The goal, the method we agreed, and an honest read on how far along each part is.
One number: X — how much a hedge fund can safely lend against a broker's first-loss capital.
“Based on this broker's actual order flow, at X = 4 your capital would not have been touched in 20 years, with 99.9% confidence.”
That sentence, defensible to a fund's risk desk, is the deliverable. Everything else is machinery to produce it honestly.
The work splits cleanly. One half is settled; the other is the real research.
Turns a worst-case loss into a lendable multiple. It reduces to one relationship, and it reproduces the Forex Hub answer (X = 4) from the call.
Produces g — the worst loss the book can actually take — from the broker's own flow. This is the hard part, and it is the six stages below.
The engine for estimating the worst-case loss, as laid out on the call.
Rebuild the position held at the LP, per currency, from the Pawn's A-book flow. Verified: it reproduces the platform's own risk number within 5% on 105 of 136 days.
Hold each of 55,627 minute-level positions fixed and drag it through 26 years of history. Worst one-day loss: 8.5–10.5% of the position, on both books. Every binding day is a 2026 gold day.
Rolling 11×11 correlation over 26 years (it is a time series — XAU/AUD ranges −0.33 to 0.79) plus 20,000 correlated random scenarios per snapshot. At today's volatility the 99.9% loss is 4.3–5.7%; the unconditional replay stays the buffer.
Three forms fitted on 70% of history, tested on 30%. The scenario formula — max over the 36 historical days that ever bind — is exact out of sample. The linear reading: 7.8% per $ long gold, 6.1% per $ short.
C₁ = $3.27M on the retained book ($192M if the hedged book is charged — see the open question). X follows: 4.9× at 2:1, infeasible above ~10:1.
Top-20 sub-30-minute shocks per asset since 2015, mined from 5-minute bars (the 2015 gold flash crash, Brexit, the 2016 election), applied jointly to every snapshot. The curated PiFolio list will replace the mined one when it arrives.