Z-Score Validation is the statistical procedure of assessing whether an observed data point or metric in a crypto financial system deviates significantly from its expected value or a typical distribution. This process helps identify anomalies.
Mechanism
A Z-score quantifies the number of standard deviations an observation is from the mean of a reference dataset. Validation involves calculating this score for various market indicators, risk parameters, or performance metrics. Values exceeding predefined thresholds signal anomalies, potential errors, or significant market events requiring investigation.
Methodology
This technique is applied across risk management, fraud detection, and performance monitoring systems. The underlying principle relies on statistical process control, using Z-scores to identify outliers that might indicate data corruption, system malfunction, or unusual trading behavior, thereby maintaining data integrity and operational oversight within the crypto ecosystem.
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