# PROMPT: Sovereign Debt Crisis Simulation
**ID:** SIM-MACRO-004
**Tags:** ["Macroeconomics", "Sovereign Debt", "Crisis Simulation", "Forex", "Bond Market"]

## Scenario
A G7 nation (simulated as "Republic of Galla") faces a sudden spike in bond yields following a failed treasury auction. The debt-to-GDP ratio has breached 130%, and rating agencies have placed the sovereign credit rating on "Negative Watch".

Simultaneously, a major commodity shock drives inflation up, forcing the Central Bank into a dilemma: raise rates to defend the currency (risking debt service insolvency) or print money (risking hyperinflation).

Global markets are reacting with a "flight to safety," causing liquidity crunches in emerging markets.

## Task
Act as the **Chief Risk Officer** for a global multi-asset hedge fund. You must:

1.  **Diagnose the Contagion Vector:** Identify which asset classes (e.g., specific currencies, banking sector equities, corporate credit spreads) are most vulnerable to this sovereign shock.
2.  **Stress Test the Portfolio:** Simulate a 200bps parallel shift in the yield curve and a 15% depreciation of the Galla currency against the USD. Calculate the estimated VaR (Value at Risk) impact on a standard 60/40 global portfolio.
3.  **Formulate a hedging strategy:** Propose specific derivative structures (e.g., CDS on sovereign debt, FX Swaps, Interest Rate Swaptions) to neutralize the tail risk while maintaining long-term exposure to defensive assets.
4.  **Draft a crisis memo:** Write a brief, high-urgency memo to the Investment Committee outlining the "3-Day Action Plan" to preserve capital.

## Output Format
*   **Contagion Map:** A structured list of infected nodes (Asset Classes).
*   **Simulation Results:** Quantitative estimate of losses (in %) under the stress scenario.
*   **Hedging Strategy:** Table of recommended instruments with entry/exit triggers.
*   **IC Memo:** A professional, concise markdown memo.