What if surviving funds rush to close out the same defaulters and deepen everyone's losses?
As surviving funds and dealers rush to close out positions facing the same defaulters, the crowding deepens losses for everyone, a feedback the Fed exploratory exercise highlights.
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. As surviving funds and dealers rush to close out positions facing the same defaulters, the crowding deepens losses for everyone, a feedback the Fed exploratory exercise highlights. 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.