FTB-C000630 / Formula component

Residual Tolerance

Residual Tolerance is the inclusive ratio-distance threshold used to classify trendline residuals.

Also known astolerance_bps

Intermediate Formula defined 1 linked topicEvidence-reviewed

Definitions

In plain terms

A tolerance of 75 basis points allows a bounded ratio error around the line.

Technical

epsilon_log = log(1 + tolerance_bps/10000); residual membership uses absolute log error <= epsilon_log.

Scope

Changing tolerance can change the winning consensus and should be versioned.

Formula

epsilon_log = log(1 + tolerance_bps / 10000)
LaTeX: \epsilon_{log}=\log(1+\frac{tolerance_{bps}}{10000})
SymbolMeaningUnit
tolerance_bpsresidual tolerancebasis points

Output unit: log-price

Examples

  • A reviewer computes Residual Tolerance on a small deterministic fixture and checks timing, units, and boundary behavior before publication.

Common misconceptions

  • Changing tolerance can change the winning consensus and should be versioned.

Concept relationships

Prerequisites

Related

Required by

Where this concept is used

Evidence and governance

  1. sklearn.linear_model.RANSACRegressor scikit-learn · first party technical publication

    Supports: preferred label, short definition, technical definition, formula

    Limits: This package enumerates every two-point hypothesis for small pivot sets instead of using random sampling.

  2. Linear Least Squares Regression NIST/SEMATECH · official standard

    Supports: preferred label, short definition, technical definition, formula

    Limits: A fitted line remains descriptive and is not evidence of a future price path.

  3. numpy.log NumPy · first party technical publication

    Supports: preferred label, short definition, technical definition, formula

    Limits: A log transform requires positive finite prices and does not by itself define a financial level.

  4. numpy.polyfit NumPy · first party technical publication

    Supports: preferred label, short definition, technical definition, formula

    Limits: The glossary freezes its own log-space OLS contract, diagnostics, and tie rules.

Reviewed by
fintech-builder-batch-011
Last reviewed
2026-08-09
Next review
2027-08-09
Record status
evidence reviewed

This record is evidence-reviewed and readable, but not yet promoted to published — it is served noindex,follow and excluded from the sitemap.

Written by

Fintech engineer building market-data and financial systems, and the author of every article, glossary record, and reference implementation on The Fintech Builder.