Approximate Design-Based Intervals for Downsampled Cross-Sectional Market Aggregates: A Randomized Design for Bandwidth-Constrained Financial Data Pipelines

Minmin Zeng

Papers from arXiv.org

Abstract: Financial institutions routinely downsample cross-sectional options panels to meet bandwidth and cost constraints. The industry default---deterministic Top-$k$ selection by open interest---provides no estimate of the aggregation error it introduces, rendering downstream risk metrics unauditable. We make the identification problem precise. For deterministic rules whose selected set depends only on auxiliary variables and not on the outcome (target-blind rules, of which Top-$k$-by-open-interest is one), the target is not identified from the retained outcomes alone unless bounds or modelling assumptions are imposed; under outcome bounds it is partially identified, with a sharp worst-case interval we characterise in closed form. We propose replacing Top-$k$ with probability sampling whose inclusion probabilities are proportional to open interest, paired with the Hajek ratio estimator and a linearised design-based variance estimator, yielding approximate design-based intervals around every aggregate. Experiments on 80 US trading sessions (211 tickers/day) and 83 sessions of Hong Kong options (131 tickers/day) show that for OI-weighted implied volatility the randomized design reduces mean absolute error by 35% (MAE 5.31 vs. 8.15 at 10% retention; paired $t=6.68$, Cohen's $d=0.75$, moving-block-bootstrap 95% CI $[1.82, 3.96]$), and the sharp worst-case interval available to Top-$k$ is 2.7--6.4$\times$ wider than the sampling interval under oracle bounds, and 9--26$\times$ wider under feasible bounds. Empirical coverage is 91.9% against a nominal 95%. We further document that inclusion probabilities must match the target's influence function, motivating a design-aware framework for production pipelines.

Date: 2026-07
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