Research
Compression → expansion — structure fixed, no edge
V1 std_logp onset is lagged; V1b restores structure. Incremental vol vs slope+ER ≈ 0 — context, not a trigger.
In brief. Vol compression followed by expansion is a seductive narrative — it needs a strict protocol. V1 (std_logp) reacts after the move (pre-onset AUCΔ ≈ 39 vs post ≈ 6). V1b fixes lag and clustering. Ablation: adding vol on top of slope + ER adds ≈ 0 (Δ log-loss −0.001). Rolling z-score persistence is a mechanical filter artefact.
Why I ran this study
The “compressed vol → expansion” story is everywhere. I wanted the same rigour as the rest of the lab: causal onset, progressively tighter matching nulls (TOD → compression → pre-move), incremental ablation.
Method arc
- Naive V1 — escape event vs null already saturated (0.89 vs 0.86 at H=10)
- Lag diagnostic — detector sees displacement in progress, not pure compression
- V1b — early + causal reformulation
- Ablation — does vol add anything beyond slope + efficiency ratio?
- Filter null — is z persistence a “regime”?
Key results
Under N_C null (compression + controlled): Δ MFE50 H=10 ≈ +0.06 only — no exploitable edge even with tight matching.
| Question | Answer |
|---|---|
| Does V1 prove compression→expansion? | No |
| Does V1b fix structure? | Yes |
| Vol surplus? | ≈ 0 |
| z persistence = regime? | No — ACF excess ≈ +0.004 vs IID-RW null |
Takeaways
We thought we saw a vol process; the diagnosis shows a lagged detector, then a clean structure with no incremental edge.
Recommended use: std_logp and derivatives as maturity / activity context — not a standalone trading onset.
Links
-
Realized vs implied volatility
- eurusd-lab series: multi-scale pullback, HMM slope
- Full protocol:
docs/research/04_compression_expansion.md.
Research note — Aug 2026. EURUSD · TIMB · 2023.