purgedcv 0.0.3

scikit-learn-compatible cross-validation for time-series and financial machine learning: purging, embargoes, combinatorial purged CV, and deflated Sharpe ratios.

Purged cross validation

scikit-learn-compatible cross-validation for time-series machine learning: purging, embargoes, and combinatorial backtest paths.

Example notebooks → — purge/embargo, walk-forward, and CPCV with PSR/DSR worked end to end on real ICU-mortality, turbofan-RUL, rainfall, and electricity-demand data.

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The problem

Standard k-fold cross-validation assumes the rows are independent. Time-series data is not. When a label resolves over the next few days, it overlaps the labels sitting right next to it, so an ordinary shuffle-split leaks tomorrow's answer back into training. The rows immediately after a test window leak too, because they are serially correlated with it. Both effects quietly inflate backtested Sharpe ratios and hand you strategies that look great on a chart and bleed money once they go live. This library removes both.

Why write another one? People have asked scikit-learn, auto-sklearn, and mlpack for purging and embargo support and been turned down or left waiting for years. The one mature implementation, mlfinlab, went closed-source and paid. The free alternative has been unmaintained since 2018. That gap is the reason this exists.

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Does it actually catch leakage?

A controlled check on synthetic data whose target is built so that no feature can predict it. The honest out-of-sample score must never be positive. Naive shuffled k-fold runs against PurgedKFold side by side (examples/synthetic_leakage_proof.ipynb, deterministic, no download):

model	naive shuffled KFold R²	PurgedKFold R²
predict-the-mean (reference)	-0.01	-0.13
k-NN	0.83	-1.31
RandomForest	0.91	-1.94

Train/test label overlap: 100% under naive → 0% under PurgedKFold.

Naive CV reports R² ≈ 0.83–0.91 on a target nothing can predict. That is pure leakage from the overlap. PurgedKFold removes the overlap and the fabricated skill collapses below a predict-the-mean baseline. The negative number is not the point; no positive skill is the correct answer, and only the purged split reports it. The library does not make models look better; it stops them looking better than they are.

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Installation

pip install purgedcv

# Directly from the repository
pip install git+https://github.com/eslazarev/purged-cross-validation.git

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Quickstart

1. Foundation primitives: purge, apply_embargo, and diagnostics

Build a manual split, clean it with the purge and embargo primitives, then audit it with the diagnostics submodule.

import numpy as np
import pandas as pd
from purgedcv import purge, apply_embargo
from purgedcv.diagnostics import assert_no_temporal_leakage, assert_embargo_respected

# 30 daily bars; each bar's label resolves 2 days later
pred  = pd.Series(pd.date_range("2024-01-01", periods=30, freq="D"))
evalu = pred + pd.Timedelta(days=2)

train_idx = np.arange(0, 20)
test_idx  = np.arange(20, 30)

# Remove training rows whose label horizon overlaps the test window
clean_train = purge(train_idx, test_idx, pred, evalu)

# Drop the 3-day post-test buffer from training
clean_train = apply_embargo(
    clean_train, test_idx, pred, evalu, embargo=pd.Timedelta(days=3)
)

# Assert the split is now leak-free (raises TemporalLeakageError if not)
assert_no_temporal_leakage(clean_train, test_idx, pred, evalu)
assert_embargo_respected(clean_train, test_idx, pred, evalu, embargo="3D")
print(f"Clean training rows: {len(clean_train)}")  # 19

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2. Splitters with scikit-learn: PurgedKFold inside cross_val_score

Drop-in replacement for KFold that applies purge and embargo automatically on every fold.

import numpy as np
import pandas as pd
from sklearn.linear_model import Ridge
from sklearn.model_selection import cross_val_score
from purgedcv import PurgedKFold

rng   = np.random.default_rng(0)
n     = 200
pred  = pd.Series(pd.date_range("2022-01-01", periods=n, freq="D"))
evalu = pred + pd.Timedelta(days=3)
X     = rng.standard_normal((n, 5))
y     = X @ rng.standard_normal(5) + rng.standard_normal(n) * 0.5

cv = PurgedKFold(
    n_splits=5,
    prediction_times=pred,
    evaluation_times=evalu,
    purge_horizon="3D",   # matches label horizon
    embargo="1D",         # 1-day post-test buffer
)

scores = cross_val_score(Ridge(), X, y, cv=cv, scoring="r2")
print(f"R² per fold: {scores.round(3)}")

All four splitters (WalkForwardSplit, PurgedKFold, PurgedGroupKFold, CombinatorialPurgedCV) satisfy the sklearn splitter protocol and work inside GridSearchCV and Pipeline.

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3. CPCV + path reconstruction + metrics: the full workflow

Combinatorial Purged CV produces C(N, K) folds that tile into multiple out-of-sample backtest paths. Use PSR and DSR to evaluate them with corrections for non-normality and selection bias.

import numpy as np
import pandas as pd
from sklearn.dummy import DummyRegressor
from purgedcv import (
    CombinatorialPurgedCV,
    probabilistic_sharpe_ratio,
    deflated_sharpe_ratio,
    min_track_record_length,
)

rng   = np.random.default_rng(42)
n     = 120
pred  = pd.Series(pd.date_range("2023-01-01", periods=n, freq="D"))
evalu = pred + pd.Timedelta(days=2)
X     = rng.standard_normal((n, 3))
y     = X @ np.array([0.5, -0.3, 0.2]) + rng.standard_normal(n) * 0.1

# N=6, K=2  →  C(6,2) = 15 folds  →  6-2 = 4 backtest paths
cv = CombinatorialPurgedCV(
    n_splits=6,
    n_test_groups=2,
    prediction_times=pred,
    evaluation_times=evalu,
)

# paths.shape == (n_paths, n_samples); NaN where a sample was not OOS
paths = cv.backtest_paths(DummyRegressor(strategy="mean"), X, y)
print(f"Backtest paths: {paths.shape}")  # (5, 120)

# Derive a toy "return" series and compute per-path PSR
per_path_returns = paths - y[np.newaxis, :]
per_path_psr = [
    probabilistic_sharpe_ratio(row[np.isfinite(row)], benchmark_skill=0.0)
    for row in per_path_returns
]
print(f"PSR per path: {[round(p, 3) for p in per_path_psr]}")

# DSR corrects for testing 5 paths simultaneously
first = per_path_returns[0]
dsr = deflated_sharpe_ratio(first[np.isfinite(first)], n_trials=5, var_sharpe=0.01**2)
print(f"Deflated SR (first path): {dsr:.3f}")

# Minimum observations needed to prove SR=0.7 beats benchmark SR=0.5 at 95% confidence
n_min = min_track_record_length(
    observed_sharpe=0.7, target_sharpe=0.5, alpha=0.05, skew=0.0, kurtosis=3.0
)
print(f"MinTRL: {int(n_min)} observations")

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API summary

Symbol	Domain	Description
purge	D2	Remove overlapping-horizon training rows
apply_embargo	D3	Remove post-test buffer rows
WalkForwardSplit	D5.1	Sliding / expanding walk-forward CV
PurgedKFold	D5.2	Contiguous test folds with purge + embargo
PurgedGroupKFold	D5.3	Group-aware purged k-fold
CombinatorialPurgedCV	D5.4	C(N,K) combinatorial folds
reconstruct_paths	D6	Assemble CPCV folds into backtest paths
probabilistic_sharpe_ratio	D7	PSR: P(true SR > benchmark)
deflated_sharpe_ratio	D7	DSR: PSR corrected for multiple testing
min_track_record_length	D7	Minimum observations to establish SR
diagnostics.*	D8	Leakage and embargo audit functions

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Methodology references

• Lopez de Prado, M. (2018). Advances in Financial Machine Learning. Wiley. Chapters 7 (purge/embargo) and 12 (CPCV).
• Bailey, D. H., & Lopez de Prado, M. (2012). The Sharpe Ratio Efficient Frontier. Journal of Risk, 15(2).
• Bailey, D. H., & Lopez de Prado, M. (2014). The Deflated Sharpe Ratio: Correcting for Selection Bias, Backtest Overfitting and Non-Normality. Journal of Portfolio Management, 40(5).

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License

MIT. See LICENSE.