Constraint-Based Allocation — Guardrails That Prevent Concentration
The portfolio allocator enforces hard limits — BTC delta under 60%, counterparty under 30%, illiquid under 25%, portfolio convexity between 50 and 75 — and warns in real time as you approach them.
TL;DR
The portfolio allocator enforces hard limits — BTC delta under 60%, counterparty under 30%, illiquid under 25%, portfolio convexity between 50 and 75 — and warns in real time as you approach them.
Why This Exists
A portfolio builder without constraints produces concentrated portfolios. The most common failure is over-allocating to a single risk factor because individual positions looked reasonable in isolation.
How It Works
Four constraints on every allocation change:
1. BTC Delta: sum(weight x btc_delta) < 0.60
2. Counterparty: max(counterparty_weight) < 0.30
3. Illiquidity: sum(locked + t90) < 0.25
4. Convexity: 50 < portfolio_convexity < 75
Amber warning within 5% of limit. Red block when breached.
What You See in the Platform
Four constraint gauges at the top of the portfolio builder, updating in real time as you drag allocation sliders.
Where to Go Next
Read Second-Order Stress for cascade effects, or Hidden Correlation for the detection engine.
Next up
Second-Order Stress — What Happens After the First Shock
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