwardDate;
if(forwardsFixingType != null && forwardsFixingLag != null) {
if(forwardsFixingType.equals("endOfMonth")) {
cpiDate = cpiDate.withDayOfMonth(1);
if(forwardsFixingLag.equals("-2M")) {
cpiDate = cpiDate.minusMonths(2);
} else if(forwardsFixingLag.equals("-3M")) {
cpiDate = cpiDate.minusMonths(3);
} else if(forwardsFixingLag.equals("-4M")) {
cpiDate = cpiDate.minusMonths(4);
} else {
throw new IllegalArgumentException("Unsupported fixing type for forward in curve " + name);
}
cpiDate = cpiDate.withDayOfMonth(cpiDate.lengthOfMonth());
}
else {
throw new IllegalArgumentException("Unsupported fixing type for forward in curve " + name);
}
}
times[index] = modelDcc.getDaycountFraction(referenceDate, cpiDate);
final double rate = annualizedZeroRates.get(forwardDate).doubleValue();
givenDiscountFactors[index] = 1.0/Math.pow(1 + rate, (new DayCountConvention_30E_360()).getDaycountFraction(referenceDate, forwardDate));
index++;
}
final DiscountCurve discountCurve = DiscountCurveInterpolation.createDiscountCurveFromDiscountFactors(name, referenceDate, times, givenDiscountFactors, null, InterpolationMethod.LINEAR, ExtrapolationMethod.CONSTANT, InterpolationEntity.LOG_OF_VALUE);
LocalDate baseDate = referenceDate;
if(forwardsFixingType != null && forwardsFixingType.equals("endOfMonth") && forwardsFixingLag != null) {
baseDate = baseDate.withDayOfMonth(1);
if(forwardsFixingLag.equals("-2M")) {
baseDate = baseDate.minusMonths(2);
} else if(forwardsFixingLag.equals("-3M")) {
baseDate = baseDate.minusMonths(3);
} else if(forwardsFixingLag.equals("-4M")) {
baseDate = baseDate.minusMonths(4);
} else {
throw new IllegalArgumentException("Unsupported fixing type for forward in curve " + name);
}
baseDate = baseDate.withDayOfMonth(baseDate.lengthOfMonth());
}
/*
* Index base value
*/
final Double baseValue = indexFixings.get(baseDate);
if(baseValue == null) {
throw new IllegalArgumentException("CurveFromInterpolationPoints " + name + " has missing index value for base date " + baseDate);
}
final double baseTime = FloatingpointDate.getFloatingPointDateFromDate(referenceDate, baseDate);
/*
* Combine all three curves.
*/
double currentProjectedIndexValue = baseValue;
if(seasonCurve != null) {
// Rescale initial value of with seasonality
currentProjectedIndexValue /= seasonCurve.getValue(baseTime);
final Curve indexCurve = new IndexCurveFromDiscountCurve(name, currentProjectedIndexValue, discountCurve);
final Curve indexCurveWithSeason = new CurveFromProductOfCurves(name, referenceDate, indexCurve, seasonCurve);
final PiecewiseCurve indexCurveWithFixing = new PiecewiseCurve(indexCurveWithSeason, curveOfFixings, -Double.MAX_VALUE, fixingTimes[fixingTimes.length-1] + 1.0/365.0);
return indexCurveWithFixing;
}
else {
final Curve indexCurve = new IndexCurveFromDiscountCurve(name, currentProjectedIndexValue, discountCurve);
final PiecewiseCurve indexCurveWithFixing = new PiecewiseCurve(indexCurve, curveOfFixings, -Double.MAX_VALUE, fixingTimes[fixingTimes.length-1]);
return indexCurveWithFixing;
}
}
}