Fail an institution and play the contagion day by day through counterparty losses, fire sales and funding runs, then try to stop it with capital.
Failed at day 0: Dealer bank C. Click another institution to fail that one instead.
| Asset class | Held in total | Day-0 loss |
|---|---|---|
| Government bondsLargest holder: Dealer bank A | $735bn | – |
| Corporate bondsLargest holder: Insurer A | $312bn | – |
| Mortgage bondsLargest holder: Dealer bank A | $261bn | – |
| EquitiesLargest holder: Hedge fund A | $153bn | – |
No price drop set. The whole system has $246bn of equity to absorb losses.
A failed borrower repays only part of what it owes, so its lenders lose money.
Stressed institutions sell assets to cut leverage; prices fall and every holder loses.
Short-term lenders and depositors pull money from weak institutions, forcing sales.
The clearing house absorbs a member's failure, then passes what is left to the other members.
The network holds stylised institutions: dealer banks, banks, regional banks, money market funds, hedge funds, insurers and one central counterparty. None of them is a real firm and the balance sheets are round numbers chosen to behave like the real thing. Each has cash, loans, securities and liabilities, and the lines between them are loans, repos and derivative contracts. A node turns stressed when its capital falls below four fifths of where it started, critical below half, and failed when it is gone. Failed nodes are hollow with a cross, so colour is never the only signal.
Four channels carry a loss. Counterparty losses travel along the lines: when a borrower fails, its lenders write off a share of what they are owed. Fire sales travel through prices: an institution short of capital sells assets, the price falls a little for every dollar sold, and everyone holding that asset is marked down, including institutions that never dealt with the failed one. Funding runs travel through confidence: short-term lenders and depositors withdraw from institutions that look weak, which forces more selling. Loss sharing at the clearing house passes a failed member's loss to the surviving members. Switch each channel off in turn to see how much of the damage it explains.
The simulation runs once per setup, and playback only moves through the stored days, so scrubbing is instant. Pin a run on the failures chart, change a switch, and the earlier curve stays behind as a ghost. The rescue game asks you to beat a rule of thumb with the same money, and the last mode sweeps network density to show why a system can be sturdy against small shocks and fragile against the wrong one.