fintech-algorithms

Factor-Score-Weighted Index

Install and import

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/alternative-weighting/factor-score-weighted-index";

Signature

calculate(data)

Worked example

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input

data
{
  "records": [
    {
      "id": "A",
      "value": 12,
      "quality": 18,
      "momentum": 8
    },
    {
      "id": "B",
      "value": 8,
      "quality": 15,
      "momentum": 12
    },
    {
      "id": "C",
      "value": 15,
      "quality": 9,
      "momentum": 5
    }
  ],
  "factorWeights": {
    "value": 0.4,
    "quality": 0.35,
    "momentum": 0.25
  },
  "scoreFloor": 0.1
}

Call

calculate(data)

Returns

object with 3 fields: ids, compositeScores, weights

{
  "ids": ["A", "B", "C", "D", "E"],
  "compositeScores": [0.639323, 0.066682, -0.176343, -0.273927, -0.255736],
  "weights": [0.541951, 0.235666, 0.10568, 0.053486, 0.063216]
}

Diagrams

Factor-Score-Weighted Index — article hero
Factor-Score-Weighted Index — failure guard
Factor-Score-Weighted Index — worked example

Calculation flow

Factor-Score-Weighted Index calculation flow 
flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate Factor-Score-Weighted Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Factor-Score-Weighted Index methodology state 
stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References