A Universal, Options-Free, One-Byte Market-State Primitive: Cross-Asset Transfer, Distributional-Novelty Detection, and Privacy-Preserving Federation

Abstract

A Universal, Options-Free, One-Byte Market-State Primitive (v2 — with a hardened bond-volatility addendum) Randolph James Ferlic, M.D., and Kimberly Kate Ferlic (Fieldstone Analytics, LLC). Version 2, Zenodo, CC-BY 4.0. v1 DOI 10.5281/zenodo.22116173. Version 2 note. This version adds a short addendum that deepens the parent paper's rates claim into a single, fully hardened bond-volatility result, together with two honest negatives that bound it. The original (v1) manuscript is unchanged and remains in this record; nothing in v1 is revised. The addendum. Paper 40 established that a fixed class-discriminant single-token encoder is a near-lossless, options-free market-stress detector that generalizes across asset classes, including credit and rates and markets with no options index. The addendum answers the specific rates question head-on. A one-byte, options-free Token Bond-Market-State Index, formed as the median token distance across nine rate-sensitive exchange-traded funds spanning Treasuries, agency mortgage-backed securities, investment-grade corporates and TIPS, tracks the MOVE index, the swaption-implied gauge of Treasury-market volatility and the bond-market analog of the VIX, at Spearman 0.81, with a moving-block bootstrap 95 percent confidence interval of 0.72 to 0.87. That is cleaner than the equity token's correlation with the VIX of 0.62. The index is statistically tied with options-implied MOVE at detecting bond-market stress, at an area under the curve of 0.805 versus 0.806, with the token-minus-MOVE interval straddling zero, and the one-byte token is statistically indistinguishable from a fifty-feature detector at the same task. The result survives block-bootstrap confidence intervals, a permutation placebo that collapses to chance, and a purged and embargoed expanding-window walk-forward evaluated entirely out of sample in time across 2015 to 2026; it is robust across four stress-label definitions, including a forward-volatility label on which a pure realized-path one-byte index essentially matches the forward-looking implied gauge. A breadth analysis sweeps the basket size from one instrument to a 22-instrument whole-rate-market aggregate: tracking is monotone in breadth and plateaus at about 0.85 by roughly nine one-byte instruments, and a single instrument's tracking ranges from 0.56 to 0.87 depending on which is chosen, so the value of breadth is reliability rather than level, delivered by a modest median-across-basket construction. Two honest negatives draw the boundary. First, the token does not flag discrete fiscal-stress events; a pre-registered event study over the 2011 and 2023 sovereign downgrades, the 2011, 2013 and 2023 debt-ceiling episodes and the 2025 downgrade returns a median event z-score of minus 0.55 with one of five events elevated and a placebo p-value of 0.83. The genuine finding is that the MOVE index itself barely moved on four of the five events; sovereign downgrades and debt-ceiling episodes were largely not bond-volatility events, because the Treasury market shrugs off fiscal headlines, and the token faithfully mirrors that non-response. Second, a per-tier credit-versus-rate discriminator built from a cross-tier token divergence is beaten by the free, standard high-yield-minus-Treasury return spread, at an area under the curve of 0.83 versus 0.97; the token merely re-derives, less well, a signal a desk already computes at no cost. Together these bound the result cleanly: the token's value in fixed income is the cheap reconstruction of an expensive, proprietary volatility signal from one byte, not a way to beat free market signals, and not forecasting, consistent with the parent paper's own finding that the token is a detector and a null forecaster. The addendum characterizes previously described and filed methods on the bond-volatility input domain and discloses no new algorithmic subject matter. Released under CC-BY 4.0; consistent with Section 2(b) of that license, no patent or other intellectual-property right of the authors is licensed or conveyed by this publication. Inquiries: randolphf@fieldstoneanalyticsllc.com. Cite as: R. J. Ferlic and K. K. Ferlic, "A universal, options-free, one-byte market-state primitive (v2, with a hardened bond-volatility addendum)," Zenodo, 2026, doi: 10.5281/zenodo.22755093. The v1 record remains at doi 10.5281/zenodo.22116173. Part of the spiral-domain-encoder-campaign Zenodo community. Companion deposits: the single-token financial market-state monitor (10.5281/zenodo.22101085); the predictive reach of a decision token, a detector-not-forecaster map (10.5281/zenodo.22736921); the deterministic multi-token token ladder (10.5281/zenodo.22003179). A Universal, Options-Free, One-Byte Market-State Primitive: Cross-Asset Transfer, Distributional-Novelty Detection, and Privacy-Preserving Federation Randolph James Ferlic, M.D. and Kimberly Kate Ferlic (Fieldstone Analytics, LLC, Austin, TX, USA) Preprint · Zenodo DOI: 10.5281/zenodo.22116173 · CC-BY 4.0 · Community: spiral-domain-encoder-campaign Abstract A companion study established that a fixed class-discriminant encoder — which reduces a window of a multivariate stream to a single 8-bit token — is a near-lossless detector of market stress across asset classes, but a taxed classifier and a null forecaster. This study asks, under strict pre-registration, whether that detector becomes a *universal, deployable primitive*, and finds that it does, along five axes, with an honest boundary preserved throughout. (1) The codebook is universal: fit on equities alone, it detects stress zero-shot across cryptocurrency, commodities, emerging-market funds, credit, and foreign exchange at a median AUC of 0.84, within 0.01 of a bespoke per-asset codebook, because the calm-to-stress discriminant direction is nearly identical across asset classes (median cross-asset cosine 0.94). (2) The token detects distributional regime-change that volatility structurally misses — the one place it beats volatility — and is an orthogonal channel that improves a volatility-only stack by +0.18 AUC on a mixed target. (3) It generalizes to credit and rates (pooled AUC 0.91) and to currency crosses (0.80), including markets with no options index. (4) It is cheap at scale and low-data: a genuine one-byte-on-the-wire firm-wide dashboard detects systemic stress at 0.92 at 200× compression — a 42-instrument universe fits in ~10 kilobytes per year — and a new deployment is usable after ~3 months of calm history. (5) The same one-byte token supports privacy-preserving federation: institutions each sharing one token per day match full-data systemic-detection utility while their individual positions are unrecoverable even to a non-linear, colluding, market-informed adversary (incremental reconstruction R² ≈ 0.01). All headline results survive a permutation-placebo leakage test, moving-block bootstrap confidence intervals, and robustness to split, seed, stress-label, and a strict recent holdout. Every negative is reported, and two honest scope refinements are disclosed: a formal differential-privacy guarantee is event-level, not stream-level, and portfolio membership is coarsely inferable while positions are not. Highlights · Universal codebook — one equity-fit codebook detects stress zero-shot across every asset class (median 0.84, transfer loss ~0.01, 22/23 targets); mechanism = a shared cross-asset stress direction (cosine 0.94). · A capability volatility lacks — the token detects distributional (shape) regime-change where trailing volatility is at or below chance; an orthogonal channel that complements any GARCH/VIX stack. · Coverage — credit/rates (pooled 0.91) and FX/carry white-space (0.80), options-free, at one byte per instrument. · Compression-at-scale — a 1-byte-on-the-wire firm-wide dashboard at AUC 0.92, 200× compression, ~10 KB/instrument-year; detection-sufficient encoder ≈ 590 multiply-accumulates and < 3 KB (microcontroller-class). · Low-data cold-start — usable after ~3 months of calm data; saturates within ~2 years; train on a trailing window. · Privacy-preserving federation — full-data-equivalent systemic detection with individual positions non-invertible even under a strong adversary; optional event-level differential privacy; manipulation-robust median aggregation; per-channel attribution; a yield-curve-shape token. · Information-theoretic characterization — detection is a ~1-bit decision while classification is high-bit; competitive with principled two-sample/OOD tests at O(1) online cost. · Honest negatives and hardening — network topology, temporal-token, cross-sectional ranking, and tail-edge results are all reported null; every headline result is leakage-tested (permutation placebo → chance) and confidence-bounded. What this record contains · Manuscript_Paper40.pdf — the manuscript (single-column preprint). · PAPER_40_ZENODO_ARCHIVE.zip — the reproducibility archive: seven pre-registration scopes (frozen outcome bands) covering studies FIN-15 … FIN-45; the deterministic per-study runners and the shared frozen encoder/loader and federation modules; the per-study JSON result summaries behind every figure and table value; the figure-rebuild script; and the eight figures. All paths and identifiers are scrubbed and leak-scanned per the campaign deposit discipline; no raw market data is redistributed. Cite as R. J. Ferlic and K. K. Ferlic, "A universal, options-free, one-byte market-state primitive: cross-asset transfer, distributional-novelty detection, and privacy-preserving federation," Zenodo, 2026, doi: 10.5281/zenodo.22116173. License and patent notice Released under the Creative Commons Attribution 4.0 International License (CC-BY 4.0). Consistent with that license, no patent, patent-application, or other intellectual-property right of the authors is licensed, waived, granted, or otherwise conveyed by this depos