Daily Papers

Coding agents increasingly act as codebase-scale collaborators that can assist with codebase conversion, but this progress has exposed a critical weakness: agents often over-trust their own local validation routines and declare success on artifacts that satisfy surface checks while violating the semantic contracts users actually care about. This problem is especially acute in codebase conversion, where prior evaluation is largely outcome-driven and therefore unstable: two implementations can match on a shallow outcome, such as a single forward loss, while diverging in gradients, optimizer behavior, or short-horizon training dynamics. We introduce T2J-Bench, a benchmark for codebase conversion that reformulates conversion as transfer under a fixed equivalence contract. A fixed verifier then compares source and converted codebases through three ordered stages: Spec (interface admissibility), Numeric (forward outputs, losses, gradients, and objective-specific tensors), and Behavioral (short training dynamics under fixed seeds). Across 355 blind conversion attempts, the best system reaches only 26.7--28.9% overall pass rate despite Spec pass rates up to 91.1%; a 4.7x token-budget spread yields only a 2.2x pass-rate spread; and all systems overestimate success by 66.6--97.8 points relative to the fixed evaluator. This suggests that failures stem more from contract-misaligned self-validation than from limited budget or backbone strength.

Generative models, particularly Large Language Models (LLMs), produce fluent outputs yet lack verifiable guarantees. We adapt Design by Contract (DbC) and type-theoretic principles to introduce a contract layer that mediates every LLM call. Contracts stipulate semantic and type requirements on inputs and outputs, coupled with probabilistic remediation to steer generation toward compliance. The layer exposes the dual view of LLMs as semantic parsers and probabilistic black-box components. Contract satisfaction is probabilistic and semantic validation is operationally defined through programmer-specified conditions on well-typed data structures. More broadly, this work postulates that any two agents satisfying the same contracts are functionally equivalent with respect to those contracts.

Paper 1 of this research programme develops a resolution-aware risk-design framework for the simplest event-linked perpetual: a contract whose underlying tracks a single binary prediction-market probability through resolution. The instrument class is broader. Variants span conditional probabilities P(A|B), spreads p^A - p^B, weighted baskets sum w_i p^(i), derivatives on variance or entropy of the probability process, contracts on liquidity itself, perpetual-on-expiring-event roll structures, and funding-only derivatives with no settlement. Each variant inherits some framework components from the single-market binary case and requires its own design adaptations. This paper develops a formal taxonomy of seven pure-form canonical variants beyond the probability-index perpetual of Paper 1, organised along four orthogonal design axes: underlying geometry, temporal structure, settlement structure, and venue composition. The list is not exhaustive; combinations are not treated separately. For each variant we provide a precise payoff definition; an inheritance map identifying which Paper 1 components carry over, are modified, or fail; variant-specific design constraints; microstructure properties; empirical evaluability on the PMXT v2 archive; and limitations. Notable findings: the conditional variant admits a candidate non-portability proposition (denominator instability as the conditioning event becomes improbable); the spread variant requires a three-channel decomposition of resolution risk; the volatility/entropy variant avoids random binary terminal-collapse but introduces estimator-convention and entropy-decay issues; the basket variant requires multi-period jump-aware margin whose aggregation is correlation-dependent. The paper is theoretical primarily; it specifies how demonstrative time series can be constructed and provides evaluability criteria to guide future work.

We study permissionless spot--perpetual basis trading in decentralized finance as a collateral control problem. The strategy holds spot inventory, hedges directional exposure with a short perpetual, and allocates capital between spot inventory and derivative margin under on-chain liquidity and execution frictions. The paper delivers three results. First, it solves a static control problem for the collateral share and shows that the risk-constrained formulation provides a more robust operating benchmark relative to the economic optimum. In comparative calibration, the required collateral rises monotonically under volatility stress. The collateral is the lowest for BTC and increases significantly for long tail assets such as LINK and DOGE. Second, the paper derives an asymmetric dynamic extension in which the lower boundary of intervention is solvency driven, and the upper boundary is determined by a trade-off between carry-loss and the cost of rebalancing. Monte Carlo simulation shows that the lower boundary remains structurally relevant, whereas meaningful interior upper triggers survive mainly in the regimes with high carry and low costs. Third, the paper validates an execution-aware implementation with live routed execution and historical backtests. The execution layer shows that the realized wedges are significant, but become worse in the case of selling the basis. This justifies a minimum effective rebalancing size and a positive execution buffer. The historical validation shows that in the case of a fixed control rule the realized performance is predominantly explained by the funding environment.

Many deployments must compare candidate language models for safety before a labeled benchmark exists for the relevant language, sector, or regulatory regime. We formalize this setting as benchmarkless comparative safety scoring and specify the contract under which a scenario-based audit can be interpreted as deployment evidence. Scores are valid only under a fixed scenario pack, rubric, auditor, judge, sampling configuration, and rerun budget. Because no labels are available, we replace ground-truth agreement with an instrumental-validity chain: responsiveness to a controlled safe-versus-abliterated contrast, dominance of target-driven variance over auditor and judge artifacts, and stability across reruns. We instantiate the chain in SimpleAudit, a local-first scoring instrument, and validate it on a Norwegian safety pack. Safe and abliterated targets separate with AUROC values between 0.89 and 1.00, target identity is the dominant variance component (η^2 approx 0.52), and severity profiles stabilize by ten reruns. Applying the same chain to Petri shows that it admits both tools. The substantial differences arise upstream of the chain, in claim-contract enforcement and deployment fit. A Norwegian public-sector procurement case comparing Borealis and Gemma 3 demonstrates the resulting evidence in practice: the safer model depends on scenario category and risk measure. Consequently, scores, matched deltas, critical rates, uncertainty, and the auditor and judge used must be reported together rather than collapsed into a single ranking.

We introduce Humans-Junior, a 3.8B model that matches GPT-4o on the FACTS Grounding public subset within a pm 5 pp equivalence margin. Results. On Q1--Q500 under identical judges, GPT-4o scores 73.5% (95% CI 69.5--77.2) and Humans-Junior 72.7% (95% CI 68.7--76.5); the paired difference is 0.8 pp (bootstrap 95% CI -3.1 to +4.7; permutation p = 0.72; Cohen's d = 0.023). TOST establishes equivalence at pm 5 pp (not at pm 3 pp). When purchased as managed APIs, Humans-Junior's base model (Phi-3.5-mini-instruct) is approx 19times less expensive than GPT-4o on Microsoft AI Foundry pricing; self-hosted or edge deployments can drive incremental inference cost toward zero. Measured vs estimated pricing sources are tabulated in Appendix E. Method. Our approach combines minimal directed "Exoskeleton Reasoning" scaffolds with behavioral fine-tuning that teaches protocol compliance (epistemic discipline) rather than domain answers. Fine-tuning alone adds little; combined, they synergize (+17.7 pp, p < 0.001) and reduce variance (approx 25%). In prompt-only settings on frontier models (Q1--Q100; non-comparable), directed reasoning improved GPT-4o by +11.8 pp to 85.3% and Gemini-2.5-Pro by +5.0 pp to 93.3% (baseline 88.3%, n = 100); see Section~5. TL;DR. A 3.8B model achieves GPT-4o-level FACTS accuracy (equivalent within pm 5 pp on Q1--Q500). Cloud pricing shows approx 19times lower cost versus GPT-4o, and self-hosted/edge deployments can approach zero marginal cost. Pricing sources are listed in Appendix E. Frontier prompt-only gains (Q1--Q100; non-comparable) and optimized-prompt exploratory results under earlier judges are summarized in Appendix F. Keywords: Small Language Models, Factual Grounding, Directed Reasoning, Fine-Tuning, Model Alignment, Cost-Efficient AI