fintech-algorithms

Minimum-Volatility Index

Install and import

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/alternative-weighting/minimum-volatility-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
{
  "ids": ["A", "B", "C"],
  "covariance": [
    [0.04, 0.006, 0.004],
    [0.006, 0.0225, 0.003],
    [0.004, 0.003, 0.01]
  ]
}

Call

calculate(data)

Returns

object with 4 fields: ids, weights, variance, volatility

{
  "ids": ["A", "B", "C"],
  "weights": [0.093023, 0.232558, 0.674419],
  "variance": 0.007814,
  "volatility": 0.088397
}

Diagrams

Minimum-Volatility Index — article hero
Minimum-Volatility Index — failure guard
Minimum-Volatility Index — worked example

Calculation flow

Minimum-Volatility 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 Minimum-Volatility Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Minimum-Volatility 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