{"schema_version":1,"experiment_id":"eoa_inverse_innovation_exp11_mechanism_context_external20_20260804","research_id":"eoa_inverse_innovation_exp11_external_scrutiny_20260804","cell_id":"invariant_mode_decomposition_design__economics_finance","opaque_id":"invariant_mode_decomposition_design__economics_finance__C","search_lanes":{"direct_problem":{"queries":["portfolio fire sale contagion eigenvalue eigenvector leverage price impact margin shock propagation operator","systemic risk fire sales spectral radius stability matrix overlapping portfolios","modal stress testing portfolio forced liquidation eigenmodes price impact","network stress testing asset liquidation eigenvector intervention systemic risk"],"source_ids":["SRC1","SRC2","SRC3","SRC4"],"no_result_note":null},"closest_prior_art":{"queries":["\"stability analysis of financial contagion due to overlapping portfolios\" eigenvalue 2014","overlapping portfolios eigenvector centrality fire sales portfolio reallocation systemic risk intervention","spectral radius constraint portfolio optimization fire sale contagion leverage","optimal intervention fire sale contagion network portfolio holdings systemic risk tax"],"source_ids":["SRC1","SRC2","SRC3","SRC5"],"no_result_note":null},"historical_terminology":{"queries":["older literature portfolio insurance dynamic hedging price feedback destabilizing market 1987 cascade","portfolio diversification leverage financial contagion cross-market hedging Value-at-Risk","generalized branching process overlapping portfolios critical leverage"],"source_ids":["SRC1","SRC3"],"no_result_note":"Older portfolio-insurance, cross-market-contagion, and leverage-cycle terminology yielded antecedents for feedback selling; no retained source predating SRC1 was as close to the proposed spectral stability mechanism."},"products_practices_standards":{"queries":["Basel stress testing standards market liquidity fire sale feedback official guidance portfolio","risk management product portfolio liquidity stress testing market impact forced liquidation first party","Bloomberg Liquidity Assessment liquidation cost horizon stress scenarios","Basel RMA30 feedback second-round effects stress testing governance limits"],"source_ids":["SRC6","SRC7","SRC8"],"no_result_note":null},"non_english_regional":{"queries":["site:banque-france.fr ventes forcées contagion portefeuilles chevauchement levier stress test liquidité","site:bundesbank.de Feuerverkäufe Ansteckung Portfolio Überschneidungen Stresstest Liquidität","site:cnmv.es ventas forzadas contagio carteras apalancamiento prueba de estrés liquidez","site:bcb.gov.br venda forçada contágio carteira alavancagem teste de estresse liquidez"],"source_ids":["SRC8"],"no_result_note":"French official terminology produced a directly relevant system-wide stress-test source. German, Spanish, and Portuguese searches produced adjacent liquidity or contagion material but nothing closer than the eight retained sources."},"composition_subproblems":{"queries":["dominant eigenvector liquidation risk portfolio limits hedge liquidity buffer","overlapping portfolios largest eigenvalue greater than 1 global cascade","fire sales successive rounds leverage targeting price impact matrix decomposition","portfolio liquidity stress testing position liquidation cost market depth margin calls"],"source_ids":["SRC1","SRC2","SRC3","SRC5","SRC7","SRC8"],"no_result_note":null}},"sources":[{"source_id":"SRC1","title":"Stability analysis of financial contagion due to overlapping portfolios","url":"https://arxiv.org/abs/1210.5987","publisher":"Journal of Banking & Finance / Elsevier (open manuscript via arXiv)","date_or_year":"2014 journal article; manuscript submitted 2012","source_type":"PRIMARY_RESEARCH","language":"English","claims_supported":["Overlapping portfolios, leverage, liquidation, and market impact can generate cascading failures.","A largest-eigenvalue threshold distinguishes stable and unstable regions in the modeled contagion process.","Dynamic deleveraging can amplify instability, and the framework is proposed for macroprudential stress testing."]},{"source_id":"SRC2","title":"Fire sales, indirect contagion and systemic stress-testing","url":"https://www.systemicrisk.ac.uk/sites/default/files/images/1.Eric%20Shaanning%20paper.pdf","publisher":"Imperial College London / Systemic Risk Centre","date_or_year":"Revised November 2016","source_type":"PRIMARY_RESEARCH","language":"English","claims_supported":["Macro-shocks can interact with leverage or capital constraints to trigger repeated fire-sale and price-impact rounds.","Liquidity-weighted portfolio overlap has a low-dimensional eigenstructure, and its principal eigenvector is used as an indirect-contagion indicator.","The operational stress test finds fire-sale losses that cannot be replicated by applying an exogenous portfolio shock without feedback."]},{"source_id":"SRC3","title":"Contagion Accounting","url":"https://www.bis.org/publ/work908.pdf","publisher":"Bank for International Settlements","date_or_year":"December 2020","source_type":"PRIMARY_RESEARCH","language":"English","claims_supported":["An accounting-based framework combines leverage targeting, overlapping portfolios, fire-sale price dynamics, and repeated contagion rounds.","Shock transmission is represented by matrix powers and decomposed into initial, first-round, and higher-round amplification.","Application to granular euro-area data finds common exposures and fire-sale calibration materially relevant to stress losses."]},{"source_id":"SRC4","title":"Quantification of systemic risk from overlapping portfolios in the financial system","url":"https://arxiv.org/abs/1802.00311","publisher":"Poledna, Martínez-Jaramillo, Caccioli and Thurner / arXiv","date_or_year":"2018","source_type":"PRIMARY_RESEARCH","language":"English","claims_supported":["Security-level holdings can be converted into a bipartite network of institutions and assets to quantify indirect contagion.","Using Mexican financial-system data, focusing on direct exposures alone understated total systemic risk by as much as 50%.","The marginal risk of an exposure depends on the state of the wider network rather than exposure size alone."]},{"source_id":"SRC5","title":"Systemic-risk-efficient asset allocation: Minimization of systemic risk as a network optimization problem","url":"https://arxiv.org/abs/1801.10515","publisher":"Pichler, Poledna and Thurner / Journal of Financial Stability manuscript via arXiv","date_or_year":"2018 manuscript; 2021 journal publication","source_type":"PRIMARY_RESEARCH","language":"English","claims_supported":["Portfolio holdings can be rearranged to reduce overlapping-portfolio systemic risk while constraining individual expected return and risk.","The proposed network optimization reduced modeled systemic risk by more than half in European sovereign exposures.","Fire-sale simulations compared original and optimized allocations and found substantially lower contagion probability after intervention."]},{"source_id":"SRC6","title":"RMA30 – Stress testing","url":"https://www.bis.org/basel_consolidated_guidelines/chapter/RMA/30.htm","publisher":"Basel Committee on Banking Supervision / Bank for International Settlements","date_or_year":"Consolidated chapter published 26 February 2026; based on October 2018 principles","source_type":"OFFICIAL_GUIDANCE","language":"English","claims_supported":["Stress tests may include behavioral feedback and second-round effects and should inform risk appetite, limits, liquidity, funding, and portfolio decisions.","Boards or appropriately senior governance bodies are responsible for oversight and challenge when stress tests affect strategic decisions.","Validation, benchmark comparison, sensitivity analysis, documentation of assumptions, and regular updating are expected controls."]},{"source_id":"SRC7","title":"Bloomberg Liquidity Assessment","url":"https://professional.bloomberg.com/products/risk/lqa/","publisher":"Bloomberg Finance L.P.","date_or_year":"2026 webpage","source_type":"FIRST_PARTY_PRODUCT","language":"English","claims_supported":["A commercial portfolio-risk product estimates position-level liquidation cost and horizon under current and stressed conditions.","The product supports daily liquidity monitoring, customized model parameters, and firm-specific scenario analysis.","Asset managers and hedge funds are identifiable prospective users of portfolio liquidity analytics."]},{"source_id":"SRC8","title":"La Banque de France, l'ACPR et l'AMF publient un rapport méthodologique sur leur premier test de résistance portant sur l’ensemble du système financier (« system-wide stress test »)","url":"https://www.banque-france.fr/fr/communiques-de-presse/la-banque-de-france-lacpr-et-lamf-publient-un-rapport-methodologique-sur-leur-premier-test-de","publisher":"Banque de France, ACPR and AMF","date_or_year":"17 June 2026","source_type":"OFFICIAL_GUIDANCE","language":"French","claims_supported":["French authorities are running an integrated stress test covering banks, insurers, and asset managers, with bottom-up reactions and top-down second-round modeling.","The exercise explicitly examines concentrated similar positions, forced sales, price amplification, margin calls, and sequential liquidity stress.","Participants report intended markets, timing, volumes, and counterparties so authorities can identify mutually inconsistent defensive plans and possible self-reinforcing dynamics."]}],"problem_evidence":{"status":"SUPPORTED","finding":"Independent research and official exercises consistently identify the proposed problem: individually assessed institutions or exposures can be connected through common holdings, leverage constraints, margin or liquidity needs, forced sales, and price impact, producing higher-round losses that ordinary direct-exposure or exogenous-shock analysis misses. Empirical applications report material indirect risk, including up to 50% understatement when only direct exposures are considered.","source_ids":["SRC1","SRC2","SRC3","SRC4","SRC8"],"uncertainty":"The magnitude is highly sensitive to holdings coverage, liquidation behavior, market-depth and price-impact calibration, and regime changes. Evidence at banking-system scale does not establish materiality for every individual leveraged fund."},"adopter_evidence":{"status":"SUPPORTED","finding":"Identifiable adopters and authorizers exist: asset managers and hedge funds use portfolio-liquidity analytics; Basel guidance assigns stress-test oversight and challenge to boards or senior governance bodies; and financial authorities already coordinate system-wide exercises with participating institutions. A fund risk committee can therefore authorize a shadow analysis, while existing portfolio and counterparty authorities retain control over live changes.","source_ids":["SRC6","SRC7","SRC8"],"uncertainty":"Public sources do not establish that a named fund currently authorizes eigenmode-based limits specifically, and governance arrangements vary across funds and jurisdictions."},"implementation_evidence":{"status":"PARTLY_SUPPORTED","finding":"The main technical pieces have been implemented separately or in close combinations: repeated fire-sale propagation, leverage constraints, linear price impact, matrix-power decomposition, eigenvalue stability tests, eigenvector monitoring, empirical holdings networks, liquidity-stress products, and risk-reducing portfolio reallocation. The exact package—estimating a local price-margin-sale operator for one fund, requiring resampling-stable modes, targeting those modes, and monitoring reconstruction residual and mode drift—was not found as an implemented routine practice.","source_ids":["SRC1","SRC2","SRC3","SRC4","SRC5","SRC7"],"uncertainty":"Public product pages expose limited methodology, and the retained research predominantly studies systems of banks rather than a single leveraged fund with continuously changing margin schedules."},"prior_art":{"disposition":"ADJACENT_PRIOR_ART","closest_analogues":[{"name":"Cont and Schaanning fire-sale systemic stress test and Indirect Contagion Index","source_ids":["SRC2"],"same_problem":true,"same_causal_lever":true,"overlap":"Models repeated losses, constraint-triggered liquidation and price impact; analyzes eigenvalues and eigenvectors of liquidity-weighted portfolio overlap; uses a principal-eigenvector measure for monitoring.","remaining_difference":"It ranks institutions using the principal overlap eigenvector and simulates system losses, but does not test fund-level interventions keyed to multiple stable modes against cost-matched ordinary limit adjustments with residual and mode-drift rejection rules."},{"name":"Caccioli et al. stability analysis of overlapping portfolios","source_ids":["SRC1"],"same_problem":true,"same_causal_lever":true,"overlap":"Uses a contagion operator's largest eigenvalue to determine whether leverage, crowding, liquidation, and market impact permit global cascades.","remaining_difference":"The generalized branching-process model is a system-level stability analysis; it does not estimate a local continuous state-transition operator for a portfolio or map dominant modes into feasible hedges, buffers, and financing changes."},{"name":"BIS Contagion Accounting","source_ids":["SRC3"],"same_problem":true,"same_causal_lever":true,"overlap":"Represents repeated shock propagation with matrices and their powers, includes leverage-driven sales and price impact, and decomposes higher-round loss amplification using granular data.","remaining_difference":"It decomposes contagion channels and rounds rather than selecting stable eigenmodes for targeted interventions, and it does not impose the proposed spectral-gap, reconstruction-residual, or mode-drift criteria."},{"name":"Systemic-risk-efficient asset allocation","source_ids":["SRC5"],"same_problem":true,"same_causal_lever":false,"overlap":"Changes portfolio allocations to reduce overlapping-portfolio systemic risk and validates the intervention in fire-sale simulations while holding individual return and risk approximately fixed.","remaining_difference":"The intervention optimizes a network-level DebtRank objective rather than reducing empirically stable modes of a local shock-propagation operator; it also omits margin-state dynamics and the proposed residual checks."}],"contrastive_claim_remaining":"For a fixed leveraged-portfolio snapshot and preregistered local shock window, resampling-stable eigenmodes of an estimated round-to-round price–margin–forced-sale operator provide reproducible warning value beyond asset limits, leverage, VaR and return-covariance PCA, and feasible mode-targeted adjustments reduce held-out peak loss, collateral shortfall or forced-sale volume more than cost-matched nonmodal adjustments without increasing reconstruction residual beyond tolerance.","contrastive_claim_falsifier":"The claim fails if no mode is stable under resampling and held-out scenarios, if baseline controls identify every materially adverse path within tolerance, or if mode-targeted adjustments do not outperform cost-matched baseline adjustments on preregistered loss, collateral and sale-volume outcomes after accounting for residual risk.","confidence":"MODERATE","search_limitations":"The bounded search covered six lanes and English, French, German, Spanish and Portuguese terminology. It relied on public pages and manuscripts; paywalled full text and proprietary implementation documentation were unavailable. The search cannot exclude unpublished internal tools, patents using different claims or terminology, or implementations outside indexed public sources."},"researchability_gates":{"externally_supported_problem":{"status":"PASS","rationale":"Multiple independent empirical and modeling sources, plus a current official system-wide exercise, support correlated forced-sale and price-impact amplification beyond coordinate-wise or direct-exposure views.","source_ids":["SRC1","SRC2","SRC3","SRC4","SRC8"]},"identifiable_adopter_or_authorizer":{"status":"PASS","rationale":"Asset managers and hedge funds are identifiable users, senior risk-governance bodies are identifiable authorizers, and regulators already convene comparable shadow stress exercises.","source_ids":["SRC6","SRC7","SRC8"]},"distinct_testable_incremental_claim":{"status":"PASS","rationale":"Close prior art covers spectral stability, eigenvector monitoring, repeated contagion and portfolio intervention, but the preregistered combination of stable local modes, cost-matched targeted action, held-out performance and residual/drift rejection remains distinct and falsifiable.","source_ids":["SRC1","SRC2","SRC3","SRC5"]},"bounded_next_evidence_step":{"status":"PASS","rationale":"A frozen-snapshot shadow pilot using historical and bounded synthetic shocks can compare modal warnings and cost-matched adjustments without live portfolio changes; published stress-test frameworks and commercial liquidity analytics demonstrate that the required inputs and comparisons are operationally bounded.","source_ids":["SRC2","SRC3","SRC7"]},"no_unresolved_safety_or_authority_stop":{"status":"PASS","rationale":"The proposed first step is analysis-only, retains existing controls, prohibits autonomous trading and relaxation of limits, and includes halt criteria. This is consistent with guidance requiring senior challenge, validation, sensitivity analysis and documented limitations.","source_ids":["SRC6","SRC7"]},"adequate_search_evidence":{"status":"PASS","rationale":"All six required lanes were searched adversarially; exactly eight retained sources were opened, span seven publisher groups, include five primary research sources, two official sources and one first-party product source, and include non-English regional evidence.","source_ids":["SRC1","SRC2","SRC3","SRC4","SRC5","SRC6","SRC7","SRC8"]}},"strict_success":true,"screen_survival":true,"remaining_research_value":"MODERATE","recommended_next_step":"Run the proposed four-week shadow pilot on one frozen portfolio snapshot. Preregister the local shock window, baseline controls, operator-estimation procedure, resampling and spectral-gap thresholds, residual budget, intervention-cost matching, held-out scenarios, and peak-loss, collateral-shortfall and forced-sale-volume endpoints; make any failure of stability or baseline noninferiority an automatic stop.","world_novelty_boundary":"This bounded public-source search supports an adjacent-prior-art disposition and a narrow empirical incremental claim only. It does not establish world novelty, patentability, freedom to operate, market size, routine adoption, or realized impact, and it cannot rule out proprietary or differently described implementations."}