Predictive Models · Direction
WaveCast-D 1.0.0
Next-day direction prediction for US equity special stocks. A calibrated Up/Down call and conviction score for every active special, every trading day before 8:00 AM EST.
What It Does
A binary direction call — with a conviction score that tells you how much to trust it.
Each morning WaveCast-D scores every active US equity special — any stock with an intrinsic borrow rate above 20 basis points — producing a predicted direction for the next trading day and a confidence score calibrated to realized accuracy. The score is not a raw probability; it is a monotonically calibrated conviction measure: higher score, higher realized accuracy.
A gradient-boosted classifier trained on rate history, market microstructure signals, cross-sectional universe dynamics, and demand-side positioning data. Walk-forward validated across 20 time-ordered folds and four distinct OBFR rate regimes — low, hiking, high, and easing — with no look-ahead and no data leakage at any step.
| Field | Description |
|---|---|
| Date | Scoring date |
| ISIN | Security identifier |
| PredictedDirection | 1 = Up, 0 = Down |
| ProbabilityUp | Raw model probability (0–1) |
| DirectionConfidence | Calibrated conviction score (0–100) |
| IntrinsicRateAvg_T1 | Current day’s actual rate (context) |
The Research Evidence
Three views into the model.
Accuracy vs naive baseline, confidence calibration, and per-tier consistency — three views demonstrating genuine predictive skill across the full special universe.
+10 Percentage Points Above the Naive Baseline
The naive baseline — always predict Down, exploiting the structural mean-reversion tendency in special rates — achieves roughly 60% accuracy. WaveCast-D achieves 70.04% across 419,505 out-of-sample predictions. That 10pp gap represents genuine predictive skill over an informed baseline.
Against the persistence baseline (yesterday’s direction = tomorrow’s), WaveCast-D is +33pp. Special rates mean-revert structurally — persistence is anti-predictive in this market.
84.5% When the Model Says It’s Confident
The DirectionConfidence score (0–100) is monotonically calibrated to realized accuracy. Q5 — the highest-confidence quintile — achieves 84.5% realized accuracy. Q1 — lowest confidence — achieves 59.6%, still above the naive baseline.
This calibration is the operational signal: filter to Q4+ to concentrate on the highest-accuracy subpopulation, or use the raw score as a continuous weight for portfolio construction.
Consistent Across All Seven Rate Tiers
Direction accuracy holds between 65.66% and 69.88% across all seven rate tiers — from Barely Warm shallow specials to Very Extreme deep squeezes. The model does not derive its headline number from one well-performing subgroup.
Accuracy is slightly lower in the deepest tiers (Very Hot, Extreme, Very Extreme) where rate dynamics are more squeeze-driven and less predictable. This is expected and disclosed.
Walk-forward cross-validation across 20 time-ordered folds, September 2020 – January 2026. No look-ahead at any step. Training windows never include validation or test data. Model retrained monthly; weekly drift monitoring triggers unscheduled retraining when rolling 5-day accuracy drops more than 5 percentage points below the 63-day baseline. Headline accuracy (70.04%) is measured on the 122-trading-day validation window, July 2025 – January 2026 (419,505 predictions). Walk-forward accuracy across all 20 folds: 70.55% (3,643,852 predictions). Held-out test set accuracy: 68.59%. Live production accuracy (59 scored dates, 203,084 rows): 67.98%.
Validated Across Every Horizon
The same model, tested four different ways.
20 Folds, 3.6M rows
419K predictions
Promotion Benchmark
59 dates, 203K rows
How Clients Use It
Three institutional applications.
WaveCast-D is designed for securities lending desks and agency lenders managing daily inventory deployment decisions.
Inventory Deployment
Push/Hold Decisions
Use DirectionConfidence to calibrate same-day inventory deployment. High-confidence Up predictions support pushing available stock into the market today; high-confidence Down predictions support holding for rate recovery. Pair with WaveCast-R for magnitude context.
Rate Negotiation
Counterparty Positioning
Enter rate conversations with a directional view. A high-confidence Down prediction on a hot name is information a counterparty may not have. Use it to negotiate term locks before the market moves, or to time recall decisions on existing open loans.
Portfolio Scoring
Universe Prioritization
Score the full ~4,000 ISIN universe each morning, then filter to high-conviction Up names in the deepest rate tiers. Concentrate trader attention and client outreach on the names most likely to move in your favour before the close.
Request beta access to WaveCast-D.
WaveCast is an invite-only beta. We show you WaveCast predictions against your inventory first. No generic demos or hard sales pitches. Share your name, firm, and role and we’ll be in touch.
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