Vix Scaled Risk Management

VIX-Scaled Risk Management

Experiment Overview

Context

Position sizing had no macro awareness — during VIX=40 panic, positions were sized the same as VIX=12 calm. VIX spikes correlate with 40-60% of max drawdown events.

Implementation

1. VIX-Scaled Position Sizing (integrated_risk.py)

Step 8 in calculate_position_size(), between correlation adjustment and capital limits:

# VIX regime scaling (linear interpolation within bands)
VIX < 15:  scale = 1.00  (normal)
VIX 15-25: scale = 0.85  (elevated, linear)
VIX 25-35: scale = 0.65  (high, linear)
VIX > 35:  scale = 0.40  (panic, linear)

• IntegratedPositionSize.macro_risk_scale field tracks the applied scale
• get_risk_summary() includes vix_level and macro_risk_scale
• Gracefully degrades to 1.0x when OpenBB unavailable
• Cached internally (_last_vix, _last_vix_scale) with refresh on each call

2. VIX Circuit Breaker (risk_monitor.py)

# CircuitBreakerConfig additions
vix_warning_threshold = 30.0    # Warning alert
vix_critical_threshold = 40.0   # Circuit breaker alert

# RealTimeRiskMonitor.check_vix_level() -> List[RiskAlert]

3. Capital Shift Suppression (capital_shift.py)

# At top of should_shift_capital():
if vix > 30.0:
    return False, "vix_suppressed"
# Prevents shifting equity capital to crypto during correlated panic

Failed Attempts

Final Parameters

# VIX bands and scales
VIX_BANDS = [(15, 1.0), (25, 0.85), (35, 0.65), (float('inf'), 0.40)]

# Circuit breaker thresholds
VIX_WARNING = 30.0
VIX_CRITICAL = 40.0

# Capital shift suppression
VIX_SHIFT_SUPPRESS = 30.0

Files Modified