# ADR-033: Financial Risk Analysis Plugin

**Status:** Proposed
**Date:** 2026-01-24
**Category:** Practical Vertical Application
**Author:** Plugin Architecture Team
**Version:** 1.0.0
**Deciders:** Plugin Architecture Team, Financial Services Domain Experts
**Supersedes:** None

## Context

Financial institutions require real-time risk analysis capabilities that can process market data, detect anomalies, and assess portfolio risk with minimal latency. Traditional approaches struggle with the high-dimensional nature of financial data and the need for explainable predictions in regulated environments.

## Decision

Create a **Financial Risk Analysis Plugin** that leverages RuVector WASM packages for real-time market analysis, fraud detection, portfolio optimization, and regulatory compliance reporting.

## Plugin Name

`@claude-flow/plugin-financial-risk`

## Description

A high-performance financial risk analysis plugin combining sparse inference for efficient market signal processing with graph neural networks for transaction network analysis. The plugin enables real-time anomaly detection, portfolio risk scoring, and automated compliance reporting while maintaining the explainability required by financial regulators (SEC, FINRA, Basel III).

## Key WASM Packages

| Package | Purpose |
|---------|---------|
| `micro-hnsw-wasm` | Fast similarity search for historical pattern matching (market regimes) |
| `ruvector-sparse-inference-wasm` | Efficient processing of sparse financial features (tick data) |
| `ruvector-gnn-wasm` | Transaction network analysis for fraud detection |
| `ruvector-economy-wasm` | Token economics and market microstructure modeling |
| `ruvector-learning-wasm` | Reinforcement learning for adaptive risk thresholds |

## MCP Tools

### 1. `finance/portfolio-risk`

Calculate comprehensive portfolio risk metrics.

```typescript
{
  name: 'finance/portfolio-risk',
  description: 'Analyze portfolio risk using VaR, CVaR, and stress testing',
  inputSchema: {
    type: 'object',
    properties: {
      holdings: {
        type: 'array',
        items: {
          type: 'object',
          properties: {
            symbol: { type: 'string' },
            quantity: { type: 'number' },
            assetClass: { type: 'string' }
          }
        }
      },
      riskMetrics: {
        type: 'array',
        items: { type: 'string', enum: ['var', 'cvar', 'sharpe', 'sortino', 'max_drawdown'] }
      },
      confidenceLevel: { type: 'number', default: 0.95 },
      horizon: { type: 'string', enum: ['1d', '1w', '1m', '1y'] }
    },
    required: ['holdings']
  }
}
```

### 2. `finance/anomaly-detect`

Detect anomalies in financial transactions and market data.

```typescript
{
  name: 'finance/anomaly-detect',
  description: 'Detect anomalies in transactions using GNN and sparse inference',
  inputSchema: {
    type: 'object',
    properties: {
      transactions: {
        type: 'array',
        items: {
          type: 'object',
          properties: {
            id: { type: 'string' },
            amount: { type: 'number' },
            timestamp: { type: 'string' },
            parties: { type: 'array', items: { type: 'string' } },
            metadata: { type: 'object' }
          }
        }
      },
      sensitivity: { type: 'number', default: 0.8, description: '0-1 anomaly threshold' },
      context: { type: 'string', enum: ['fraud', 'aml', 'market_manipulation', 'all'] }
    },
    required: ['transactions']
  }
}
```

### 3. `finance/market-regime`

Identify current market regime through pattern matching.

```typescript
{
  name: 'finance/market-regime',
  description: 'Classify market regime using historical pattern matching',
  inputSchema: {
    type: 'object',
    properties: {
      marketData: {
        type: 'object',
        properties: {
          prices: { type: 'array', items: { type: 'number' } },
          volumes: { type: 'array', items: { type: 'number' } },
          volatility: { type: 'array', items: { type: 'number' } }
        }
      },
      lookbackPeriod: { type: 'number', default: 252, description: 'Trading days' },
      regimeTypes: {
        type: 'array',
        items: { type: 'string', enum: ['bull', 'bear', 'sideways', 'high_vol', 'crisis'] }
      }
    },
    required: ['marketData']
  }
}
```

### 4. `finance/compliance-check`

Automated regulatory compliance verification.

```typescript
{
  name: 'finance/compliance-check',
  description: 'Check transactions and positions against regulatory requirements',
  inputSchema: {
    type: 'object',
    properties: {
      entity: { type: 'string', description: 'Entity identifier' },
      regulations: {
        type: 'array',
        items: { type: 'string', enum: ['basel3', 'mifid2', 'dodd_frank', 'aml', 'kyc'] }
      },
      scope: { type: 'string', enum: ['positions', 'transactions', 'capital', 'all'] },
      asOfDate: { type: 'string', format: 'date' }
    },
    required: ['entity', 'regulations']
  }
}
```

### 5. `finance/stress-test`

Run stress testing scenarios on portfolios.

```typescript
{
  name: 'finance/stress-test',
  description: 'Run stress test scenarios using historical and hypothetical shocks',
  inputSchema: {
    type: 'object',
    properties: {
      portfolio: { type: 'object', description: 'Portfolio holdings' },
      scenarios: {
        type: 'array',
        items: {
          type: 'object',
          properties: {
            name: { type: 'string' },
            type: { type: 'string', enum: ['historical', 'hypothetical'] },
            shocks: { type: 'object' }
          }
        }
      },
      metrics: { type: 'array', items: { type: 'string' } }
    },
    required: ['portfolio', 'scenarios']
  }
}
```

## Use Cases

1. **Risk Management**: Portfolio managers assess real-time risk exposure across asset classes
2. **Fraud Detection**: Compliance teams identify suspicious transaction patterns
3. **Market Surveillance**: Detect potential market manipulation or insider trading
4. **Regulatory Reporting**: Automate Basel III capital adequacy calculations
5. **Algorithmic Trading**: Identify market regime changes for strategy adaptation

## Architecture

```
+------------------+     +----------------------+     +------------------+
|   Market Data    |---->|  Financial Plugin    |---->|   Risk Engine    |
|  (FIX/REST)      |     |  (Real-time)         |     | (VaR/Stress)     |
+------------------+     +----------------------+     +------------------+
                                   |
                         +---------+---------+
                         |         |         |
                    +----+---+ +---+----+ +--+-----+
                    | Sparse | |  GNN   | |Economy |
                    |Inference| |Network| |Model   |
                    +--------+ +--------+ +--------+
```

## Performance Targets

| Metric | Target | Baseline (Traditional) | Improvement |
|--------|--------|------------------------|-------------|
| Portfolio VaR calculation | <100ms for 10K positions | ~10s (Monte Carlo) | 100x |
| Transaction anomaly scoring | <5ms per transaction | ~100ms (rules engine) | 20x |
| Market regime classification | <50ms for 1-year history | ~1s (statistical) | 20x |
| Compliance check | <1s for full entity scan | ~30s (manual rules) | 30x |

## Risk Assessment

| Risk | Likelihood | Impact | Mitigation |
|------|------------|--------|------------|
| Model risk (false negatives) | Medium | High | Backtesting framework, shadow mode |
| Regulatory non-compliance | Low | Critical | Explainability, audit trails, model governance |
| Market data latency | Medium | Medium | Caching, fallback to last known values |
| Historical data quality | Medium | Medium | Data validation, missing data handling |

## Security Considerations

### CRITICAL: Financial Data Protection Requirements

| Requirement | Implementation | Severity |
|-------------|----------------|----------|
| **PCI-DSS Compliance** | No storage of PAN/CVV in plugin memory | CRITICAL |
| **SOX Compliance** | Immutable audit logs for all risk calculations | CRITICAL |
| **Data Encryption** | AES-256 for data at rest, TLS 1.3 in transit | CRITICAL |
| **Key Management** | HSM or secure enclave for cryptographic keys | CRITICAL |
| **Segregation of Duties** | Separate roles for trading, risk, and compliance | HIGH |

### Input Validation (CRITICAL)

All MCP tool inputs MUST be validated using Zod schemas:

```typescript
// finance/portfolio-risk input validation
const PortfolioRiskSchema = z.object({
  holdings: z.array(z.object({
    symbol: z.string().regex(/^[A-Z0-9.]{1,10}$/).max(10), // Stock symbol format
    quantity: z.number().finite().min(-1e9).max(1e9),      // Reasonable position limits
    assetClass: z.string().max(50).optional()
  })).min(1).max(10000), // Max 10K positions
  riskMetrics: z.array(z.enum(['var', 'cvar', 'sharpe', 'sortino', 'max_drawdown'])).optional(),
  confidenceLevel: z.number().min(0.9).max(0.999).default(0.95),
  horizon: z.enum(['1d', '1w', '1m', '1y']).optional()
});

// finance/anomaly-detect input validation
const AnomalyDetectSchema = z.object({
  transactions: z.array(z.object({
    id: z.string().uuid(),
    amount: z.number().finite().min(-1e12).max(1e12), // Trillion limit
    timestamp: z.string().datetime(),
    parties: z.array(z.string().max(200)).max(10),
    metadata: z.record(z.string(), z.unknown()).optional()
  })).min(1).max(100000), // Batch limit
  sensitivity: z.number().min(0).max(1).default(0.8),
  context: z.enum(['fraud', 'aml', 'market_manipulation', 'all']).default('all')
});

// finance/compliance-check input validation
const ComplianceCheckSchema = z.object({
  entity: z.string().max(200),
  regulations: z.array(z.enum(['basel3', 'mifid2', 'dodd_frank', 'aml', 'kyc'])).min(1),
  scope: z.enum(['positions', 'transactions', 'capital', 'all']).default('all'),
  asOfDate: z.string().regex(/^\d{4}-\d{2}-\d{2}$/).optional()
});
```

### WASM Security Constraints

| Constraint | Value | Rationale |
|------------|-------|-----------|
| Memory Limit | 1GB max | Handle large portfolio calculations |
| CPU Time Limit | 60 seconds per operation | Allow complex risk calculations |
| No Network Access | Enforced by WASM sandbox | Prevent market data leakage |
| No File System Access | Sandboxed virtual FS only | Prevent unauthorized data access |
| Deterministic Execution | Required for audit reproducibility | Same input = same output |

### Authentication & Authorization

```typescript
// Required role-based access control for financial tools
const FinanceRoles = {
  TRADER: ['portfolio-risk', 'market-regime'],
  RISK_MANAGER: ['portfolio-risk', 'anomaly-detect', 'stress-test', 'market-regime'],
  COMPLIANCE_OFFICER: ['compliance-check', 'anomaly-detect'],
  AUDITOR: ['compliance-check'], // Read-only, full audit access
  QUANT: ['portfolio-risk', 'market-regime', 'stress-test']
};

// Segregation of duties enforcement
const INCOMPATIBLE_ROLES = [
  ['TRADER', 'COMPLIANCE_OFFICER'],  // Traders cannot self-approve
  ['TRADER', 'AUDITOR']              // Traders cannot audit own trades
];
```

### Audit Logging Requirements (SOX, MiFID II)

```typescript
interface FinancialAuditLog {
  timestamp: string;              // ISO 8601 with microsecond precision
  userId: string;                 // Authenticated user ID
  toolName: string;               // MCP tool invoked
  transactionIds: string[];       // Affected transaction IDs
  portfolioHash: string;          // Hash of portfolio state
  riskMetricsComputed: string[];  // Which metrics were calculated
  modelVersion: string;           // Version of risk model used
  inputHash: string;              // Hash of inputs for reproducibility
  outputHash: string;             // Hash of outputs for verification
  executionTimeMs: number;        // Performance tracking
  regulatoryFlags: string[];      // Any compliance alerts triggered
}

// Audit logs MUST be:
// - Immutable (write-once storage)
// - Timestamped with trusted time source
// - Retained for 7 years minimum (MiFID II)
// - Available for regulatory inspection within 72 hours
```

### Identified Security Risks

| Risk ID | Severity | Description | Mitigation |
|---------|----------|-------------|------------|
| FIN-SEC-001 | **CRITICAL** | Market manipulation via risk model exploitation | Model validation, anomaly detection on outputs |
| FIN-SEC-002 | **CRITICAL** | Unauthorized access to trading signals | Role-based access, audit logging |
| FIN-SEC-003 | **HIGH** | Front-running via timing analysis | Randomized processing delays, rate limiting |
| FIN-SEC-004 | **HIGH** | Model theft via inference attacks | Output perturbation, query rate limiting |
| FIN-SEC-005 | **MEDIUM** | Denial of service via complex portfolios | Input size limits, timeout enforcement |

### Rate Limiting Requirements

```typescript
// Prevent abuse and ensure fair resource allocation
const FinanceRateLimits = {
  'portfolio-risk': { requestsPerMinute: 60, maxConcurrent: 5 },
  'anomaly-detect': { requestsPerMinute: 100, maxConcurrent: 10 },
  'stress-test': { requestsPerMinute: 10, maxConcurrent: 2 },  // Expensive operation
  'market-regime': { requestsPerMinute: 120, maxConcurrent: 10 },
  'compliance-check': { requestsPerMinute: 30, maxConcurrent: 3 }
};
```

### Data Integrity Controls

```typescript
// Ensure calculation reproducibility for regulatory audits
interface RiskCalculationProof {
  inputHash: string;        // SHA-256 of serialized inputs
  modelChecksum: string;    // Checksum of WASM module used
  randomSeed: string;       // Seed for any stochastic components
  outputHash: string;       // SHA-256 of outputs
  signature: string;        // Signed by calculation service
}
```

### Regulatory Compliance

- **Explainability**: All risk scores include feature attribution
- **Audit Trail**: Complete logging of all risk calculations
- **Model Governance**: Version control for all models
- **Backtesting**: Built-in model validation framework
- **Regulatory Reporting**: Automated generation of required reports

## Implementation Notes

### Phase 1: Core Risk Engine
- VaR/CVaR calculation engine
- Historical simulation framework
- Basic stress testing

### Phase 2: Advanced Analytics
- GNN-based fraud detection
- Market regime classification
- Sparse inference for tick data

### Phase 3: Compliance
- Regulatory report generation
- Model risk management
- Audit logging and explainability

## Dependencies

```json
{
  "dependencies": {
    "micro-hnsw-wasm": "^0.2.0",
    "ruvector-sparse-inference-wasm": "^0.1.0",
    "ruvector-gnn-wasm": "^0.1.0",
    "ruvector-economy-wasm": "^0.1.0",
    "ruvector-learning-wasm": "^0.1.0"
  }
}
```

## Consequences

### Positive
- Real-time risk analysis with millisecond latency
- Explainable predictions for regulatory compliance
- Unified platform for multiple risk domains

### Negative
- Requires historical market data for training
- Model validation requires significant backtesting
- May need regulatory approval for production use

### Neutral
- Can operate in shadow mode alongside existing systems

## Related ADRs

| ADR | Relationship |
|-----|--------------|
| ADR-004: Plugin Architecture | Foundation - Defines plugin structure |
| ADR-017: RuVector Integration | Dependency - Provides WASM packages |
| ADR-040: Quantum Optimizer | Related - Portfolio optimization algorithms |
| ADR-038: Neural Coordination | Related - Multi-agent trading simulations |

## References

- Basel III Framework: https://www.bis.org/basel_framework/
- MiFID II: https://www.esma.europa.eu/policy-rules/mifid-ii-and-mifir
- ADR-017: RuVector Integration
- ADR-004: Plugin Architecture

---

**Last Updated:** 2026-01-24
