liborpaths.java

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/* WARANTY NOTICE AND COPYRIGHT
This program is free software; you can redistribute it and/or
modify it under the terms of the GNU General Public License
as published by the Free Software Foundation; either version 2
of the License, or (at your option) any later version.

This program is distributed in the hope that it will be useful,
but WITHOUT ANY WARRANTY; without even the implied warranty of
MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
GNU General Public License for more details.

You should have received a copy of the GNU General Public License
along with this program; if not, write to the Free Software
Foundation, Inc., 59 Temple Place - Suite 330, Boston, MA  02111-1307, USA.

Copyright (C) Michael J. Meyer

[e-mail]
[e-mail]

*/


/*
 * PathPairs.java
 *
 * Created on September 2, 2002, 3:41 PM
 */

package Examples.Libor;

import Libor.LiborProcess.*;
import Graphics.*;

/** <p>Opens a window and allocates a Libor Process of dimension 
 *   <code>n=100</code> with time steps <code>delta_j=0.25</code>.
 *  ie. a tenor structure of length 25 years.</p>
 *
 *  <p>Whenever the window is clicked a new path of Libor <code>L_90</code>
 *  and the corresponding log-Gaussian approximations <code>L0_90</code>
 *  and <code>L1_90</code> are displayed. The idea is to see how well the
 *  log-Gaussian approximations track true Libor.</p>
 *
 *  <p>Unsurprisingly it is found that <code>L1</code> approximates Libor
 *  better than <code>L0</code>. Noticeably divergence is seen only
 *  after long time periods.</p>
 *
 * @author Michael J. Meyer
 */
public class LiborPaths extends PathFrame{
    

       // window parameters
       static final int w=600,
                        h=350,
                        xOffset=70,
                        yOffset=70,
                        mPath=3;
       
       static final double dt=0.25;      // size of time step
    
       // Libor process setup
       static final int n=100,           // dimension of Libor process
                        i=90,            // computing Libors L_i, L^0_i
                        T=i-1;           // time steps to horizon
       static final double[] path=new double[i+1];  


       // Libor parameter sample 
       static final LMM_Parameters 
       lmmParams=new LMM_Parameters(n,LMM_Parameters.CS);
        
       static final LiborProcess LP=new LiborProcess(lmmParams);
       
       static final double l0=LP.initialTermStructure()[i];  // L_i(0)
       
       int count;        // counts the paths so we can cycle correctly
                         // in groups of three
       
       
       
       
/*******************************************************************************
 *
 *            THE PATHS
 *
 ******************************************************************************/
       
       /** Alternates between Libor and driftless Libor set at time
        *  <code>t=T_11</code>.
        */
       public double[] nextPath()
       {
           
           if(count==0){  LP.newPath(i,i,true,true,true);
                          for(int t=0;t<=i;t++)path[t]=LP.L(i,t);
                          count=1;  }
           
           else if(count==1){  for(int t=0;t<=i;t++)path[t]=LP.L0(i,t);
                               count=2;   } 
                      
           else if(count==2){  for(int t=0;t<=i;t++)path[t]=LP.L1(i,t);
                          count=0;   } 
           
           return path;
       } // end newPath
           
       
/*******************************************************************************
 *
 *                           CONSTRUCTOR
 *
 ******************************************************************************/           
               
       /** Uses the static final parameter values since we don't intend
        *  to alter these.
        */   
       public LiborPaths()
       {
           super("L_j (black), L0_j (red), L1_j (blue); "+
                 "j="+i+", n="+n+", delta_k=0.25",
                 w,h,xOffset,yOffset,T,dt,l0,mPath);
           count=0;
       }
       
/*******************************************************************************
 *
 *                                MAIN
 *
 ******************************************************************************/
       
       
       /** Opens the window and displays a new path of Libor <code>L_75<code>
        *  and the corresponding path of driftless Libor code>L^0_75<code>
        *  whenever the window is clicked.
        */
       public static void main(String[] args)
       {
           new LiborPaths().show();
       }
       
       
} // end PathPairs