Capital Efficiency Risk Simulation

This module extends the existing PMM routing simulator with a simulation-only treasury/risk overlay. It evaluates capital allocation, leverage, spread policy, peg pressure, volatility throttles, external liquidity floors, and liquidation probability before any live contract work.

The model is intentionally wired to the current ecosystem:

PMM routing, capture, churn, intervention cost, and peg deviation still come from scripts/run-scenario.cjs.
Risk defaults live in config/capital-efficiency-policy.json.
Scenario-specific capital assumptions live under capitalEfficiency in config/scenarios/*.json.
deployment-status.json remains the deployed-graph source when graphMode = deployed.

This is not a live leverage configuration. Contract work remains gated by audit engagement evidence, governance approval, operational dashboards, and runbooks.

Model

Each Monte Carlo path tracks:

T: total capital
alpha: treasury/yield allocation
L: leverage
sigma: mean-reverting volatility
P: peg price around 1.0
external liquidity floor
collateral/debt liquidation state

Per epoch, capital updates with:

T_next = T + T * (yield + market_making - volatility_drag - intervention_drag - redemption_drag)

Volatility follows:

sigma_next = sigma + kappa * (sigma_bar - sigma) + eta * N(0, 1)

Peg dynamics follow a lightweight imbalance/arb model:

P_next = P + beta * imbalance - arb_liquidity_coefficient * (P - 1)

If volatility exceeds sigmaCrit, the simulator reduces effective allocation/leverage and widens spread up to the configured ceiling. If external liquidity drops below the policy floor, the path records a violation and clamps allocation.

Run

Baseline routing scenarios are unchanged:

node scripts/run-scenario.cjs hub_only_11
node scripts/run-scenario.cjs bridge_shock_137_56

Capital stress scenarios:

node scripts/run-scenario.cjs crash_40pct_external_asset
node scripts/run-scenario.cjs high_vol_sigma_spike
node scripts/run-scenario.cjs bank_run_redemption_spike

Optimizer sweep:

node scripts/run-scenario.cjs --optimizer leverage_sweep_1x_to_4x

leverage_sweep_1x_to_4x also enables optimizer mode by default.

CI-style validation:

node scripts/validate-capital-efficiency.cjs

Scorecard Additions

Capital-enabled scenarios emit:

roi_mean, roi_p05, roi_p95
pnl_distribution
max_drawdown_p95
liquidation_probability
peg_deviation_frequency
external_liquidity_floor_violations
volatility_throttle_events
spread_adjustment_events

Optimizer output ranks parameter candidates by ROI penalized for liquidation, drawdown, and peg frequency. A candidate is deployable only if it passes the policy gates in capital-efficiency-policy.json.

Institutional Defaults

The default posture is conservative:

external liquidity floor: 20% of capital
target leverage: 2-3x
deployable optimizer candidates capped at 3x
hard leverage rejection above 4x
default max LTV: 65%
hard LTV ceiling: 75%
target spread: 30-50 bps
public PMM remains peg support, not the primary profit engine

Any later Solidity blueprint must consume the simulator outputs as evidence, not as authority to deploy leverage automatically.

Latest Local Run

Generated on 2026-04-27 from the current configs:

Scenario	ROI mean	Liquidation probability	p95 drawdown	Notes
`chain138_deployed_capital_efficiency`	`0.0542`	`0`	`0`	Base deployed Chain 138 graph survives under defaults.
`crash_40pct_external_asset`	`-0.0646`	`1`	`0.08`	Crash scenario liquidates at the tested 2.5x leverage.
`high_vol_sigma_spike`	`-0.0665`	`1`	`0.0841`	Volatility spike liquidates at the tested 2.5x leverage.
`bank_run_redemption_spike`	`-0.1586`	`0`	`0.2177`	Redemption stress survives but consumes most drawdown budget.
`leverage_sweep_1x_to_4x`	`0.1359` top deployable	`0`	`0`	Top deployable candidate is capped at 3x by policy.

Interpretation:

Crash/high-volatility profiles are not deployable at 2.5x without lower allocation, lower leverage, stronger collateral haircuts, or faster deleveraging assumptions.
Bank-run defense survives locally but should be treated as near-limit because p95 drawdown is close to the 25% default gate.
Optimizer may still simulate 3.5x/4x candidates, but policy prevents them from being marked deployable.

Dashboard And Runbook Requirements

Before any live leverage contract work, operations must expose:

ROI band: roi_mean, roi_p05, roi_p95
Drawdown: max_drawdown_p95
Liquidation: liquidation_probability
Liquidity floor: external_liquidity_floor_violations
Peg defense: peg_deviation_frequency
Throttles: volatility_throttle_events
Spread changes: spread_adjustment_events
Existing PMM health: capture, churn, intervention cost, and worst-pool diagnostics

Deployment remains blocked until:

Smart contract audit engagement evidence exists.
Governance approval is recorded.
Risk dashboard and alerting are live.
Operator runbook covers deleverage, circuit breaker, redemption throttle, and treasury liquidity deployment.
Treasury/liquidity commitments are documented.

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