Hyeonjin Kim, Minseok Kim, Seunghyeon Jung +3cs.AI cs.CE
Traditional finance relies on experts to hand-craft factors through a principled process grounded in economic rationale. Recent LLM-based multi-agent systems have automated this process, scaling factor mining far beyond manual effort. However, these automated approaches optimize directly for returns and rarely check whether a generated factor still expresses the economic hypothesis that motivated it. We identify this inconsistency between mathematical form and economic meaning as a structural failure mode of return-oriented automation. The resulting factors blur the line between real signals and spurious correlations and break down across regime shifts. We propose FaVOR (Factor Validation through Observable Reasoning), an agentic framework that restructures factor mining around hypothesis-level evidence rather than return outcomes. In place of the standard hypothesis-to-formula leap, FaVOR enforces a three-stage consistency loop tying mathematical form to economic rationale throughout. (1) Decomposition splits a broad economic hypothesis into independent observable conditions. (2) Validation checks whether each factor reflects its intended condition. (3) Integration merges them into a composite whose structure remains interpretable. On the CSI 500 and S&P 500 in 2025, FaVOR outperforms existing baselines while remaining effective across regimes. FaVOR shows that hypothesis-grounded factor discovery produces signals that are interpretable by construction, regime-robust, and economically faithful. The code is available at https://github.com/damilab/FaVOR.
Systematic trading rests on one article of faith: that regularities found in the past persist. We state it as a time-invariant mechanism driven by an unobserved latent state, and show that it leaves a researcher five constants to declare --- the recurrence bound $Lambda$ at a block length $b$, the invariance defect $epsilon_0$ of the representation it is declared of, the coherence times $ell_i$ of the state's coordinates, the signal ceiling $rho$ and the fraction $kappa$ of it contingent on the regime --- after which the architecture of a correct quantitative investment system is nearly forced.
Learning from heterogeneous representations is often reduced to feature concatenation, erasing which representation produced each error. We propose residual algebra, in which each representation retains its coordinate system and owns its unresolved residual until an explicit aggregation boundary. Fold instantiates representations as point-in-time conditional-mean fields on 10x10 rank grids, and FPRC-PQ composes them through relax-aggregate-close: each field first fits a correction to its own residual, corrected fields then meet at a fixed mean, and a shared learner closes only the aggregate's fresh residual. We formalize aggregation as a quotient by the zero-sum redistribution kernel, characterizing legal post-aggregation operators as those constant on its cosets. The resulting composition separates representation, local residual estimation, and residual-of-residual estimation, with population variance reduction and first-order coupled-path mean orthogonality. Rumination-B and Rumination-H extend the algebra with quotient-legal finite correction and feedback. On 3.67M Chinese A-share stock-day observations (2023-2026) under a frozen point-in-time protocol, FPRC-PQ raises net-of-cost return from 13.52% to 19.10% and Sharpe from 1.42 to 2.09, outperforming matched-capacity, unified-residual, identity-free two-stage, and pairwise-only controls. The gain is thus attributable to explicit residual ownership and composition rather than additional features or trees.
Large language model agents can discover alphas, yet current methods have three weaknesses. The search cannot adapt during the run, automation usually ends at alpha generation while library selection and model choice stay manual, and alpha discovery can read the test window through loop feedback or code problems. We present AutoScientist-Quant, a self evolving search process that regards quantitative research as one budgeted search problem. A single controller conditions every decision on the remaining budget, choosing at each round whether to improve, combine, pivot, or stop, which node to expand, how many alphas to generate, and how to retrieve past trajectories from the shared memory. The same core then selects from the library and tunes the model, closing the loop from hypothesis to deployable strategy. We also review the evaluation pipeline reused from prior work, fix two lookahead problems, and keep the feedback window disjoint from the held out test window, so every comparison tests true generalization. On CSI universes, the framework attains the best value of nearly every metric in every setting, and these conclusions hold across several backbones and markets.
Weicheng Ye, Youran Sun, Xingyu Ren +3cs.AI cs.MA q-fin.CP q-fin.PM
Language models can propose many plausible trading factors, but an autonomous research system must also allocate its evaluation budget, verify its own evidence, and preserve how each candidate was produced. We present AgonAlpha, an architecture that searches over frozen research artifacts---hypotheses, executable expressions, platform evidence, rationales, and review status---rather than formulas alone. To our knowledge, AgonAlpha is the first alpha-mining system to combine verified artifact search, a fresh-context adversarial reviewer with re-execution and veto authority, and pending-aware parallel budget allocation, together with a complete public evidence trail. Independent deployments on WorldQuant BRAIN produced SPECTACULAR-grade alphas across five users and six model backends, with Fitness reaching 9.50 and Sharpe reaching 3.48, while retaining prompt-to-expression provenance for every submission.
Symbolic alpha factor discovery can score a completed expression, but it provides no direct label for the structural decisions that produced it. Generative flow networks (GFlowNets) preserve a diverse, reward-proportional distribution over complete expressions, yet their trajectory-level objective does not compare unchosen sibling actions at an intermediate state. We introduce AlphaG-OPD, a structural on-policy distillation framework that turns terminal factor evaluations into local action guidance. Its design separates three decisions. Component I determines where to teach by exposing grammar-valid siblings at partial abstract-syntax-tree (AST) states visited by the current forward policy. Component II determines what is reliable enough to teach: it evaluates three supported siblings under four shared suffixes and admits a KL-bounded target only when their matched comparisons exhibit sufficient winner agreement and a positive empirical lower confidence bound (LCB). Component III determines how strongly and for how long to teach by consolidating accepted targets through bounded replay, score-indexed expiry, and forward-gradient balancing, without additional factor evaluations. Terminal reward, Trajectory Balance, the backward policy, grammar, and factor-pool rules remain unchanged. An equal-physical-score four-arm ablation tests paired teaching, reliability gating, and consolidation. Across China's CSI300, CSI500, and CSI1000 and the U.S. S&P 500, the complete method delivers strong cross-market performance over multiple random seeds.
Automated alpha mining has increasingly adopted large language model (LLM) agents for factor generation and iterative discovery. However, existing LLM-based systems often delegate both factor construction and search decisions to the agent itself, without an explicit exploration space or a principled mechanism for navigating that space. As a result, exploration remains largely implicit and difficult to control or optimize systematically. We introduce AlphaSchema, which constructs and explores a structured space of trading semantics for alpha mining. Each point in this space is a schema plan composed of Event, Context, Qualities, Direction, and Output, specifying the semantics of a candidate factor before implementation. AlphaSchema decouples exploration from implementation: an LLM translates selected schema plans into executable factors, while evaluated rewards are accumulated to learn a surrogate model over the semantic space. An iterative selection mechanism uses this model to balance global exploration, surrogate-guided exploitation, and local mutation. Experiments on the Chinese stock market show that AlphaSchema discovers factor pools with strong predictive and portfolio performance. Further analyses show that the semantic search process navigates diverse regions while increasingly allocating evaluations toward high-reward regions, and that implementations of the same schema plans by different LLMs exhibit comparable predictive quality, suggesting that alpha mining quality is largely robust to the choice of LLM within our framework.
Liexin Cheng, Xue Cheng, Shuaiqiang Liu +1q-fin.CP cs.AI
Automated code generation is becoming an important tool in quantitative finance, where large language models can generate option pricing implementations directly from mathematical model specifications. Validating such implementations, however, requires considerably more than conventional software testing: numerical pricing methods must remain mathematically consistent, numerically stable, and reliable across a wide range of model parameters. We introduce RIDGE, an autonomous validation framework in which generated pricing implementations are subjected to structured no-arbitrage tests, stress tests, benchmark comparisons, and consistency checks. Validation evidence is interpreted diagnostically, while the resulting knowledge is accumulated in a repository and reused across models and successive validation iterations. This enables systematic refinement of both the pricing implementation and the validation methodology. The framework is applied to five stochastic volatility models. Across these studies, all detected implementation defects are removed and, in two cases, the validation process itself leads to new semi-analytic pricing methodologies. The supplementary material is available in the GitHub repository: https://github.com/ShQiangLiu/ridge.
Although large language model agents are increasingly applied to quantitative-finance workflows, their evaluation remains fragmented across isolated tasks, while the financial relevance of benchmark tasks is often overlooked. Yet financial workflows are inherently multi-stage, spanning interdependent tasks such as forecasting, strategy construction, risk management, and trading. Existing platforms typically focus on a single task, and can therefore overstate agent competence and fail to reveal weaknesses in generalization, real-market interaction, and financially meaningful decision-making. We introduce OpenFinGym, a unified gym environment for quantitative-finance agent development that covers forecasting, market generation, real-time trading, and fraud detection under a single execution and verification interface. OpenFinGym additionally provides an automated task-construction pipeline that turns quantitative finance publications into executable task packages; a containerised runtime with a host-side verifier service that supports scalable agent rollouts and prevents runtime train-test leakage; a paper trading engine with a low-latency data-stream design; deferred-resolution support for long-horizon and event-market forecasts; and integration for SFT and RL post-training
Ruben Wiedemann, Antoine Jacquier, Lukas Gononcs.LG
Enforcing functional inequality constraints such as monotonicity and convexity in neural networks is a fundamental challenge in many industrial and scientific applications. Classical one-sided penalty methods, along with primal-dual methods gated by complementary slackness, provide constraint gradients only at violated locations, resulting in fragile satisfaction. Architectures that guarantee feasibility by construction, on the other hand, remain largely limited to elementary cases and impose additional inductive biases. We introduce neural slack variables, a deep learning native primal-side approach that converts constraint enforcement into a regression problem by coupling the primary network with a jointly learned auxiliary network. The auxiliary network serves as a valid target for the primary network's constraint quantities, inducing feasibility and regularity. Neural slack variables achieve zero measured violations on dense-grid monotonicity and convexity test cases, where penalty and primal-dual baselines leave residual violations, and enable arbitrage-free learning of volatility surfaces, an open industrial challenge in quantitative finance.
While deep learning has excelled in various domains, its application to sequential decision-making in finance remains challenging due to the low Signal-to-Noise Ratio (SNR) and non-stationarity of financial data. Leveraging the reasoning capabilities of Large Language Models (LLMs), we propose \textbf{PandaAI}, a closed-loop neuro-symbolic LLM agent with market regime modeling and constrained alpha generation, which bridges general LLM reasoning with financial rigor and suppresses the financial toxicity of LLM-generated outputs. To bridge the gap between general linguistic capability and financial rigor, we fine-tune a domain-specific LLM. Furthermore, we integrate this LLM into a modular architecture and form a closed-loop system. Unlike traditional models that optimize isolated prediction metrics, \textbf{PandaAI} is designed as a neuro-symbolic agent that navigates the complex, real-world financial environment with explicit risk awareness. Extensive experiments on CSI 300 stock data show that \textbf{PandaAI} achieves a $18.2\%$ higher Rank IC and $25.7\%$ lower maximum drawdown than state-of-the-art time-series models. Our constrained LLM generation and dual-channel adaptation method provide a general paradigm for LLM deployment in high-stakes sequential decision-making scenarios.
Damian Lebiedź, Robert Ślepaczukcs.LG cs.NE q-fin.ST q-fin.TR stat.ML
This study aims to determine whether the application of Deep Reinforcement Learning (DRL) as a specialized execution overlay can enhance pair trading in highly volatile cryptocurrency markets. Although classical implementations of the strategy have proven successful in traditional equities, they frequently exhibit rigidity and suffer from severe divergence risks when applied to high-variance environments. To address this need, this research introduces novel concepts. To construct a robust system, we developed a hierarchical "Filter-then-Rank" pair selection methodology and a proprietary "Fixed Risk, Adaptive Mean" execution model. The system employs a Proximal Policy Optimization (PPO) agent with a Long Short-Term Memory (LSTM) layer to govern execution decisions within strict deterministic risk management boundaries. Evaluated on 1-hour interval data from the Binance USD-M Futures market, the optimized RL policy achieved an out-of-sample performance that substantially outperformed the heuristic baseline. A stationary circular block bootstrap robustness check confirms that the agent's risk-adjusted outperformance is statistically significant at the 10 percent level. Although falling marginally short of the stricter 5 percent threshold, this result highlights the extreme idiosyncratic variance characteristic of digital assets. Ultimately, this thesis contributes to the quantitative finance literature by introducing a hybrid architecture that combines statistical arbitrage with DRL execution policies. Furthermore, it delivers a novel framework for safe reinforcement learning via deterministic shielding, proving that anchoring a neural policy to statistically robust boundaries successfully mitigates severe divergence risks.