Conflicting risk bands need a feasible intersection

Conflicting risk bands should be resolved as constraints on the same defined quantity. We would compute their feasible intersection before invoking the model. If the intersection is empty, the mandate needs a decision about which requirement can change.

In an illustrative configuration, an account-level rule permits gross exposure from 0% through 80% of equity. A strategy’s preferred operating band is 60% through 100%. Their intersection is 60% through 80%. If the strategy preference is advisory, the account can still operate below 60%; if it is a mandatory minimum, the intersection describes the only accepted range.

A minimum changes the meaning

Now change the strategy minimum to 90%. The intersection with the 80% ceiling is empty. Picking 80% silently satisfies the ceiling while violating the minimum. Picking 90% silently violates the ceiling. Averaging to 85% violates both. The useful compiler output identifies the two source fields and reports the empty range.

We would first normalize units and scope. A position-level band and an account-level band require different calculations. A margin percentage and a notional percentage cannot be intersected as interchangeable values. Inclusive endpoints also matter: two closed bands meeting at 80% share one admissible point, while an exclusive boundary can remove that point.

The proposed fixture uses a table with source, scope, measure, lower endpoint and upper endpoint. Add a field declaring whether each endpoint is binding or advisory. A resulting contract includes the resolved interval and the reason any preference was relaxed. The owner can review the exact relaxation rather than a reassuring summary.

Tests should include nested intervals, a single shared endpoint and a fully disjoint pair. When a market move pushes the current account outside the allowed band, evaluate exposure reductions separately from fresh entries. Requiring immediate restoration can create a forced transaction; that response needs its own authority.

A band is useful when its feasible set and response are visible. We would keep the unresolved state reviewable, with explicit permission for observation and authorized position management while the owner decides the conflicting requirement.

Our mandate compiler provides the wider instruction-to-action framework for this feasible risk intersection. The published controls research supplies its historical background. DXAP publicly describes the corresponding separation between model proposals and external policy checks.