Praxis Core: A Multi-Layered Structural Intelligence Engine for Foreign Exchange Execution Under Entropic Regime Shifts

Vaish, Chakit (2025): Praxis Core: A Multi-Layered Structural Intelligence Engine for Foreign Exchange Execution Under Entropic Regime Shifts.

Abstract

Foreign exchange markets are not merely venues for speculative profit—they are systemic transmitters of macroeconomic stability and instability. Volatile currency regimes can exacerbate trade imbalances, distort capital flows, and trigger policy interventions that carry long-term consequences for national economies. Yet, much of the existing algorithmic trading infrastructure remains tethered to predictive fragility, relying on static indicators that collapse under regime shifts and volatility clustering.

Praxis Core introduces a structural intelligence framework that reframes FX execution as an adaptive, state-aware process directly aligned with macroeconomic stability objectives. By integrating a four-state Markov-Switching GARCH model—Bayesian-smoothed to stabilize rare transitions—with dual volatility and orderflow memory processes, Praxis Core detects and responds to regime mutations before they cascade into macro-level dislocations.

Execution is anchored not to arbitrary price triggers, but to structural market topology—liquidity-depth contours, volatility surface curvature, and macro-sentiment alignment—ensuring trades are positioned where they absorb, rather than amplify, systemic stress. Risk is adaptively modulated using non-Gaussian tail modeling, regime-weighted sizing, and memory-aware throttling, preserving capital during high-impact macro events such as central bank interventions or geopolitical shocks.

With a compliance-grade cryptographic audit layer, atomic-time synchronization, and fully transparent decision logic, Praxis Core offers a verifiable, institution-ready mechanism that bridges microstructure precision with macroeconomic responsibility. In doing so, it positions FX execution not only as a profit engine but as a stabilizing force—capable of mitigating spillover volatility that would otherwise propagate through global trade and investment channels.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreign Exchange Markets, Regime-Switching Models, Market Microstructure, Systemic Risk Mitigation, Adaptive Execution Algorithms, Bayesian Smoothing, Macro-Financial Stability, Central Bank Policy, Quantitative Trading Systems, Non-Gaussian Risk Models, Liquidity Topology, High-Frequency Risk Control, Cryptographic Audit Trails, Atomic Time Synchronization, Currency Crisis Prevention, Macroprudential Risk Management, Sovereign FX Defense Systems, Economic Resilience Architecture, Structural Intelligence Framework, Independent Finance Researcher.
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F37 - International Finance Forecasting and Simulation: Models and Applications; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

References

Hamilton, J.D. (1989). A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle. Econometrica, 57(2), 357–384.

Engle, R.F. (1982). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica, 50(4), 987–1007.

Diebold, F.X., & Rudebusch, G.D. (1996). Measuring Business Cycles: A Modern Perspective. The Review of Economics and Statistics, 78(1), 67–77.

Hasbrouck, J. (2007). Empirical Market Microstructure. Oxford University Press.

Andersen, T.G., Bollerslev, T., Diebold, F.X., & Vega, C. (2003). Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange. American Economic Review, 93(1), 38–62.

Brunnermeier, M.K., Nagel, S., & Pedersen, L.H. (2008). Carry Trades and Currency Crashes. NBER Macroeconomics Annual, 23, 313–348.

Obstfeld, M., Shambaugh, J.C., & Taylor, A.M. (2005). The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility. Review of Economics and Statistics, 87(3), 423–438.

Lyons, R.K. (2001). The Microstructure Approach to Exchange Rates. MIT Press.

Gabaix, X., Krishnamurthy, A., & Vigneron, O. (2007). Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market. Journal of Finance, 62(2), 557–595.

Adrian, T., & Shin, H.S. (2010). Liquidity and Leverage. Journal of Financial Intermediation, 19(3), 418–437.