Model the cascade before the margin call becomes a record

Explore how concentrated equity losses, synthetic leverage, collateral policy, liquidation timing, and dealer coordination can combine into an illustrative counterparty credit event.

Review model assumptions

A stress test with an audit trail

Adjust the scenario, run the local calculation, and inspect both the aggregate finding and dealer-level allocation. Values are hypothetical and are not live market, bank, fund, or enforcement data.

Market shock

Set the market shock

Define the portfolio drawdown and the liquidation horizon used by the illustrative model.

Equity drawdown 30%

Liquidation horizon 3 days

Financing

Coordination

Scenario finding

Run the baseline to calculate a useful exposure finding.

The model is ready.

Results will explain the loss path rather than repeat the selected inputs.

Illustrative dealer allocation
Dealer	Notional	Allocated loss

What the model assumes

A hypothetical fund begins with $4.2 billion of equity capital.
Gross notional equals equity capital multiplied by the selected leverage.
The collateral cushion is simplified as gross notional multiplied by the selected haircut.
Liquidation loss increases with time and decreases with coordination.
Dealer allocations are illustrative shares, not statements about named institutions.

This educational model is not legal, investment, accounting, or risk-management advice. It does not determine whether any subpoena, reporting duty, violation, liability, or loss exists.

See the causal chain, not just the total

A market shock first reduces portfolio value. If the modelled collateral cushion is insufficient, a margin deficit appears. Liquidation timing and coordination then determine the additional uncovered loss allocated across dealers.

Abstract view of financial records and market screens used to illustrate a counterparty review — Loss, deficit, liquidation, preservation

Separate the economic sequence from the records that may explain decisions and timing.

Scenario guidance

When leverage rises, gross exposure can grow faster than the collateral cushion.

Compare the gross notional and margin deficit rather than treating the drawdown percentage as a complete loss estimate.

Liquidation speed matters after the initial shortfall has already appeared.

The model applies a larger slippage factor to longer, uncoordinated liquidation paths and a smaller factor to staged liquidation.

Preservation planning should follow decisions, communications, positions, and execution timing.

The workbench provides a scenario aid only. Qualified legal and compliance teams must determine actual preservation and reporting obligations.

Define portfolio shock Calculate collateral shortfall Model liquidation path Allocate illustrative dealer loss Review decision records Export scenario evidence

Keep the scenario with the review record

Run a scenario first, inspect the on-page finding, then download the assumptions and dealer allocation as a local CSV. No scenario input is transmitted by this page.