diff --git a/README.md b/README.md
index 98d8677..4b971b5 100644
--- a/README.md
+++ b/README.md
@@ -32,6 +32,7 @@ The library covers the full workflow of a sovereign debt analyst: from descripti
    - [Event Studies & Early Warning](#event-studies--early-warning)
 5. [Error Handling](#error-handling)
 6. [Running the Tests](#running-the-tests)
+7. [Extracting sovereign\_debt\_py](#extracting-sovereign_debt_py)
 
 ---
 
@@ -1714,3 +1715,15 @@ python -m pytest
 
 All 154 tests should pass in under 5 seconds.
 
+---
+
+## Extracting sovereign\_debt\_py
+
+The `sovereign_debt_py/` subdirectory is a standalone pure-Python package (no
+PyXLL dependency) that mirrors the analytic functions in this library.  A
+step-by-step guide for moving it into its own GitHub repository — including
+options for preserving git history, updating imports, and updating CI — is
+available at:
+
+[`docs/extract-sovereign-debt-py.md`](docs/extract-sovereign-debt-py.md)
+
diff --git a/docs/extract-sovereign-debt-py.md b/docs/extract-sovereign-debt-py.md
new file mode 100644
index 0000000..768bc94
--- /dev/null
+++ b/docs/extract-sovereign-debt-py.md
@@ -0,0 +1,291 @@
+# Extracting `sovereign_debt_py` into its own repository
+
+`sovereign_debt_py` is a pure-Python library (no PyXLL / Excel dependency) that
+mirrors the analytic functions in this repository.  It currently lives in the
+subdirectory `sovereign_debt_py/` of `sovereign_debt_xl` and has its own
+`pyproject.toml`, making it easy to spin out into a standalone repo.
+
+---
+
+## Current layout inside `sovereign_debt_xl`
+
+```
+sovereign_debt_xl/          ← repo root
+├── sovereign_debt_py/      ← sub-project root (owns its own pyproject.toml)
+│   ├── pyproject.toml      ← declares name = "sovereign-debt-py"
+│   └── sovereign_debt_py/  ← importable package
+│       ├── __init__.py
+│       ├── _coerce.py
+│       ├── averaging.py
+│       ├── amortization.py
+│       ├── contagion.py
+│       ├── credit_risk.py
+│       ├── debt_composition.py
+│       ├── event_studies.py
+│       ├── fiscal.py
+│       ├── forecasting.py
+│       ├── imf_framework.py
+│       ├── indexing.py
+│       ├── macro_financial.py
+│       ├── market_microstructure.py
+│       ├── modeling.py
+│       ├── political_esg.py
+│       ├── reserves.py
+│       ├── stress.py
+│       ├── utils.py
+│       └── yield_curve.py
+└── sovereign_debt_xl/      ← PyXLL / Excel add-in package (kept here)
+```
+
+---
+
+## Option A — Preserve git history with `git subtree split`
+
+Preserving history lets you see every commit that ever touched `sovereign_debt_py`
+in the new repo, which is useful for `git blame`, changelogs, and bisect.
+
+### Prerequisites
+
+```bash
+# git ≥ 1.7.11 ships subtree support built-in — no extra install needed
+git --version
+```
+
+### Steps
+
+```bash
+# 1. Work in a fresh clone of sovereign_debt_xl so you can't accidentally
+#    push the rewritten branch back to the wrong remote.
+git clone https://github.com/zachessesjohnson/sovereign_debt_xl.git sdpy-extraction
+cd sdpy-extraction
+
+# 2. Create a local branch whose *entire* history consists only of commits
+#    that touched sovereign_debt_py/, with that directory promoted to root.
+git subtree split --prefix=sovereign_debt_py -b split/sovereign-debt-py
+
+# 3. Create the new, empty GitHub repository via the web UI or gh CLI:
+#      https://github.com/new  →  name it "sovereign_debt_py"
+#    (Do NOT initialise it with a README — keep it completely empty.)
+
+# 4. Add the new repo as a remote and push the extracted branch as main.
+git remote add new-origin https://github.com/zachessesjohnson/sovereign_debt_py.git
+git push new-origin split/sovereign-debt-py:main
+
+# 5. Verify the new repo looks correct, then clean up the scratch clone.
+cd ..
+rm -rf sdpy-extraction
+```
+
+After the push, `sovereign_debt_py.git` will contain only the files that were
+inside `sovereign_debt_py/` in each commit, and the commit timestamps / messages
+will match those in `sovereign_debt_xl`.
+
+### Alternative: `git filter-repo` (faster for large histories)
+
+`git filter-repo` is a third-party tool (install with `pip install git-filter-repo`)
+that is faster and safer than `filter-branch` for large repos.
+
+```bash
+pip install git-filter-repo
+
+# Work in a fresh clone.
+git clone https://github.com/zachessesjohnson/sovereign_debt_xl.git sdpy-extraction
+cd sdpy-extraction
+
+# Rewrite history, keeping only the sovereign_debt_py/ subtree.
+git filter-repo --subdirectory-filter sovereign_debt_py
+
+# Push the rewritten main branch to the new repository.
+git remote add new-origin https://github.com/zachessesjohnson/sovereign_debt_py.git
+git push new-origin main
+
+cd ..
+rm -rf sdpy-extraction
+```
+
+---
+
+## Option B — Simple copy (no history)
+
+Use this when you want a clean start in the new repo and do not need git history.
+
+```bash
+# 1. Create the new GitHub repository (empty, no README) via the web UI.
+
+# 2. Copy the sub-project contents to a temporary directory.
+cp -r sovereign_debt_py/ /tmp/sovereign_debt_py_new
+cd /tmp/sovereign_debt_py_new
+
+# 3. Initialise a fresh git repo and make the first commit.
+git init -b main
+git add .
+git commit -m "Initial commit: extracted from sovereign_debt_xl"
+
+# 4. Push to the new repository.
+git remote add origin https://github.com/zachessesjohnson/sovereign_debt_py.git
+git branch -M main
+git push -u origin main
+```
+
+---
+
+## After the extraction: updating `sovereign_debt_xl`
+
+`sovereign_debt_xl` and `sovereign_debt_py` currently share **no import
+relationship** — the two packages are independent mirror implementations.
+If you later want `sovereign_debt_xl` to *delegate* its logic to
+`sovereign_debt_py` (recommended to reduce duplication), follow the steps
+below.
+
+### 1. Declare `sovereign_debt_py` as a dependency
+
+**Via GitHub (before a PyPI release)** — edit `sovereign_debt_xl/pyproject.toml`:
+
+```toml
+[project]
+dependencies = [
+    "numpy",
+    "pandas",
+    "scipy",
+    "statsmodels",
+    "scikit-learn",
+    "sovereign-debt-py @ git+https://github.com/zachessesjohnson/sovereign_debt_py.git",
+]
+```
+
+**Via PyPI (once published)** — replace the git URL with the package name:
+
+```toml
+dependencies = [
+    ...
+    "sovereign-debt-py",
+]
+```
+
+**Via git submodule** — useful if you always want both repos in sync locally:
+
+```bash
+# From the sovereign_debt_xl repo root:
+git submodule add https://github.com/zachessesjohnson/sovereign_debt_py.git sovereign_debt_py
+git commit -m "Add sovereign_debt_py as a git submodule"
+```
+
+### 2. Update imports in `sovereign_debt_xl`
+
+Each module in `sovereign_debt_xl/` currently re-implements the logic directly.
+Once `sovereign_debt_py` is available as a dependency, you can simplify, for
+example in `sovereign_debt_xl/averaging.py`:
+
+```python
+# Before (logic lives here, decorated for Excel):
+from pyxll import xl_func
+from ._coerce import safe_err, to_1d_floats
+import numpy as np
+
+@xl_func(...)
+def xl_weighted_average(values, weights):
+    ...  # implementation
+
+# After (delegate to sovereign_debt_py, just add the Excel decorator):
+from pyxll import xl_func
+from sovereign_debt_py.averaging import xl_weighted_average
+
+@xl_func(...)
+def xl_weighted_average(values, weights):
+    return xl_weighted_average(values, weights)
+```
+
+> **Note on naming:** functions in `sovereign_debt_py` keep the `xl_` prefix so
+> that their public API matches what `sovereign_debt_xl` exposes to Excel — the
+> prefix is part of the shared interface, not an Excel-only convention.
+
+Repeat for every module.
+
+### 3. Remove the now-redundant `sovereign_debt_py/` subtree
+
+Once `sovereign_debt_xl` depends on the external package, remove the embedded
+copy:
+
+```bash
+# If you used git submodule:
+git submodule deinit -f sovereign_debt_py
+git rm -f sovereign_debt_py
+rm -rf .git/modules/sovereign_debt_py
+git commit -m "Remove embedded sovereign_debt_py (now an external dependency)"
+
+# If you did NOT use git submodule (simple deletion):
+git rm -r sovereign_debt_py/
+git commit -m "Remove embedded sovereign_debt_py (now an external dependency)"
+```
+
+---
+
+## CI / test updates
+
+### In the new `sovereign_debt_py` repository
+
+Add `.github/workflows/pytest.yml` in the new repo:
+
+```yaml
+name: pytest
+
+on:
+  push:
+  pull_request:
+
+jobs:
+  test:
+    runs-on: ubuntu-latest
+    strategy:
+      matrix:
+        python-version: ["3.11", "3.12"]
+
+    steps:
+      - uses: actions/checkout@v4
+
+      - uses: actions/setup-python@v5
+        with:
+          python-version: ${{ matrix.python-version }}
+
+      - name: Install
+        run: |
+          python -m pip install -U pip
+          pip install -e ".[dev]"
+
+      - name: Test
+        run: pytest -q
+```
+
+> **Note:** `sovereign_debt_py` does **not** use PyXLL, so no `conftest.py`
+> mock is needed.  The `[dev]` extra (defined in its `pyproject.toml`) already
+> includes `pytest`.
+
+### In `sovereign_debt_xl` after switching to the external package
+
+The existing CI workflow (`.github/workflows/pytest.yml`) installs dependencies
+via `requirements.txt` and `pip install -e .`.  Once `sovereign_debt_py` is
+listed in `pyproject.toml` as a dependency, installing with `pip install -e .`
+will pull it in automatically — no workflow changes are required.
+
+If you pin the git-URL form of the dependency and want CI to always use the
+latest commit, add a manual cache-bust step or use the `--no-cache-dir` flag:
+
+```yaml
+- name: Install dependencies
+  run: |
+    python -m pip install -U pip
+    pip install --no-cache-dir -e .
+```
+
+---
+
+## Quick-reference checklist
+
+- [ ] Create a new GitHub repo `sovereign_debt_py` (empty, public or private)
+- [ ] Choose Option A (history preserved) or Option B (clean start) above and run the commands
+- [ ] Verify the new repo builds: `pip install -e .` and `pytest -q`
+- [ ] Add `.github/workflows/pytest.yml` to the new repo
+- [ ] Declare the dependency in `sovereign_debt_xl/pyproject.toml` (git URL or PyPI name)
+- [ ] Optionally refactor `sovereign_debt_xl` modules to delegate to `sovereign_debt_py`
+- [ ] Remove the `sovereign_debt_py/` subtree from `sovereign_debt_xl`
+- [ ] Confirm `sovereign_debt_xl` CI still passes after the removal