Formula and accounting assumptions
Stressed reserves equal immediately available cash plus bond value × (1 − bond haircut) plus volatile value × (1 − price decline). Divide by outstanding claims for total reserve coverage. Redemption demand equals claims × the requested percentage. The cash-only gap is demand less cash, floored at zero; the total stressed reserve gap is demand less all stressed reserves, also floored at zero. These gaps measure different constraints.
Worked hypothetical example
For $1,000 in claims, assume $100 cash, $500 bonds with a 10% haircut and $400 volatile assets falling 50%. Stressed reserves total $750, or 75% of all claims. An 80% redemption wave requests $800. Cash covers only 12.5% of that request, while liquidating all stressed reserves still leaves a $50 gap. A smaller wave might be covered in value yet still require sales and settlement before enough cash becomes available.
Interpret the scenarios and limits
The inputs are a hypothetical reserve composition, not evidence about any issuer's attestation, custody or solvency. The model assumes the haircut valuations can be realized; encumbrances, delayed settlement, bank access and claim priority may restrict recovery. Only immediately available amounts belong in the cash field. If no claims are requested, the cash-to-demand percentage is undefined rather than infinite. Review value coverage and timing gaps together instead of using a single reserve ratio as a guarantee of redemption.