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zhaoli 06fb1e8ee9 book: fold Q-campaign (exp 33-43) evidence into ledger, claims, and chapters

- EVIDENCE#022-032: Q01-Q11 runs (2 PASS / 9 FAIL) with run_ids and branches
- CLAIMS: promote M2 Sharpe-drift to PROVEN (Q01), refute Kelly (Q06), risk-limit-as-alpha (Q08), standalone reversal (Q11); add label-horizon + weekly-rebalance + long-short-turnover claims
- README: TOC + claim inventories for ch 04/05/07/08/09/10/12 updated to the Q-campaign
- new chapters 04 (prune), 05 (ensembles), 07 (isolation), 08 (construction), 09 (cost/turnover), 10 (risk limits & gates), 12 (synthesis); ch 00/02/03 updated
- Q08 calibration evidence persisted under book/data/evidence/q08-risklimit/

2026-08-20 01:23:21 +00:00

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Chapter 10 — Risk Limits and Gates: Safety Net, Not Alpha

Status: drafting. Claim inventory: see README.md ch. 10.

Every desk wants to believe risk controls are a performance lever. On the TradeAC clean lake the evidence says otherwise: risk limits are a safety net, and overlay gates mostly churn. This chapter separates the two claims — what a liquidity floor does (defund) and what a regime gate does (churn) — on the post-reset signal.

The post-reset A/B (Q08)

The reference pred (exp 26, 21afc6af…) was run through rd_risk_calibrate with the live spec {liquidity_floor_adv: $5M, size_cap_pct: 0.12, concentration_cap_pct: 0.95, drawdown_pause_pct: 0.10} versus no limits, same window (2026-01-04→2026-08-10), topk10/n_drop1, SPY, $1M:

Spec	ann return	IR	maxDD
baseline (no limits)	+27.50%	1.5804	−6.91%
candidate (5M floor + caps)	+2.20%	1.5121	−0.65%

PROVEN — EVIDENCE#029 → exp 40. Read the columns carefully:

The floor binds. The $5M ADV floor drops DBA, DBC, ESPO, FDN, REM, TAN, UNG, XAR (8 of 50 names) — it does real work on this panel.
No IR edge. Candidate IR 1.5121 < baseline 1.5804. Gating does not improve the risk-adjusted return; the floor removes small-AVD names but the surviving book has no better rank.
The drawdown cut is pure defunding. size_cap 0.12 × concentration_cap 0.95 folds the effective risk_degree to ≈ 0.0095 — about $9.5k deployed of a $1M book. maxDD falls to −0.65% because there is almost nothing at risk, not because risk was managed well.

The pre-clean-lake claim that "$5M liquidity floor improves IR 0.81→0.98" (exp 18) is not reproduced on the clean-lake signal. That number stays idea material (EVIDENCE#008 → exp 18, pre-clean-lake). PROVEN (refutation) — EVIDENCE#029 → exp 40.

The regime gate (Q10)

A HMM regime overlay (sp_hmm_p_regime1 ≥ 0.5 entry gate, RegimeGateDropoutStrategy) on the same daily signal:

net −4.26%, IR −0.382, maxDD −7.38% — meets the drawdown leg (7.38% < 7.69%) but far below the net-IR acceptance;
the gate churned 276 trades in ~150 days; ~6.3pp of cost erased the +2.02% gross;
signal metrics byte-identical to the reference (IC 0.0502, RankIC 0.0660).

PROVEN — EVIDENCE#031 → exp 42. A regime gate that flips exposure on a regime posterior priced into the features already just adds turnover. This clean-lake re-test refutes the "gates are a free drawdown cut" idea carried from exp 20 (pre-clean-lake, byte-identical no-ops there) (EVIDENCE#009).

The synthesis

Risk limits: keep them as a live harness (the round-3 live round used the same spec and the funnel held — EVIDENCE#020), but never market them as alpha. On this signal they defund, not improve. PROVEN — EVIDENCE#029/020.
Gates: regime/momentum overlays on top of features the model already sees add turnover, not edge. PROVEN — EVIDENCE#031/009.
Where risk does earn its keep: as a cap on damage, not a return source. The drawdown pause and floor are the reason the live round stays disciplined; their value is the tail, not the mean. REFERENCED (risk-management practice) + PROVEN (round-3 funnel held under the spec).

Desk rules distilled from this chapter

A/B any risk-limit spec against no-limits on the same pred before shipping it; if IR does not improve, it is defunding.
Report deployed capital alongside maxDD — a smaller drawdown with 100x less risk is not a risk win.
Prefer limits that bind rarely but cap hard (liquidity floor, drawdown pause) over gates that churn every day (regime overlay).
TODO(evidence-needed: a live round under the weekly-rebalance construction with the risk-limit spec, to confirm the safety-net behavior at higher deployed capital)

Evidence cited in this chapter

Tag	Source
`EVIDENCE#029`	exp 40 (Q08), MLflow run `4667984187…` (exp `tac-rd-q08-risklimit`, id 43), branch `exp/40-q08-risk-limit-ab-on-exp-26-reference-si`, `book/data/evidence/q08-risklimit/risk_calibration.json`
`EVIDENCE#031`	exp 42 (Q10), run `436acd01…`, branch `exp/42-q10-hmm-regime-overlay-entry-gate-on-sph`
`EVIDENCE#020`	round 3, trace 27, branch `exp/27-scheduled-algo-retrain-on-2026-08-17-tac`
`EVIDENCE#009/008`	exp 20/18 (pre-clean-lake, idea material)

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