lob-latent-regimes/README.md

⚡️ Latent Micro-Regime Early Detection in LOBs

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🌪 The Thesis: Stress is not a Bolt from the Blue

Standard market signals like Volatility and Imbalance are post-mortem indicators—they tell you the ship is sinking while you're already underwater.

This project proves that liquidity instability has a "incubation period." We capture the latent structural decay before the price cracks.

"If you wait for the volatility spike, you've already lost. We detect the silence before the scream."

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🧠 The Architecture: Causal Delayed Transition

We move beyond simple binary states. Our model architecture assumes a three-stage causal evolution of market failure:

State	Regime	Market Reality	Observability
🟢 0	Stable	Equilibrium liquidity	High
🟡 1	Latent Build-up	Hidden deterioration / Depth erosion	Invisible (The "Ghost" Phase)
🔴 2	Stress	Observable Dislocation / Crash	High (Reactive)

🛠 The "God-Mode" Detection Logic

Our detector operates on a MAX-trigger fusion across high-dimensional channels:

• Probabilistic Instability: HMM posterior entropy spikes.
• Temporal Drift: Recursive analysis of spread & depth velocity.
• Structural Erosion: Real-time order flow decay signals.
• Rising-Edge Trigger: Precise identification of the onset of instability.

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📊 Performance Matrix (The "Kill-The-Baselines" Table)

While classical signals lag by 20+ units, our Adaptive Trigger provides an average lead-time of +18.62, catching the regime shift before it manifests in price.

Method	Mean \Delta (Lead-Time)	Precision	Coverage
🔥 Adaptive Trigger	+18.62	100%	52.6%
🧬 Model-Only	+14.95	100%	43.2%
📡 Multi-Trigger	+13.15	100%	28.1%
📉 Imbalance	-24.84	54.9%	78.7%
📉 Volatility	-32.02	45.5%	43.3%

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📂 Project Anatomy

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├── 🧪 experiments/      # Evolutionary stages v1 → v7 (The Lab)
├── 📓 notebooks/        # Final production-grade experiment notebook
├── 📈 results/          # High-fidelity figures & summary.txt
├── 📄 paper/            # The theoretical foundation (PDF)
├── 🎨 assets/           # Dynamic visualization & GIFs
└── 📜 README.md         # You are here.

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⚡ Quick Start (Reproduction Pipeline)

Tested on NVIDIA T4 (Colab) and Apple Silicon M4. Results are 100% deterministic via seeded initialization.

# Clone the madness
git clone https://github.com/your-repo/latent-lob-detection.git
cd latent-lob-detection

# Arm the environment
pip install -r requirements.txt

# Run the flagship pipeline
python experiments/v7_final.py

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🏆 Key Contributions

1. Causal Latent Theory: Formalized the Regime 1 \rightarrow Regime 2 transition delay.
2. Zero-False-Positive Logic: 100% precision thresholding in the early-detection window.
3. The Trigger Fusion: Combined entropy, drift, and flow into a single "Early-Warning" signal.
4. Positive Lead-Time: Mathematically demonstrated dominance over reactive baselines.

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📝 Citation

@article{lob_micro_regime_detection_2026,
  title={Early Detection of Latent Micro-Regimes in Limit Order Books},
  author={Hiremath, Prakul},
  year={2026}
}

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Built with ☕️, 🐍, and a relentless pursuit of Alpha.
License: MIT