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finmath lib is a Mathematical Finance Library in Java.
It provides algorithms and methodologies related to mathematical finance.
/*
* (c) Copyright Christian P. Fries, Germany. Contact: [email protected].
*
* Created on 20.05.2005
*/
package net.finmath.marketdata2.model.curves;
import java.io.Serializable;
import java.time.LocalDate;
import java.time.ZoneId;
import java.util.ArrayList;
import java.util.Date;
import java.util.function.DoubleFunction;
import java.util.stream.DoubleStream;
import net.finmath.exception.CalculationException;
import net.finmath.marketdata2.model.AnalyticModel;
import net.finmath.montecarlo.RandomVariableFromDoubleArray;
import net.finmath.montecarlo.interestrate.LIBORModelMonteCarloSimulationModel;
import net.finmath.stochastic.RandomVariable;
import net.finmath.time.businessdaycalendar.BusinessdayCalendar;
import net.finmath.time.businessdaycalendar.BusinessdayCalendarExcludingWeekends;
/**
* A container for a forward (rate) curve. The forward curve is based on the {@link net.finmath.marketdata.model.curves.CurveInterpolation} class.
* It thus features all interpolation and extrapolation methods and interpolation entities as {@link net.finmath.marketdata.model.curves.CurveInterpolation}.
*
* The forward F(t) of an index is such that * F(t) * D(t+p) equals the market price of the corresponding
* index fixed in t and paid in t+d, where t is the fixing time of the index and t+p is the payment time of the index.
* F(t) is the corresponding forward and D is the associated discount curve.
*
* @author Christian Fries
* @version 1.0
*/
public class ForwardCurveInterpolation extends AbstractForwardCurve implements Serializable {
private static final long serialVersionUID = -4126228588123963885L;
/**
* Additional choice of interpolation entities for forward curves.
*/
public enum InterpolationEntityForward {
/** Interpolation is performed on the forward **/
FORWARD,
/** Interpolation is performed on the value = forward * discount factor **/
FORWARD_TIMES_DISCOUNTFACTOR,
/** Interpolation is performed on the zero rate **/
ZERO,
/** Interpolation is performed on the (synthetic) discount factor **/
DISCOUNTFACTOR
}
private InterpolationEntityForward interpolationEntityForward = InterpolationEntityForward.FORWARD;
/**
* Generate a forward curve using a given discount curve and payment offset.
*
* @param name The name of this curve.
* @param referenceDate The reference date for this code, i.e., the date which defines t=0.
* @param paymentOffsetCode The maturity of the index modeled by this curve.
* @param paymentBusinessdayCalendar The business day calendar used for adjusting the payment date.
* @param paymentDateRollConvention The date roll convention used for adjusting the payment date.
* @param interpolationMethod The interpolation method used for the curve.
* @param extrapolationMethod The extrapolation method used for the curve.
* @param interpolationEntity The entity interpolated/extrapolated.
* @param interpolationEntityForward Interpolation entity used for forward rate interpolation.
* @param discountCurveName The name of a discount curve associated with this index (associated with it's funding or collateralization), if any.
*/
public ForwardCurveInterpolation(final String name,
final LocalDate referenceDate,
final String paymentOffsetCode,
final BusinessdayCalendar paymentBusinessdayCalendar,
final BusinessdayCalendar.DateRollConvention paymentDateRollConvention,
final InterpolationMethod interpolationMethod,
final ExtrapolationMethod extrapolationMethod,
final InterpolationEntity interpolationEntity,
final InterpolationEntityForward interpolationEntityForward,
final String discountCurveName) {
super(name, referenceDate, paymentOffsetCode, paymentBusinessdayCalendar, paymentDateRollConvention, interpolationMethod,
extrapolationMethod, interpolationEntity, discountCurveName);
this.interpolationEntityForward = interpolationEntityForward;
if(interpolationEntityForward == InterpolationEntityForward.DISCOUNTFACTOR) {
super.addPoint(0.0, new RandomVariableFromDoubleArray(1.0), false);
}
}
/**
* Generate a forward curve using a given discount curve and payment offset.
*
* @param name The name of this curve.
* @param referenceDate The reference date for this code, i.e., the date which defines t=0.
* @param paymentOffsetCode The maturity of the index modeled by this curve.
* @param interpolationEntityForward Interpolation entity used for forward rate interpolation.
* @param discountCurveName The name of a discount curve associated with this index (associated with it's funding or collateralization), if any.
*/
public ForwardCurveInterpolation(final String name, final LocalDate referenceDate, final String paymentOffsetCode, final InterpolationEntityForward interpolationEntityForward, final String discountCurveName) {
this(name, referenceDate, paymentOffsetCode, new BusinessdayCalendarExcludingWeekends(), BusinessdayCalendar.DateRollConvention.FOLLOWING, InterpolationMethod.LINEAR, ExtrapolationMethod.CONSTANT, InterpolationEntity.VALUE, interpolationEntityForward, discountCurveName);
}
/**
* Generate a forward curve using a given discount curve and payment offset.
*
* @param name The name of this curve.
* @param referenceDate The reference date for this code, i.e., the date which defines t=0.
* @param paymentOffsetCode The maturity of the index modeled by this curve.
* @param discountCurveName The name of a discount curve associated with this index (associated with it's funding or collateralization), if any.
*/
public ForwardCurveInterpolation(final String name, final LocalDate referenceDate, final String paymentOffsetCode, final String discountCurveName) {
this(name, referenceDate, paymentOffsetCode, InterpolationEntityForward.FORWARD, discountCurveName);
}
/**
* Generate a forward curve using a given discount curve and payment offset.
*
* @param name The name of this curve.
* @param paymentOffset The maturity of the underlying index modeled by this curve.
* @param interpolationEntityForward Interpolation entity used for forward rate interpolation.
* @param discountCurveName The name of a discount curve associated with this index (associated with it's funding or collateralization), if any.
*/
public ForwardCurveInterpolation(final String name, final double paymentOffset, final InterpolationEntityForward interpolationEntityForward, final String discountCurveName) {
super(name, null, paymentOffset, discountCurveName);
this.interpolationEntityForward = interpolationEntityForward;
}
/**
* Create a forward curve from given times and given forwards.
*
* @param name The name of this curve.
* @param referenceDate The reference date for this code, i.e., the date which defines t=0.
* @param paymentOffsetCode The maturity of the index modeled by this curve.
* @param paymentBusinessdayCalendar The business day calendar used for adjusting the payment date.
* @param paymentDateRollConvention The date roll convention used for adjusting the payment date.
* @param interpolationMethod The interpolation method used for the curve.
* @param extrapolationMethod The extrapolation method used for the curve.
* @param interpolationEntity The entity interpolated/extrapolated.
* @param interpolationEntityForward Interpolation entity used for forward rate interpolation.
* @param discountCurveName The name of a discount curve associated with this index (associated with it's funding or collateralization), if any.
* @param model The model to be used to fetch the discount curve, if needed.
* @param times A vector of given time points.
* @param givenForwards A vector of given forwards (corresponding to the given time points).
* @return A new ForwardCurve object.
*/
public static ForwardCurveInterpolation createForwardCurveFromForwards(final String name, final LocalDate referenceDate, final String paymentOffsetCode,
final BusinessdayCalendar paymentBusinessdayCalendar, final BusinessdayCalendar.DateRollConvention paymentDateRollConvention,
final InterpolationMethod interpolationMethod, final ExtrapolationMethod extrapolationMethod, final InterpolationEntity interpolationEntity,
final InterpolationEntityForward interpolationEntityForward, final String discountCurveName, final AnalyticModel model, final double[] times, final RandomVariable[] givenForwards) {
final ForwardCurveInterpolation forwardCurveInterpolation = new ForwardCurveInterpolation(name, referenceDate, paymentOffsetCode, paymentBusinessdayCalendar, paymentDateRollConvention,
interpolationMethod, extrapolationMethod, interpolationEntity, interpolationEntityForward, discountCurveName);
for(int timeIndex=0; timeIndex 0);
forwardCurveInterpolation.addForward(null, fixingTime, givenForwards[timeIndex], isParameter);
}
return forwardCurveInterpolation;
}
/**
* Create a forward curve from given times and discount factors.
*
* The forward curve will have times.length-1 fixing times from times[0] to times[times.length-2]
*
* forward[timeIndex] = (givenDiscountFactors[timeIndex]/givenDiscountFactors[timeIndex+1]-1.0) / (times[timeIndex+1] - times[timeIndex]);
*
* Note: If time[0] > 0, then the discount factor 1.0 will inserted at time 0.0
*
* @param name The name of this curve.
* @param times A vector of given time points.
* @param givenDiscountFactors A vector of given discount factors (corresponding to the given time points).
* @param paymentOffset The maturity of the underlying index modeled by this curve.
* @return A new ForwardCurve object.
*/
public static ForwardCurveInterpolation createForwardCurveFromDiscountFactors(final String name, final double[] times, final RandomVariable[] givenDiscountFactors, final double paymentOffset) {
final ForwardCurveInterpolation forwardCurveInterpolation = new ForwardCurveInterpolation(name, paymentOffset, InterpolationEntityForward.FORWARD, null);
if(times.length == 0) {
throw new IllegalArgumentException("Vector of times must not be empty.");
}
if(times[0] > 0) {
// Add first forward
final RandomVariable forward = givenDiscountFactors[0].sub(1.0).pow(-1.0).div(times[0]);
forwardCurveInterpolation.addForward(null, 0.0, forward, true);
}
for(int timeIndex=0; timeIndex 0);
forwardCurveInterpolation.addForward(null, fixingTime, forward, isParameter);
}
return forwardCurveInterpolation;
}
/**
* Create a forward curve from given times and given forwards with respect to an associated discount curve and payment offset.
*
* @param name The name of this curve.
* @param times A vector of given time points.
* @param givenForwards A vector of given forwards (corresponding to the given time points).
* @param model An analytic model providing a context. The discount curve (if needed) is obtained from this model.
* @param discountCurveName Name of the discount curve associated with this index (associated with it's funding or collateralization).
* @param paymentOffset Time between fixing and payment.
* @return A new ForwardCurve object.
*/
public static ForwardCurveInterpolation createForwardCurveFromForwards(final String name, final double[] times, final RandomVariable[] givenForwards, final AnalyticModel model, final String discountCurveName, final double paymentOffset) {
final ForwardCurveInterpolation forwardCurveInterpolation = new ForwardCurveInterpolation(name, paymentOffset, InterpolationEntityForward.FORWARD, discountCurveName);
for(int timeIndex=0; timeIndex 0);
forwardCurveInterpolation.addForward(model, fixingTime, givenForwards[timeIndex], isParameter);
}
return forwardCurveInterpolation;
}
/**
* Create a forward curve from given times and given forwards with respect to an associated discount curve and payment offset.
*
* @param name The name of this curve.
* @param times A vector of given time points.
* @param givenForwards A vector of given forwards (corresponding to the given time points).
* @param model An analytic model providing a context. The discount curve (if needed) is obtained from this model.
* @param discountCurveName Name of the discount curve associated with this index (associated with it's funding or collateralization).
* @param paymentOffset Time between fixing and payment.
* @return A new ForwardCurve object.
*/
public static ForwardCurveInterpolation createForwardCurveFromForwards(final String name, final double[] times, final double[] givenForwards, final AnalyticModel model, final String discountCurveName, final double paymentOffset) {
final RandomVariable[] givenForwardsAsRandomVariables = DoubleStream.of(givenForwards).mapToObj(new DoubleFunction() {
@Override
public RandomVariableFromDoubleArray apply(final double x) { return new RandomVariableFromDoubleArray(x); }
}).toArray(RandomVariable[]::new);
return createForwardCurveFromForwards(name, times, givenForwardsAsRandomVariables, model, discountCurveName, paymentOffset);
}
/**
* Create a forward curve from forwards given by a LIBORMonteCarloModel.
*
* @param name name of the forward curve.
* @param model Monte Carlo model providing the forwards.
* @param startTime time at which the curve starts, i.e. zero time for the curve
* @return a forward curve from forwards given by a LIBORMonteCarloModel.
* @throws CalculationException Thrown if the model failed to provide the forward rates.
*/
public static ForwardCurveInterpolation createForwardCurveFromMonteCarloLiborModel(final String name, final LIBORModelMonteCarloSimulationModel model, final double startTime) throws CalculationException{
final int timeIndex = model.getTimeIndex(startTime);
// Get all Libors at timeIndex which are not yet fixed (others null) and times for the timeDiscretizationFromArray of the curves
final ArrayList liborsAtTimeIndex = new ArrayList<>();
final int firstLiborIndex = model.getLiborPeriodDiscretization().getTimeIndexNearestGreaterOrEqual(startTime);
final double firstLiborTime = model.getLiborPeriodDiscretization().getTime(firstLiborIndex);
if(firstLiborTime>startTime) {
liborsAtTimeIndex.add(model.getForwardRate(startTime, startTime, firstLiborTime));
}
// Vector of times for the forward curve
final double[] times = new double[firstLiborTime==startTime ? (model.getNumberOfLibors()-firstLiborIndex) : (model.getNumberOfLibors()-firstLiborIndex+1)];
times[0]=0;
final int indexOffset = firstLiborTime==startTime ? 0 : 1;
for(int i=firstLiborIndex;iNote: This implementation currently ignores the provided paymentOffset.
* Instead it uses the payment offset calculate from the curve specification.
*
* @param model An analytic model providing a context. Some curves do not need this (can be null).
* @param fixingTime The fixing time of the index associated with this forward curve.
* @param paymentOffset The payment offset (as internal day count fraction) specifying the payment of this index. Used only as a fallback and/or consistency check.
*
* @return The forward.
*/
@Override
public RandomVariable getForward(final AnalyticModel model, final double fixingTime, final double paymentOffset)
{
// @TODO A warning should be issued that this implementation does not use
// if(paymentOffset != this.getPaymentOffset(fixingTime)) {
// Logger.getLogger("net.finmath").warning("Requesting forward with paymentOffsets not agreeing with original calibration. Requested: " + paymentOffsets +". Calibrated: " + getPaymentOffset(fixingTime) + ".");
// }
return this.getForward(model, fixingTime);
}
/**
* Add a forward to this curve.
*
* @param model An analytic model providing a context. The discount curve (if needed) is obtained from this model.
* @param fixingTime The given fixing time.
* @param forward The given forward.
* @param isParameter If true, then this point is server via {@link #getParameter()} and changed via {@link #setParameter(RandomVariable[])} and {@link #getCloneForParameter(RandomVariable[])}, i.e., it can be calibrated.
*/
private void addForward(final AnalyticModel model, final double fixingTime, final RandomVariable forward, final boolean isParameter) {
double interpolationEntitiyTime;
RandomVariable interpolationEntityForwardValue;
switch(interpolationEntityForward) {
case FORWARD:
default:
interpolationEntitiyTime = fixingTime;
interpolationEntityForwardValue = forward;
break;
case FORWARD_TIMES_DISCOUNTFACTOR:
interpolationEntitiyTime = fixingTime;
interpolationEntityForwardValue = forward.mult(model.getDiscountCurve(getDiscountCurveName()).getValue(model, fixingTime+getPaymentOffset(fixingTime)));
break;
case ZERO:
{
final double paymentOffset = getPaymentOffset(fixingTime);
interpolationEntitiyTime = fixingTime+paymentOffset;
interpolationEntityForwardValue = forward.mult(paymentOffset).add(1.0).log().div(paymentOffset);
break;
}
case DISCOUNTFACTOR:
{
final double paymentOffset = getPaymentOffset(fixingTime);
interpolationEntitiyTime = fixingTime+paymentOffset;
interpolationEntityForwardValue = getValue(fixingTime).div(forward.mult(paymentOffset).add(1.0));
break;
}
}
super.addPoint(interpolationEntitiyTime, interpolationEntityForwardValue, isParameter);
}
@Override
protected void addPoint(double time, final RandomVariable value, final boolean isParameter) {
if(interpolationEntityForward == InterpolationEntityForward.DISCOUNTFACTOR) {
time += getPaymentOffset(time);
}
super.addPoint(time, value, isParameter);
}
/**
* Returns the special interpolation method used for this forward curve.
*
* @return The interpolation method used for the forward.
*/
public InterpolationEntityForward getInterpolationEntityForward() {
return interpolationEntityForward;
}
@Override
public String toString() {
return "ForwardCurve [" + super.toString() + ", interpolationEntityForward=" + interpolationEntityForward + "]";
}
}