The Simulation Desk · agent-based scenario simulation · 2026-06-10
We stress-tested one scenario from the desk’s register with an ensemble of interacting simulated actors — institutions, intermediaries, policymakers and traders — and let them argue, trade and react over multiple rounds. What follows is what the simulation surfaced for the desk to investigate. It is calibration-gated: it carries 0 percentage points on every published probability (cap 5pp, Day 13). Probes, not predictions.
Scenario under test: Stock-bond correlation regime break — the 60/40 / LDI hedge fails
Desk thesis: If bonds stop hedging equities, the 60/40 and LDI hedges that anchor most policy portfolios quietly stop working.
Desk probability at run time: 36% — see the scenario register for the current number and model card.
What the simulation surfaced — probes for the desk
- Desks treat 60/40 and LDI hedge failure as already signalled — pre-emptive repositioning could itself amplify and confirm the correlation break
- The fashionable cure (dynamic asset allocation) raises turnover and trading costs; sim actors who adopted it questioned whether it beats the disease
- Synchronized cash-raising by large allocators emerged as the default liquidity response — collective hoarding is itself a market-structure risk
- An above-consensus CPI print is the live tripwire: simulated actors keyed cascade selling off inflation surprises (CPI YoY 3.95% read as the real-time signal)
- A sizeable mean-reversion camp expects stock-bond correlation to re-normalize and will fade the move — a standing source of two-way volatility
From the simulation record
In the simulated correlation-break regime, long-duration owners (sovereign funds, public pensions) reconstructed portfolios around the judgment that 60/40 and LDI hedging had already failed as signals, rotating toward alternatives, private equity and real assets while raising cash buffers against a liquidity squeeze.
Dissent was material: one camp argued markets self-correct and correlation re-normalizes, while skeptics of dynamic allocation warned that frequent rebalancing raises transaction costs and can destroy returns — with inflation surprises (CPI YoY 3.95% in the run) and geopolitical shocks identified as the trigger points that would force the issue.
What this is — and is not
These are research prompts surfaced by a simulation, not facts and not published probabilities. Anything that survives the desk’s source-gated investigation shows up in the scenario’s model card with named sources; the rest is discarded.
Interrogate this scenario in the Scenario Lab → · Command Center · The Odds Board · How the simulation leg is governed