What if a multi-notch downgrade of a bank's largest counterparty forces a large CVA loss?
Even short of default, a multi-notch downgrade of a bank's largest counterparty forces a large credit-valuation-adjustment loss that erodes trading capital, a CCAR P&L driver.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Even short of default, a multi-notch downgrade of a bank's largest counterparty forces a large credit-valuation-adjustment loss that erodes trading capital, a CCAR P&L driver. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ · Risk-parity deleveraging ▲ — which propagate through our causal graph to the markets below.