Where models die

The world stops matching the model. Regime change and leverage turn a small error fatal.

A relationship that held for years stops holding. The position was sized on the old relationship, and leverage converts a modest modelling error into an existential one before anyone can re-estimate.

How to spot it. Ask what the position assumes is stable, then ask what happens on the day it is not.

Pen-and-ink drawing: a ship's chart table at night, spread with a carefully drawn nautical chart, dividers and a parallel rule. Through the bridge windows beyond it, jagged uncharted rocks and a heavy sea stand exactly where the chart shows nothing.

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24Events in this quadrant

Every event filed in Q4 Where models die

Tricolor Holdings2025Prosecutors say a subprime lender double-pledged collateral; banks saw security that wasn't there.
First Brands Group2025Off-balance-sheet factoring hid the debt; invoices were allegedly inflated up to 50x.
Yen carry-trade unwind2024A small BoJ hike unwound the global carry trade; Nikkei's worst since 1987.
Silicon Valley Bank2023A duration mismatch met a 94%-uninsured base in a digital-speed run.
First Republic Bank2023The same rate trap as SVB, triggered by contagion across 'similar' banks.
Credit Suisse / UBS2023A 167-year-old G-SIB failed on confidence; AT1 bonds zeroed before equity.
Adani-Hindenburg rout2023A short-seller report erased $150B from an over-levered conglomerate.
LME nickel squeeze2022Nickel spiked 270% in two days; the exchange cancelled the trades.
Terra / Luna collapse2022An 'algorithmic' stablecoin depegged into a mint-and-burn death spiral.
Three Arrows Capital2022One over-levered fund defaulted and cascaded through every crypto lender.
UK LDI / gilt crisis2022'Safe' pension hedges hid leverage that forced a gilt margin doom-loop.
Archegos collapse2021Hidden swap leverage detonated; each bank only saw its own slice.
Swiss franc unpeg (SNB)2015The central bank swore it would defend the floor. Three years steady, then 30% in twenty minutes.
Cyprus bail-in2013The eurozone's first depositor bail-in. Nearly half of every euro above the insured limit became shares in the bank that lost it.
JPMorgan London Whale2012A new risk model halved the danger overnight. It divided by a sum instead of an average.
MF Global collapse2011He bet $6.3B on Europe's shakiest bonds. The margin calls got paid with customer money.
2010 Flash Crash2010The models assumed a buyer would always be there. For 36 minutes, there was none.
Global financial crisis2008Complexity and leverage, and nobody knew who was on the other side.
Icelandic banking collapse2008320,000 people ran banks worth ten times their GDP. All three fell in a single week.
Northern Rock bank run2007Funded long mortgages with short-term wholesale money. It froze, and Britain queued: first bank run in 150 years.
Amaranth Advisors2006A leveraged bet that winter gas would outrun summer. The spread the model ruled out arrived in a week.
LTCM1998Two Nobel laureates, 25-to-1 leverage, and a model that met reality.
Orange County1994The richest US county levered a dull treasury into the largest municipal bankruptcy.
Black Monday1987Portfolio insurance fed on itself until the market fell a fifth in a day.

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