Trade-R1: Bridging Verifiable Rewards to Stochastic Environments via Process-Level Reasoning Verification

ACL ARR 2026 January Submission2717 Authors

Keywords: Large Language Models, Reinforcement Learning, Reward Hacking, Quantitative Trading, Verifiable Rewards

Abstract: Reinforcement Learning (RL) has enabled Large Language Models (LLMs) to achieve remarkable reasoning in domains like mathematics and coding, where verifiable rewards provide clear signals. However, extending this paradigm to financial decision is challenged by the market's stochastic nature: rewards are verifiable but inherently noisy, causing standard RL to degenerate into reward hacking. To address this, we propose Trade-R1, a model training framework that bridges verifiable rewards to stochastic environments via process-level reasoning verification. Our key innovation is a verification method that transforms the problem of evaluating reasoning over lengthy financial documents into a structured Retrieval-Augmented Generation (RAG) task. We construct a triangular consistency metric, assessing pairwise alignment between retrieved evidence, reasoning chains, and decisions to serve as a validity filter for noisy market returns. We explore two reward integration strategies: Fixed-effect Semantic Reward (FSR) for stable alignment signals, and Dynamic-effect Semantic Reward (DSR) for coupled magnitude optimization. Experiments on different country asset selection demonstrate that our paradigm reduces reward hacking, with DSR achieving superior cross-market generalization while maintaining the highest reasoning consistency.

Paper Type: Long

Research Area: Financial Applications and Time Series

Research Area Keywords: Reinforcement learning, LLM/AI agents, Financial/business NLP, Fine-tuning, Prompting, Transfer learning / domain adaptation, Applications

Contribution Types: Model analysis & interpretability, NLP engineering experiment, Approaches to low-resource settings, Approaches low compute settings-efficiency, Publicly available software and/or pre-trained models, Data analysis

Languages Studied: English, Chinese

Submission Number: 2717