add q08 risk-limit calibration evidence (A/B results)

2026-08-20 00:51:31 +00:00
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+# Q08 — Risk-limit A/B re-validation (trace 40)
+
+**Status:** DONE (verdict: REFUTED as an IR edge; safety-net value retained)
+
+## Input
+- Reference signal: exp-26 pred, run `21afc6afdb674a399b59dd76c97628ce` (mlflow exp 25)
+- Window: 2026-01-04 → 2026-08-10, Topk10 n_drop1, SPY benchmark, $1M, 5/15bp/$5
+- Tool: `rd_risk_calibrate` (A/B + sensitivity grid). Full JSON: `risk_calibration.json`
+
+## Candidate spec (round-3 live spec)
+`{"liquidity_floor_adv": 5000000, "size_cap_pct": 0.12, "concentration_cap_pct": 0.95, "drawdown_pause_pct": 0.10}`
+
+## Results (net, with cost)
+| Config | IR | Ann. return | Max DD |
+|---|---|---|---|
+| baseline (no limits) | 1.5804 | +27.50% | −6.91% |
+| **candidate (5M floor + caps)** | **1.5121** | +2.20% | **−0.65%** |
+| liquidity $10M | 1.5457 | +2.25% | −0.64% |
+
+## Findings
+- **Floor binds, not a no-op**: $5M liquidity floor dropped 8 symbols —
+  `DBA, DBC, ESPO, FDN, REM, TAN, UNG, XAR`.
+- **No IR edge from the gate**: candidate IR (1.512) is BELOW baseline (1.580).
+  The exp-18 direction (floor IR 0.81→0.98) does NOT reproduce on the clean-lake
+  reference signal.
+- **Drawdown cut is pure defunding**: size_cap 0.12 × concentration 0.95 fold
+  the effective risk_degree to ~0.0095 → ~$9.5k deployed of $1M (~100x less).
+  Sensitivity grid shows both caps are no-ops (conc 20–50% identical,
+  size_cap 5–20% identical); only the liquidity floor moves returns, marginally.
+- **Conclusion**: keep the live spec as a safety net; there is no risk-limit
+  gate IR edge to harvest when the signal is the bottleneck (exp-20 pattern).
+
+## Artifacts on this branch
+- `evidence/q08-risklimit/risk_calibration.json` — full calibration dump
+- `queue/designs/q08_risk_limit_ab.md` — the pre-registered design doc
@@ -0,0 +1,401 @@
+{
+  "rows": [
+    {
+      "label": "baseline (no limits)",
+      "mean": 0.001155,
+      "std": 0.011279,
+      "annualized_return": 0.274989,
+      "information_ratio": 1.580427,
+      "max_drawdown": -0.069145
+    },
+    {
+      "label": "liquidity $10,000,000",
+      "mean": 9.4e-05,
+      "std": 0.000942,
+      "annualized_return": 0.022464,
+      "information_ratio": 1.545736,
+      "max_drawdown": -0.006389
+    },
+    {
+      "label": "conc 20%",
+      "mean": 0.000115,
+      "std": 0.001168,
+      "annualized_return": 0.027285,
+      "information_ratio": 1.513718,
+      "max_drawdown": -0.008104
+    },
+    {
+      "label": "conc 30%",
+      "mean": 0.000115,
+      "std": 0.001168,
+      "annualized_return": 0.027285,
+      "information_ratio": 1.513718,
+      "max_drawdown": -0.008104
+    },
+    {
+      "label": "conc 40%",
+      "mean": 0.000115,
+      "std": 0.001168,
+      "annualized_return": 0.027285,
+      "information_ratio": 1.513718,
+      "max_drawdown": -0.008104
+    },
+    {
+      "label": "conc 50%",
+      "mean": 0.000115,
+      "std": 0.001168,
+      "annualized_return": 0.027285,
+      "information_ratio": 1.513718,
+      "max_drawdown": -0.008104
+    },
+    {
+      "label": "candidate {\"liquidity_floor_adv\": 5000000.0, \"size_cap_pct\": 0.12, \"concentration_cap_pct\": 0.95, \"drawdown_pause_pct\": 0.1}",
+      "mean": 9.2e-05,
+      "std": 0.000943,
+      "annualized_return": 0.021991,
+      "information_ratio": 1.512051,
+      "max_drawdown": -0.00653
+    },
+    {
+      "label": "size_cap 5%",
+      "mean": 9.2e-05,
+      "std": 0.000943,
+      "annualized_return": 0.021991,
+      "information_ratio": 1.512051,
+      "max_drawdown": -0.00653
+    },
+    {
+      "label": "size_cap 10%",
+      "mean": 9.2e-05,
+      "std": 0.000943,
+      "annualized_return": 0.021991,
+      "information_ratio": 1.512051,
+      "max_drawdown": -0.00653
+    },
+    {
+      "label": "size_cap 15%",
+      "mean": 9.2e-05,
+      "std": 0.000943,
+      "annualized_return": 0.021991,
+      "information_ratio": 1.512051,
+      "max_drawdown": -0.00653
+    },
+    {
+      "label": "size_cap 20%",
+      "mean": 9.2e-05,
+      "std": 0.000943,
+      "annualized_return": 0.021991,
+      "information_ratio": 1.512051,
+      "max_drawdown": -0.00653
+    },
+    {
+      "label": "liquidity $5,000,000",
+      "mean": 9.2e-05,
+      "std": 0.000943,
+      "annualized_return": 0.021991,
+      "information_ratio": 1.512051,
+      "max_drawdown": -0.00653
+    },
+    {
+      "label": "liquidity $1,000,000",
+      "mean": 9.1e-05,
+      "std": 0.000929,
+      "annualized_return": 0.021625,
+      "information_ratio": 1.508748,
+      "max_drawdown": -0.006376
+    },
+    {
+      "label": "liquidity $2,500,000",
+      "mean": 7.1e-05,
+      "std": 0.000918,
+      "annualized_return": 0.017,
+      "information_ratio": 1.199721,
+      "max_drawdown": -0.007158
+    }
+  ],
+  "runs": {
+    "baseline": {
+      "risk": {
+        "mean": 0.0011554172081987572,
+        "std": 0.01127853762493476,
+        "annualized_return": 0.27498929555130425,
+        "information_ratio": 1.5804272791471323,
+        "max_drawdown": -0.06914515336341577
+      },
+      "applied": {}
+    },
+    "candidate": {
+      "risk": {
+        "mean": 9.239707947451976e-05,
+        "std": 0.0009427144352738658,
+        "annualized_return": 0.0219905049149357,
+        "information_ratio": 1.5120514373488407,
+        "max_drawdown": -0.006530482262119444
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "size_cap 5%": {
+      "risk": {
+        "mean": 9.239707947451976e-05,
+        "std": 0.0009427144352738658,
+        "annualized_return": 0.0219905049149357,
+        "information_ratio": 1.5120514373488407,
+        "max_drawdown": -0.006530482262119444
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "size_cap 10%": {
+      "risk": {
+        "mean": 9.239707947451976e-05,
+        "std": 0.0009427144352738658,
+        "annualized_return": 0.0219905049149357,
+        "information_ratio": 1.5120514373488407,
+        "max_drawdown": -0.006530482262119444
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "size_cap 15%": {
+      "risk": {
+        "mean": 9.239707947451976e-05,
+        "std": 0.0009427144352738658,
+        "annualized_return": 0.0219905049149357,
+        "information_ratio": 1.5120514373488407,
+        "max_drawdown": -0.006530482262119444
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "size_cap 20%": {
+      "risk": {
+        "mean": 9.239707947451976e-05,
+        "std": 0.0009427144352738658,
+        "annualized_return": 0.0219905049149357,
+        "information_ratio": 1.5120514373488407,
+        "max_drawdown": -0.006530482262119444
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "conc 20%": {
+      "risk": {
+        "mean": 0.00011464156491316718,
+        "std": 0.0011683839517000441,
+        "annualized_return": 0.027284692449333788,
+        "information_ratio": 1.5137180903503433,
+        "max_drawdown": -0.008103887185240407
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "conc 30%": {
+      "risk": {
+        "mean": 0.00011464156491316718,
+        "std": 0.0011683839517000441,
+        "annualized_return": 0.027284692449333788,
+        "information_ratio": 1.5137180903503433,
+        "max_drawdown": -0.008103887185240407
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "conc 40%": {
+      "risk": {
+        "mean": 0.00011464156491316718,
+        "std": 0.0011683839517000441,
+        "annualized_return": 0.027284692449333788,
+        "information_ratio": 1.5137180903503433,
+        "max_drawdown": -0.008103887185240407
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "conc 50%": {
+      "risk": {
+        "mean": 0.00011464156491316718,
+        "std": 0.0011683839517000441,
+        "annualized_return": 0.027284692449333788,
+        "information_ratio": 1.5137180903503433,
+        "max_drawdown": -0.008103887185240407
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "liquidity $1,000,000": {
+      "risk": {
+        "mean": 9.086210454881382e-05,
+        "std": 0.0009290831160004576,
+        "annualized_return": 0.021625180882617688,
+        "information_ratio": 1.508747982736451,
+        "max_drawdown": -0.006376134679664126
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "ESPO"
+        ]
+      }
+    },
+    "liquidity $2,500,000": {
+      "risk": {
+        "mean": 7.142665167642606e-05,
+        "std": 0.0009184775632266332,
+        "annualized_return": 0.016999543098989402,
+        "information_ratio": 1.1997208834083914,
+        "max_drawdown": -0.0071582979845040825
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "REM",
+          "XAR"
+        ]
+      }
+    },
+    "liquidity $5,000,000": {
+      "risk": {
+        "mean": 9.239707947451976e-05,
+        "std": 0.0009427144352738658,
+        "annualized_return": 0.0219905049149357,
+        "information_ratio": 1.5120514373488407,
+        "max_drawdown": -0.006530482262119444
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "REM",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    },
+    "liquidity $10,000,000": {
+      "risk": {
+        "mean": 9.438545151345752e-05,
+        "std": 0.0009420158170657147,
+        "annualized_return": 0.02246373746020289,
+        "information_ratio": 1.5457360696934006,
+        "max_drawdown": -0.006388809561209335
+      },
+      "applied": {
+        "dropped_liquidity": [
+          "DBA",
+          "DBC",
+          "ESPO",
+          "FDN",
+          "ICLN",
+          "ITA",
+          "MDY",
+          "REM",
+          "SHY",
+          "TAN",
+          "UNG",
+          "XAR"
+        ]
+      }
+    }
+  },
+  "candidate": {
+    "liquidity_floor_adv": 5000000.0,
+    "size_cap_pct": 0.12,
+    "concentration_cap_pct": 0.95,
+    "drawdown_pause_pct": 0.1
+  }
+}
@@ -0,0 +1,34 @@
+# QUEUE-08 — Risk-limit A/B re-validation: $5M liquidity floor on the exp-26 reference
+
+**Status:** QUEUED · **Priority:** P1 · **Effort:** tool-only (no new code)
+
+## Hypothesis (prove)
+The $5M liquidity floor improves net IR and cuts drawdown on the **post-reset**
+reference signal (pre-reset exp 18, EVIDENCE#008: net IR 0.81→0.98, cumDD
+7.93%→5.44%), while size/concentration caps hurt by cutting deployed capital.
+Needs re-validation on the exp-26 lineage because exp 18 is pre-clean-lake and
+not comparable (EVIDENCE#009/010). Source: `book/CLAIMS.md` open question +
+`book/README.md` `TODO(evidence-needed: reconciliation of exp 18 risk-limit spec
+on the post-reset reference signal)`.
+
+## Change vs exp-26 reference (ONE variable)
+- Reference: the saved exp-26 prediction (run `21afc6af…`, mlflow exp 25).
+- A/B via `rd_risk_calibrate` (runs limit-vs-no-limit A/B + sensitivity grid
+  over size_cap_pct, concentration_cap_pct, liquidity_floor_adv) and/or
+  `rd_backtest` with `risk_limits` on the SAME saved `pred.pkl`:
+  - baseline: no limits (this must reproduce the exp-26 net +2.13% / IR 0.21);
+  - candidate: `{"liquidity_floor_adv": 5000000, "size_cap_pct": 0.12,
+    "concentration_cap_pct": 0.95, "drawdown_pause_pct": 0.10}` (round-3 spec).
+- Pick the spec (B2 calibration) that keeps live ≈ backtest.
+
+## Acceptance
+- Candidate spec: `net_IR > 0.21` AND `net_max_drawdown < 7.69%` vs no-limit on
+  the same pred. Size/concentration caps expected to REDUCE deployed capital
+  (record the direction as confirmation of exp 18).
+- If the floor is a no-op (gates don't bind at this signal) → report that gates
+  are no-ops when the signal is the bottleneck (exp 20 pattern) as a PROVEN
+  clean-lake result.
+
+## Execution prerequisites
+- None (uses saved pred + `rd_risk_calibrate`/`rd_backtest`). Trace the A/B as
+  an experiment; record the spec chosen for the next live round.