walkforward

Volatility forecasts, position sizing and purged walk-forward splits that never see the future. A C11 library with a numpy front door.

pip install walkforward

Most backtests that look good are quietly peeking one bar ahead. The estimator that sizes a position knows the return it is about to earn, or a training label was computed from prices inside the test window. This library is built so those two things cannot happen by accident, and it is checked on every push against pandas, numpy, scikit-learn, the arch package and exact rational arithmetic.

• One timing convention. Every forecast at index t is built from data before t. ewma_vol and the GARCH filters are predictive; the rolling statistics and range estimators are contemporaneous and say so in their own docstrings, with lag to fix them.
• Purging that asks the right question. PurgedWalkForward takes a label horizon, not a purge count, because purge = h - 1 is the part people get wrong. Drops straight into cross_val_score.
• GARCH(1,1) by maximum likelihood, checked against arch on identical samples and identical likelihoods, and invariant to the units of the returns.
• Sizing that fails closed. A bad price gives a zero position, not a NaN one. A leverage cap that could overflow is refused rather than silently ignored.
• Ridge by Householder QR, so a feature at a price level near 1e9 keeps its slope precision.

Research tooling, not investment advice. It is a set of building blocks, not a backtester: it knows nothing about costs, borrow, calendars or corporate actions.

The loop

import numpy as np
import walkforward as wf

# The fit assumes mean-zero returns. Demean with the TRAINING mean; the
# full-sample mean would put the future into the fit.
train = returns[:1000] - returns[:1000].mean()
model = wf.garch_fit(train)

# sigma[t] forecasts period t from returns before t. filter_from continues
# from the variance state the fit ended on, which is what makes the
# out-of-sample path the same as filtering everything together.
sigma = model.filter_from(returns[1000:])

# A position held over period t is entered at the close of t-1, so it is
# sized against the previous close, and earns position * price * return.
entry = close[999:-1]
position = wf.vol_target_position(
    sigma, target_vol=0.01, equity=100_000.0, price=entry, max_leverage=2.0
)
pnl = position * entry * returns[1000:]

model.persistence, model.half_life and model.unconditional_vol are there so you do not have to recompute them.

Cross-validation

from sklearn.ensemble import GradientBoostingRegressor
from sklearn.model_selection import cross_val_score
import walkforward as wf

# Target is a 21-period forward return, so labels span 21 periods and the
# last 20 training rows before each test window are dropped.
cv = wf.PurgedWalkForward(train_size=756, test_size=252, label_horizon=21)

scores = cross_val_score(GradientBoostingRegressor(), X, y, cv=cv)

Without the purge, the twenty training rows before each test window carry labels that were partly computed from test-window prices. The library counts that leak in its own test suite: at a horizon of 21, a purge of 20 leaves zero leaking training rows and a purge of 19 leaves ten.

There is no embargo argument, on purpose. An embargo protects training data that sits after a test window, and a walk-forward never trains on anything after the window it is testing. walk_forward_splits(..., include_post_train=True) exposes that variant with the warning it deserves.

Conventions

Volatility is per period. Annualised converts as annual / sqrt(periods_per_year), so a 10% annual target on daily data is 0.10 / sqrt(252), about 0.0063.

rolling_std uses the population convention and divides by window. Pandas rolling().std() defaults to the sample convention, so the two differ by sqrt(window / (window - 1)).

A pandas Series in gives a pandas Series out, on the same index. Realigning a bare array by hand is one of the ways lookahead gets in.

Bad arguments raise. Bad elements are handled per function and documented on each: a non-finite return is skipped by the recursions, makes a rolling window NaN, and gives a zero position in sizing. DomainError (a ValueError) means the arguments were fine but the computation has no answer: a singular design, a sample with no variance, an overflowing recursion.

What it is checked against

The C library underneath is compared on every push to independent implementations, and the numbers are reproducible from tests/reference/ in the repository.

The C also runs under AddressSanitizer and UndefinedBehaviorSanitizer, on 32-bit and 64-bit, and gives bit-identical answers under GCC and Clang.

License

MIT. Source and the C library: https://github.com/haeganm/walkforward