Stress testing plans

A plan is optimized against a model of the world. The model is wrong. Validation asks three questions, in this order:

1. Does the ranking survive plausible errors in the model?
2. What is the most likely way this fails, and does that trajectory worry us?
3. What are we actually trading, and have we said so?

The governing principle: plan with a simple model, evaluate with a rich one. A simple planning model resists overfitting to assumptions you cannot verify. The evaluation model can be as elaborate as you can justify, because nothing is being fitted to it.

Workflow