documentation.md

Systemic Contagion Simulation 2026

Overview

Interactive Dash application that simulates systemic contagion risk by showing the cumulative total assets of critically undercapitalized U.S. banks. Banks are stress-tested using CRE default scenarios, and those with Adjusted Equity-to-Assets below 2% are identified as critically undercapitalized. Their total assets are sorted ascending and plotted cumulatively, revealing the scale of systemic exposure. Two historical reference lines provide context against the 2008 GFC and 2023 bank failures.

How It Works

Adjusted Equity-to-Assets Calculation

Each bank's adjusted capitalization ratio is computed as:

• Adjusted Equity-to-Assets = (Total Equity - CRE Losses) / Total Assets

When the Unrealized Losses toggle is ON, unrealized securities losses are subtracted:

• Adjusted Equity-to-Assets = (Total Equity - CRE Losses - Unrealized Losses) / Total Assets

Where:

• CRE Losses = CRE Total x Default Rate x LGD

Unrealized losses are stored as positive values representing the magnitude of losses.

Critically Undercapitalized Filter

Banks with Adjusted Equity-to-Assets < 2% are classified as critically undercapitalized under the Prompt Corrective Action (PCA) framework.

Cumulative Aggregation

1. Only critically undercapitalized banks (Adjusted Equity-to-Assets < 2%) are included
2. Their total assets are sorted in ascending order (smallest to largest)
3. A running cumulative sum is computed across these banks
4. The result is plotted as a bar chart with banks on the x-axis and cumulative total assets ($M) on the y-axis

Reference Lines

Two horizontal reference lines provide historical context:

Reference	Value	Description
2008 GFC	$307B	Washington Mutual total assets
2023 Bank Failures	$548B	SVB + Signature + First Republic combined total assets

Controls

Control	Range	Default	Description
CRE Default Rate	0-50%	10%	Percentage of CRE portfolio that defaults
Loss Given Default	0-100%	50%	Loss severity on defaulted loans
Total Assets	$10-100B	$10B	Minimum bank size filter
Unrealized Losses	ON/OFF	OFF	Include unrealized securities losses in stress calculation

Display

Cumulative Total Assets Chart

A bar chart showing:

• X-axis: Critically undercapitalized banks sorted by total assets (ascending), fixed to max 147 banks
• Y-axis: Cumulative total assets in $M
• Red bars: Cumulative total assets of critically undercapitalized banks
• Purple reference lines: 2008 GFC ($307B Total Assets) and 2023 Bank Failures ($548B Total Assets)

Hover displays the bank index and cumulative total assets at that point.

A dynamic formula line above the chart shows the Adjusted Equity-to-Assets calculation and the < 2% filter threshold.

Data Source

The Banking Initiative at Florida Atlantic University — Q3 2025 FFIEC Call Reports.

Run Locally

pip install -r requirements.txt
python app.py
# Open http://localhost:8050

Customization

You can use this app with your own data by replacing the data.csv file. Your CSV must include the following columns in the same format:

Column	Description	Example
Ticker	Stock ticker symbol (blank for non-public banks)	JPM
Name	Bank name	JPMORGAN CHASE BANK
ST	State abbreviation	NY
Total Assets ($M)	Total assets in millions	3459261
Total Equity ($M)	Total equity in millions	312794
CRE Total ($M)	Commercial real estate exposure in millions	174381
CET1 Capital ($M)	Common Equity Tier 1 capital in millions	291288
Total Unrealized Loss ($M)	Unrealized loss on investment securities in millions (positive values)	1842
Price	Latest stock closing price in dollars	293.70
Volume	Average 30-day trading volume	44276127
Volatility	30-day annualized volatility as percentage	26.0