Glossary · SIGMA Intelligence

Contagion Coefficient

A network-derived measure (0–1) of how efficiently financial stress propagates from one entity to its connected counterparties — the "infection rate" of a financial crisis.

Definition

The contagion coefficient C(i,j) between two financial entities i and j represents the probability that a unit of stress in entity i is transmitted to entity j through their network connections. The aggregate contagion coefficient for an entity is the mean transmission probability across all its direct connections, weighted by exposure size. A coefficient above 0.6 indicates high contagion risk — stress in this entity will likely spread rapidly to connected institutions. The coefficient is computed using a modified DebtRank algorithm that accounts for network topology, exposure concentration, and historical co-movement patterns.

In the SIGMA Engine

The contagion coefficient is one of the eight layers in the SIGMA Engine (L4: Network Contagion). Entities with high contagion coefficients are flagged as systemic nodes — their stress has outsized implications for the broader financial network. This is particularly relevant for Austria (Raiffeisen Russia exposure), Italy (TARGET2 imbalances), and China (shadow banking network).

Frequently Asked

Which financial entities have the highest contagion coefficients?

Global systemically important banks (G-SIBs) typically have the highest contagion coefficients due to their size and interconnectedness. The top contagion nodes tracked by Noosphere Prime include US mega-banks, ECB/Eurosystem, and major sovereign debt markets. Country-level contagion coefficients are displayed on each country intelligence page.

Related Concepts

Systemic Risk Phantom Chain SIGMA Score Fragility Index