Anchor Paper · Macro Lab

This calculator covers one of the three channels in the Macro Shock Architecture. Read The Anatomy of a Crisis → for the overarching framework that ties commodity, credit, and policy shocks into a single architecture, with bridges to every related paper.

Macro Lab · Shock Simulator

Credit Shock Calculator

Credit market stress or systemic banking event. Watch spreads spike immediately, equities crash 24-48 hours later, central banks cut rates, contagion spreads.

Credit Event Severity

0/100

0 (No event) 25 (Regional) 50 (Significant) 100 (Systemic crisis)

⚠ No credit stress. Markets pricing normal defaults.

Timeline: How Credit Shocks Propagate

T+0 (Hours)

Spreads blow out immediately. CDS swaps, bond market reprices. Credit event triggers instant repricing in OAS, HY spreads spike 100+ bps.

T+24-48h

Equities crash as market processes earnings impact and contagion fears. Vol spikes (VIX 30-40+). Flight-to-safety kicks in (currency rally).

T+2-3d

Central banks cut aggressively. Emergency liquidity facilities deployed. Inflation expectations fall (demand destruction signal).

T+1-2w

Contagion assessed. If systemic: spreads stay elevated, credit crunch begins. If contained: spreads compress back as CB backstop credible.

T+0: Credit Market Response (Immediate)

Credit Spreads (OAS)

150 bps

Widened 0 bps

Volatility Spike

VIX equivalent

Spreads widen instantly as credit risk reprices. HY bonds most affected (wider moves than IG). Safe bonds (Treasuries, German Bunds) rally on flight-to-safety.

Equity Market (T+24-48h)

Delayed reaction to credit stress

0.0%

↓ 0.00

Growth Expectations

Recession fears spike

2.50%

↓ 0.00

T+2-3 Days: Central Bank Emergency Response

Policy Rate

5.00%

Cut 0.00% (emergency)

Inflation Expectations

3.50%

Deflation fear emerges

Real Rates

1.50%

Often negative in crisis

Central banks deploy emergency toolkit: rate cuts, QE announcements, emergency lending facilities. Goal: restore liquidity, prevent systemic cascade.

EPS Guidance

Companies downgrade on credit crunch fears

8.00%

↓ 0.00

Safe-Haven Currency

Reserve currency rallies sharply

100.0

↑ 0.00

Safe Asset Yield (Treasury)

4.50%

Plunges on flight-to-safety. Investors accept negative real returns for liquidity. 2008: 10Y fell to 2% despite rate cuts.

Risk Asset Yield (Credit)

5.00%

Rises sharply (risk premium). HY bond yields spike 500+ bps in systemic crises. Illiquidity premium dominates.

Contagion Risk Assessment

Low (Contained)

Event likely contained to initial shock source. Spillover minimal. Market quickly reprices and moves on.

Key Spillover Channels

• Funding markets: Repo, money market freezes
• Equity volatility: Correlation rises, diversification fails
• Credit ratings: Downgrades trigger forced selling
• Liquidity: Bid-ask spreads widen, redemptions spike
• Leverage: Margin calls trigger forced unwinds

Shock Transmission Logic

T+0h

Credit event hits. Default, bank failure, or major counterparty stress. CDS swaps spike, bonds sell off.

T+24h

Equities crash as market reprices. VIX spikes. Earnings downgrades cascade. Flight-to-safety kicks in (USD up, emerging down).

T+48h

Central bank cuts 25-75 bps emergency. Announces lending facilities, QE preparedness. Goal: stop panic, restore confidence.

T+1w

Contagion assessed. If contained: spreads begin tightening, equities stabilize. If systemic: spreads stay wide, credit crunch persists.

NextLevel Education Private Limited · ARN-XXXXXX · Illustrative macroeconomic model for education and advisor training. Real-world outcomes depend on forward guidance credibility, market positioning, liquidity conditions, and geopolitical context.