VolatilityCompressionExpansionDetector

Summary

VolatilityCompressionExpansionDetector is RTTA's streaming implementation of: Short-versus-long EWMA volatility ratio detector for compression and expansion regimes.

Update API

result = rtta.VolatilityCompressionExpansionDetector().update(close)

The update(...) call consumes one observation using close. advance(...) uses the same inputs when the caller wants to update state without materializing a Python return value.

Theory Of Operation

VolatilityCompressionExpansionDetector first constructs a scalar market-state metric from the current observation and compact streaming state, then passes that metric through explicit entry/exit hysteresis. The metric is named in the recurrence below; the hysteresis keeps the output stable until the metric crosses the opposite exit band.

Recurrence

Let \(z_t = close_t\) denote the observation consumed by one update(...) call and let \(\theta\) denote constructor parameters such as window lengths, thresholds, and smoothing constants.

\[r_t=\frac{close_t-close_{t-1}}{close_{t-1}}\]

\[v^S_t=(1-\alpha_S)(v^S_{t-1}+\alpha_S r_t^2), \qquad v^L_t=(1-\alpha_L)(v^L_{t-1}+\alpha_L r_t^2)\]

\[q_t=\frac{\sqrt{\max(v^S_t,\epsilon)}}{\sqrt{\max(v^L_t,\epsilon)}}\]

\[r_t = \begin{cases} 1, & r_{t-1} \le 0 \text{ and } q_t \ge u_e \\ 0, & r_{t-1} = 1 \text{ and } q_t \le u_x \\ -1, & r_{t-1} \ge 0 \text{ and } q_t \le \ell_e \\ 0, & r_{t-1} = -1 \text{ and } q_t \ge \ell_x \\ r_{t-1}, & \text{otherwise} \end{cases}\]

The entry/exit constants satisfy \(\ell_e < \ell_x \le u_x < u_e\).

The return value is the current scalar indicator value.

Implementation Notes

The recurrence is implemented in src/rtta/indicator.cpp in class VolatilityCompressionExpansionDetector.

Reference

Background reference