Reflect 3 Attempt 01

Asteria Investment Office — Operational Skill

Data Precedence Rule

Current environment always overrides stale local payloads.

• The remote API (/api/portfolios, /api/instruments/bonds, /api/issuers, /api/policies, /api/index-levels, /api/macro-signals, /api/allocation/prior-views) is the book of record.
• Local request payloads contain intake context (requested ticket sizes, focus sets, review windows) but their stale snapshots, stale marks, and stale exception-board quantities must be reconciled to current API records.
• When a local payload's date or quantity conflicts with the API, use the API value.
• Set data_precedence fields to "current_environment_over_stale_payload" or equivalent.

Key Endpoints and What They Carry

Policy Identification

• Use the top-level policy-set ID from /api/policies (e.g., "POLICY_SET_2026_05") when an answer template asks for policy_id in an allocation or committee context.
• For portfolio-specific constraint checks, use the constraint_policy_id from the portfolio record (e.g., POL_CREDIT_DEFAULT, POL_CREDIT_RISK_REDUCTION, POL_CORRELATION_DEFAULT, POL_MULTI_ASSET_DEFAULT).

Weighted Portfolio Metrics (Credit Tasks)

For a portfolio with holdings (qty_i, dur_i, ytm_i, rating_bucket_i):

MV = Σ qty_i
HY_pct = Σ(qty_i for HY bonds) / MV × 100
Wtd_dur = Σ(qty_i × dur_i) / MV
Wtd_ytm = Σ(qty_i × ytm_i) / MV

Post-trade: remove sold bonds' contributions, add bought bonds' contributions, recompute MV, HY_pct, wtd_dur, wtd_ytm. Round to declared precision (typically 2 decimal places for percentages and duration, 1 decimal place for notional in USD millions).

Pearson Correlation from Index Levels (Correlation Tasks)

1. Extract 12 monthly levels per index (start-date through end-date).
2. Compute 11 monthly simple returns: r_t = (L_t − L_{t−1}) / L_{t−1}.
3. Compute Pearson: r = Σ(x_i−x̄)(y_i−ȳ) / √(Σ(x_i−x̄)² · Σ(y_i−ȳ)²).
4. Round to 3 decimal places.
5. return_observations = 11 (one less than the number of level dates).
6. Within each pair, index IDs are sorted alphabetically ascending.
7. index_set lists all universe indices in ascending alphabetical order.

View Mapping from Macro Signals (Allocation Tasks)

For each opportunity set, read score from /api/macro-signals for the target quarter:

Change versus prior quarter: Compare the new view to the prior quarter's view from /api/allocation/prior-views. Use rank order UW = −1, N = 0, OW = 1. If current rank > prior rank → "UP", if < → "DOWN", else "UNCHANGED".

Constraint Checks

Credit Constraints

• HY cap: hy_allocation_pct ≤ max_hy_allocation_pct (typically 20%). Use post-trade HY.
• Duration band: weighted_modified_duration_years ∈ [3.0, 5.0].
• Issuer diversification (selected pair): The two selected bonds must have different issuer_ids.
• Subsector diversification (selected pair): At least subsector_min_count_for_diversified (2) distinct subsectors among the selected bonds.
• Watchlist avoidance: No selected bond's issuer may be on the watchlist (watchlist: true in /api/issuers).

Watchlist Issuers

The following issuers are on the watchlist:

• ISS_DRIFTWOOD (Driftwood Shale Finance) — bonds: BND_DRIFTWOOD_2028, BND_DRIFTWOOD_2031
• ISS_JUNIPER_TEL (Juniper Telecom) — bonds: BND_JUNIPER_2028, BND_JUNIPER_2030
• ISS_PACIFIC_REFIN (Pacific Refining) — bonds: BND_PACREF_2028, BND_PACREF_2030

Correlation Constraints

• High threshold (0.8): Pairs with correlation > 0.8 represent concentration risk.
• Low threshold (0.2): Pairs with correlation < 0.2 (or negative) represent diversification.
• China-Asia dependence: Check IDX_CHINA vs IDX_AC_ASIA_PAC_EX_JP. If correlation > 0.8, set china_asia_dependence_flag = true and primary_code = "CHINA_ASIA_DEPENDENCE".

Output Ordering Conventions

• Trades (credit tasks): SELL before BUY, then ascending by instrument_id within each action.
• Allocation rows: Follow the order in the request payload's focus_opportunity_sets list.
• Index lists and pair IDs: Ascending alphabetical by index ID.
• Sleeve actions: Ascending by sleeve name or in the order specified by the template.
• Correlation summary pairs: highest_concentration first, best_diversifier second.

Risk Overlay Selection (Allocation Tasks)

Choose the overlay that matches the dominant signal pattern across opportunity sets:

• CREDIT_RISK_REDUCTION / trim_credit_beta: When HY is UW and U.S. Treasuries/IG is OW — signals rotation from credit risk to quality.
• DURATION_QUALITY_TILT / tilt_to_duration_quality: When duration assets (UST, Bunds) are broadly OW and credit/equity is mixed.
• EQUITY_BETA_EXTENSION / add_cyclical_equity_beta: When equity OW signals dominate.
• CURRENCY_DEFENSIVE_HEDGE / add_currency_hedge: When USD is UW and defensive currencies are OW.
• NO_OVERLAY / hold_policy_weights: When signals are balanced/neutral across asset classes.

Rationale codes in the overlay should be listed in business-priority order (most impactful first).

Precision Rules (by Field)

• Correlation values: 3 decimal places (e.g., 0.915, −0.825).
• Portfolio weights/percentages (HY%, YTM%, duration): 2 decimal places (e.g., 13.24, 5.76, 3.28).
• Notional/quantity (USD millions): 1 decimal place (e.g., 4.0, 12.0).
• Signal scores: 3 decimal places (e.g., 0.732, −0.373).
• Return observations: integer (11 for a 12-month window).
• Dates: YYYY-MM-DD format.

Common Pitfalls

1. Stale local data: Never use local payload marks, quantities, or dates that conflict with the current API. The stale exception board or desk worksheet may show different quantities than the current portfolio — always use current API data.
2. HY identification: HY = rating_bucket == "HY" (BB+ and below). BBB− and above is IG.
3. Watchlist from issuers endpoint, not bonds: Check /api/issuers for the watchlist field — the bond record alone may not carry it.
4. Same-issuer concentration: A bond from an issuer already in the portfolio may still pass the selected-issuer diversification check (it only checks the two new bonds against each other), but be aware of overall issuer concentration limits.
5. Duration push: When replacing short-duration HY bonds with longer-duration IG bonds, duration drifts up — verify it stays within [3.0, 5.0].
6. Correlation sign: The "lowest" correlation is the most negative (not the closest to zero). The pair with the most negative correlation is the best diversifier.
7. View change direction: Changing from OW to UW is DOWN (not UP), even though UW is "underweight." Use the numeric rank order.
8. Energy-linked filter: For energy credit tasks, filter bonds to energy_linked == true and candidate == true. Verify the issuer is not on the watchlist.
9. Policy ID contexts: Portfolio-level constraint checks reference the portfolio's constraint_policy_id; allocation-view tasks use the top-level policy_id from /api/policies.
10. Trade sizing: Total sells must equal total buys (rotation, not net inflow/outflow) unless the request explicitly describes new funding.