Liquidity Screen
Install and import#
npm install fintech-algorithmsimport { calculate } from "fintech-algorithms/index-and-benchmark-engineering/governance-and-maintenance/liquidity-screen";Signature#
calculate(data)Requires sustained tradability, not a single good month. Median turnover over a minimum number of months is the standard test, and the median is deliberate: a mean is dominated by one spike of activity.
Parameters#
| Name | Type | Notes |
|---|---|---|
data | { records: Record[]; minimumMedianTurnover: number; minimumMonths: number } | minimumMonths is the sustained-history requirement, which is what stops a newly listed name qualifying on a burst of IPO volume. |
Returns#
{ results, passingIds, threshold }
Per-candidate results with the realised median and the threshold applied.
Errors#
- When minimumMonths is less than 1 — throws
Complexity: time O(n × months),
space O(n).
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#
{
"records": [
{
"id": "A",
"monthlyTurnover": [0.18, 0.21, 0.2, 0.17, 0.23, 0.19]
},
{
"id": "B",
"monthlyTurnover": [0.04, 0.06, 0.05, 0.03, 0.05, 0.04]
},
{
"id": "C",
"monthlyTurnover": [0.12, 0.11, 0.14, 0.1, 0.13, 0.12]
}
],
"minimumMedianTurnover": 0.08,
"minimumMonths": 6
}Call#
calculate(data)Returns#
object with 3 fields: results, passingIds, threshold
{
"results": [
{
"id": "A",
"medianTurnover": 0.195,
"passes": true
},
{
"id": "B",
"medianTurnover": 0.045,
"passes": false
},
{
"id": "C",
"medianTurnover": 0.12,
"passes": true
}
],
"passingIds": ["A", "C", "D"],
"threshold": 0.08
}Diagrams#
Calculation flow#
Liquidity Screen 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 Liquidity Screen"]
E --> F["Recompute invariants"]
F --> G{"Checks pass?"}
G -->|No| D
G -->|Yes| H["Publish audited output"]
Liquidity Screen 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.
References#
- S&P Dow Jones Indices Index Mathematics Methodology — S&P Dow Jones Indices
- S&P DJI Equity Indices Policies & Practices — S&P Dow Jones Indices
- FTSE Russell Capping Methodology — FTSE Russell, LSEG
- FTSE Russell Index Policy and Methodology Library — FTSE Russell, LSEG
- MSCI Global Investable Market Indexes Methodology Library — MSCI
- MSCI Minimum Volatility Indexes Methodology — MSCI
- S&P Risk Control 2.0 Indices Methodology — S&P Dow Jones Indices
- Principles for Financial Benchmarks — International Organization of Securities Commissions
- Regulation (EU) 2016/1011 — European Union
- Portfolio Selection — Harry Markowitz
- On the Properties of Equally-Weighted Risk Contributions Portfolios — Sébastien Maillard, Thierry Roncalli, and Jérôme Teïletche
- Fundamental Indexation — Robert Arnott, Jason Hsu, and Philip Moore
- FTSE Currency Hedging Methodology Overview — FTSE Russell, LSEG