AI Agents · Lesson

Risk and Compliance Guardrails

Position sizing limits, prohibited instrument checks, and audit logging.

Why Financial Agents Need Hard Guardrails

A financial agent that can recommend any trade without restrictions could expose users to catastrophic losses or regulatory violations. Unlike a human advisor, an agent will execute its recommendation logic consistently — which means a bug or misconfiguration affects every user.

Hard guardrails prevent the worst outcomes.

Position Size Limits

Limit how much of the portfolio the agent can recommend putting into any single asset. A common rule: no single position should exceed 20% of total portfolio value. This prevents catastrophic concentration risk.

MAX_POSITION_PCT = 0.20   # 20% of portfolio max per asset

def check_position_size(ticker: str, trade_usd: float,
                        portfolio_value: float) -> dict:
    proposed_pct = trade_usd / portfolio_value
    if proposed_pct > MAX_POSITION_PCT:
        return {
            'allowed': False,
            'reason': (
                f'Position size {proposed_pct:.1%} exceeds limit {MAX_POSITION_PCT:.1%}. '
                f'Max trade for this portfolio: USD {portfolio_value * MAX_POSITION_PCT:.0f}'
            )
        }
    return {'allowed': True, 'position_pct': round(proposed_pct, 4)}

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