financial risk teams

Abstract: Tabular foundation models use in-context learning to estimate conditional expected outcomes and average treatment effects for specific groups of individuals. Using these estimates to guide scientific decisions requires reliable uncertainty quantification. The challenge is to account simultaneously for two sources of uncertainty: limited-context bias and context variation arising from the small labeled sample supplied at inference. Predictive spread does not directly quantify both sources of uncertainty, and we observe that the ordinary bootstrap may substantially overestimate context variation, whereas subsampling may underestimate it. We introduce TabCUQ, a perturbation-based framework that injects noise into observed outcomes and applies the foundation model to the perturbed contexts. TabCUQ estimates context variation using wild-bootstrap dispersion and accounts for limited-context bias using the maximum deviation between perturbed and original estimates. For a kernel-regression analogue whose estimation error admits an exact decomposition into these two components, we show that our framework provides asymptotically valid pointwise coverage. In simulations, TabCUQ substantially improves coverage, with average interval widths typically about twice those of an oracle bias-aware benchmark. Across seven real-world tasks, it also improves coverage of reference functions learned from much larger samples.

Abstract: Accurate modeling of rare, high-impact financial events is essential for robust risk management. Sampling-based techniques such as Sequential Markov Chain Monte Carlo (SMCMC) generate diverse scenarios but inefficiently explore high-risk regions, while Deep Reinforcement Learning (DRL) converges on narrow sets of scenarios, limiting diversity. We present GRID, which uses Generative Flow Networks (GFlowNets) -- samplers that draw objects in proportion to a reward -- to systematically generate diverse and realistic financial tail-risk scenarios. Building on continuous GFlowNets, GRID introduces a flexible mixture-policy architecture with variable-specific distribution families for high-dimensional, sequential macro-financial data, together with plausibility constraints that keep generated trajectories realistic. A central practical advantage is robustness to reward-proxy imperfection: because GFlowNets sample proportionally rather than maximize, they remain broadly exploratory even when the oracle's out-of-sample accuracy is low -- an unavoidable reality in financial forecasting. On three real-world crises, GRID improves scenario diversity, realism, and tail-risk coverage over RL and MCMC baselines, and ablations over oracle architectures and distribution families yield practical insights into continuous GFlowNet behavior under noisy rewards.

Abstract: We study optimal intervention design problems aimed at minimizing the aggregate volatility in network systems. We consider linear network equilibrium models arising in network games, production networks, and opinion dynamics, where exogenous shocks hitting a few nodes can propagate through the network and cause detrimental systemic effects. Focusing on idiosyncratic shocks, we first identify a general network centrality measure that determines the amplification factor of the variance of each node's shock to the aggregate system volatility, and show that, in relevant special cases, it reduces to Katz-Bonacich, cycle, and concentration centralities. We then consider a system planner who can attenuate the shocks on the nodes, subject to a budget constraint, so as to minimize the aggregate volatility. We solve this problem analytically and show that its solution has a water-filling-type structure: for low budget, the intervention is concentrated on the node(s) maximizing a quantity ω_i that combines the shock's variance, the node's centrality, and the intervention cost; as the budget increases, more and more nodes are targeted, and for sufficiently large budget every node with ω_i > 0 receives an intervention proportional to ω_i. Finally, we study a robust version of the problem, where the planner minimizes the volatility against the worst-case vector of shock variances chosen by an adversary within a given budget. We solve this min-max problem analytically and show that its solution also has a water-filling-type structure, with the ratio between the node's centrality and the square root of the adversarial cost playing the role of ω_i.

Abstract: Contextual decision making uses observed covariates to guide decisions under uncertainty. Two natural approaches are predict-then-optimize (PtO), which learns the conditional expected objective, and generate-then-optimize (GtO), which learns conditional uncertainty and optimizes using generated scenarios. We study when each approach is preferable by examining how the choice of learning target affects statistical accuracy and optimization tractability. Although PtO learns a narrower target, our regret bounds show how differences in smoothness can offset GtO's additional dimensional burden. Exploiting smoothness also raises an optimization tradeoff: within the class of nonnegative-weight PtO methods studied, a lower bound limits the gains from additional smoothness, while more flexible methods may introduce signed weights and lose the guarantee of preserving convexity. GtO preserves scenario-wise convexity, but requires learning a richer object and generating scenarios for optimization. Synthetic experiments and a real case study illustrate how these tradeoffs vary with data availability and problem structure. Together with the scope for reusing a model across tasks, our findings provide practical guidance for choosing between the approaches without identifying a universal winner.

Abstract: Robust covariance estimation under entry-wise contamination and missing data is challenging in various signal processing applications. Under the Student-$t$ model, observation-level reweighting induces a uniform attenuation across samples, which can lead to cumulative information loss even when most coordinates remain informative. The alternative Student-$t^*$ model enables coordinate-wise robustness, but its E-step is not available in closed form. We extend inference for the Student-$t^*$ model to incomplete observations through a stochastic approximation EM (SAEM) algorithm operating on a reduced latent space: stochastic updates of the coordinate-wise scales are combined with Rao-Blackwellized Gaussian conditional moments, which avoids explicit sampling of latent Gaussian variables while preserving a likelihood-based framework. Experiments on synthetic and real sensor data show a lower Fisher-Rao error than Gaussian, Student-$t$, imputation-based and detect-then-estimate estimators at moderate to high outlier rates under diffuse contamination.

Abstract: Forecasting rare, high-cost events in multivariate time-series systems is hard because their precursors are seldom observed, so a purely data-driven model has little to learn from. The engineers who run these systems, however, hold knowledge that precedes such events, information absent from the scarce labels. We call this a semantic prior and inject it into a self-supervised event forecaster through two switchable mechanisms, a covariate mechanism and an attention-bias mechanism, each the identity at its null, so one architecture serves every prior type with no per-dataset architecture search. A prior helps when it supplies information the observed window does not already contain: in a short context an informative prior beats no prior in-domain (pooled h-AUROC over the no-prior baseline: a periodicity clock +14%, p<0.001; a conservation residual +47% at a 0.25 label fraction), and a working prior transfers out-of-domain (+53%), substituting for feature transfer, while priors the window already recovers stay inert and the attention-bias mechanism shows no measurable gain. KITE is a switchable, attributable route to contextual conditioning, and a substrate for scaling toward cross-domain, pretrained time-series foundation world models that carry their governing structure explicitly.

Abstract: Post-hoc correction adjusts a forecaster that cannot be retrained, such as a foundation model, but a correction fitted where errors are stable can hurt where they shift. We aim for downside control: not much worse than the starting forecast. We combine the frozen forecaster, a static corrector and an online corrector on the simplex, using only losses that mature after the horizon. Across seven benchmarks and four base models, two of them foundation models, the worst deterioration over 28 pairs at the main horizon is 0.15% and gains reach 11.5%. On day-ahead load for seven European bidding zones it lowers mean MSE in all seven zones, while single correctors raise mean MSE by up to 102% where the published forecast is most accurate. Three empirical conditions on expert speed, stream length and outcome alignment, each fixed by a documented failure, delimit its scope. Learning from the provisional outcome improves four zones on the settled one; learning on the settled outcome restores all seven.

Abstract: Volatility forecasts play a central role in financial risk management because their overall level and day-to-day movements affect downstream decisions. Most studies compare forecasting models while keeping the training loss fixed. Yet losses emphasise different errors and can target different properties of future volatility, so raw comparisons may combine persistent forecast-level differences with differences in daily forecast movements. This leaves unresolved whether the importance of loss choice comes mainly from the forecast level it targets or from differences that remain after level adjustment. We address this gap through a comparison of seven losses and five models across major cryptocurrencies. Validation-based alignment adjusts the forecast level before the raw and aligned forecasts are evaluated using statistical scores and one-day Value-at-Risk. Before alignment, marginal score variation is greater across losses. After alignment, model choice becomes the larger source of variation in the full five-model comparison, while cross-loss differences in VaR breach rates narrow substantially. Our contribution is a comprehensive evaluation of loss and model choice that shows why losses can appear so influential in raw comparisons and how this interpretation changes when forecast level and downstream risk are considered explicitly.

Abstract: This manuscript formalizes the most popular model validation tools used in general insurance actuarial modeling. These include graphical tools like calibration plots, actual-vs-expected plots, lift charts, Murphy diagrams, as well as classical statistical tools such as Bregman losses, deviance losses, elementary losses, Murphy's decomposition and Gini scores. Particular emphasis is placed on whether calibration and discrimination are studied under a policy-weighted or an exposure-weighted population measure. This distinction is crucial in ensuring that premium schemes are calibrated on the correct scale.

Abstract: Ethereum decentralized finance (DeFi) provides a public, time-stamped record of transaction-level event streams, but the same public symbols can create strong machine-learning shortcuts. We introduce ETH-TraceBench, a benchmark for evaluating Ethereum DeFi representations under temporal, protocol, pool/infrastructure, and symbolic shift. The raw event universe covers January 2021-December 2025 and contains 1.35 billion transactions with logs and 5.01 billion raw log rows. Model evaluation uses a fixed 911,267-instance supervised sample, training on 2021-2024, selecting models on 2025H1, and testing on 2025H2. Simple models perform strongly on the aggregate temporal test: TraceStats-GB reaches 0.953 macro-F1 and TopicEmitterHashMLP 0.959 on the canonical DEX test set. Performance drops sharply under protocol novelty, with macro-F1 of 0.794, 0.743, and 0.766 for TraceStats-GB, TopicEmitterTrace-SGD, and TopicEmitterHashMLP, while strict unseen-pool scores remain 0.927, 0.897, and 0.935. Uniswap v4 and Ekubo v1, both absent from supervised training, are materially harder than the full test. Jointly masking emitter and topic identity reduces DEX macro-F1 to 0.916 and liquidation macro-F1 to 0.774 for TopicEmitterTrace-SGD. A standard Transformer over log-index-ordered events provides no consistent advantage over a deterministic shuffle of the same events, indicating that high aggregate scores can arise without sophisticated chronological modeling. A natural-prevalence audit estimates 2025H2 DEX prevalence among logged Ethereum transactions at about 22.5%, and a deterministic 400-transaction audit finds complete agreement with task label sources and independently re-queried raw-log counts. ETH-TraceBench therefore treats difficult transfer and controlled-input conditions, rather than a single aggregate score, as the main evaluation target.

Abstract: Modern prediction-driven decision systems often rely on black-box predictors, but a point forecast alone does not provide the uncertainty scale required for robust downstream decision-making. We build a score-calibrated robustness framework that converts any fixed point predictor into a decision-relevant uncertainty representation through distribution-free conformal calibration. We use the conformal score, rather than a particular uncertainty set, as the primitive unit of robustness. The same score determines coverage-calibrated uncertainty sets for reliability-based robust optimization and normalizes target violations in a target-oriented formulation, Conformal Robust Satisficing. This formulation induces a conformal fragility measure that quantifies how rapidly performance deteriorates as the realized parameter departs from the forecast on the conformal score scale. For objective-uncertainty problems under standard convexity and duality conditions, we show that the reliability-based and target-oriented formulations parameterize the same score-calibrated robust decision frontier. This equivalence yields a data-driven mapping between reliability levels and acceptable targets and characterizes the marginal cost of robustness. Synthetic experiments validate the theoretical guarantees and illustrate the reliability-target correspondence. A real-data online-grocery case study demonstrates how the interface combines deep-learning demand forecasts with tractable inventory optimization, thereby improving reliability and reducing operational costs. Overall, our work shows that conformal scores endow fixed black-box predictors with an interpretable uncertainty scale for downstream decision-making while enabling reliability guarantees, acceptable-target selection, and fragility analysis within a unified framework.

Abstract: Deep Limit Order Book forecasting models capture nonlinear market dynamics, but their ability to quantify the effects of counterfactual order book messages has not been systematically validated. We introduce a model-agnostic framework that compares a trained forecaster's predictive distributions before and after injecting mechanically valid counterfactual messages, defining short-horizon model-implied market impact. A Transformer-based forecaster recovered scenario rankings with a Spearman correlation of 0.99 and 97.2% directional agreement with realized historical outcomes among non-neutral scenarios. Observation-level analysis further showed that estimated impacts captured incremental sequence-dependent variation beyond scenario identity and the pre-event forecast. These results provide evidence that pretrained Limit Order Book forecasters can be repurposed for scenario-conditioned response modeling without retraining.

Abstract: The prevailing assumption in applied machine learning is that progress on consequential quantitative decisions such as pricing risk, allocating capital, triaging patients, or containing a network intrusion will follow from progress in large language models (LLMs). A language model is trained on a representation of the world that was produced by human description; description is a lossy encoding of the quantitative record, and the loss is irreversible: no downstream model, at any scale, can recover from a description what the description did not encode. We formalize this as a property of the representation on which a model is trained rather than of the model capacity, and we identify three further properties that consequential settings demand of a model and that a language substrate cannot supply by construction: reproducibility, lineage from every output back to the source records that produced. it, and calibrated uncertainty. We argue that these properties define a distinct model class, which we call the Large Quantitative Model (LQM).

Abstract: Credit default prediction is a tabular classification problem in which modest gains in F1 translate directly into reduced financial exposure. We ask whether Instantaneous Quantum Polynomial-time (IQP) circuits can produce features that improve a classifier over both its raw classical baseline and Kernel PCA - the strongest unsupervised classical non-linear alternative - at an equal feature budget. The dataset provides 23 financial attributes per client; for an n-qubit circuit we select n of them, encode each as a rotation angle, and read 2n expectation values back out as new features. The motivation for using a quantum circuit is computational: an n-qubit IQP circuit runs in constant depth and encodes feature correlations in a 2^n-dimensional Hilbert space, whereas classical simulation of its exact output statistics scales exponentially in n. Using the UCI Default of Credit Card Clients dataset and five-fold cross-validation, we find that appending 16 IQP features (n = 8 qubits) to a Logistic Regression model raises F1 from 0.462 to 0.517 (+0.055, p < 0.0001). Kernel PCA, the next-best method, reaches only 0.493 at the same feature count; the gap survives Benjamini-Hochberg correction across 12 tests (p = 0.00007). No other classifier - Random Forest, SVM, XGBoost, or k-NN - benefits, which points to a linear-expressivity mechanism rather than a generic improvement. We also show that how the 8 input features are chosen matters: Random Forest importance-guided selection reaches F1 = 0.523, while encoding maximally uncorrelated features drops it to 0.496, demonstrating that the circuit amplifies informative structure rather than creating it from scratch.

Abstract: Industrial fraud detection often relies on costly expert-crafted features that overlook graph-structured relational signals, while GNNs often do not meet the interpretability and deployment requirements of financial risk control. We propose GraphFAS (Graph Feature Automated Selection), a distributed feature selection procedure based on Boruta that bridges this gap through: (1) a non-parametric graph feature generation module that constructs explicit, interpretable structural features via multi-hop subgraph extraction and multi-scale aggregation without learned parameters; and (2) an automated distributed feature selection algorithm extending Boruta with median-based aggregation across partitions to robustly identify informative features at scale with minimal domain expertise. Compared with end-to-end GNN pipelines, GraphFAS decouples feature aggregation from model training, enabling direct integration with tabular models and direct compatibility with TreeSHAPbased explanations. Deployed in Alipay, GraphFAS delivers orderof-magnitude improvements in engineering efficiency while showing strong performance against expert-driven and graph-learning baselines on large-scale graphs.