What if traders start pricing in a euro breakup?
Redenomination clauses and TARGET2 dominating desks is the full euro-breakup tail: long Bunds/short BTP at maximum convexity, short EUR and EU banks, gold bid on currency-regime risk. The 2012 Grexit/EMU-breakup scare is the only modern template, when periphery spreads gapped hundreds of bp on exit-pricing alone. Germany is the redenomination winner (new-DM up), the periphery the loser. As a stated tail, the heavy credit/financial-conditions roots are appropriate; just note the cascade omits the cleanest expression — the Bund-BTP spread itself.
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 Tail risk 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. Redenomination clauses and target2 imbalances dominate desks as a periphery exit becomes a live tail scenario. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.