Glossary · SIGMA Intelligence

Fragility Index

A structural vulnerability metric derived from debt load, systemic interconnections, and institutional resilience — measuring how close a financial system is to a non-linear tipping point.

Definition

The Fragility Index quantifies the Minsky-Taleb concept of hidden vulnerability: systems that appear stable on the surface but carry latent structural stress that will amplify any shock. Inspired by Nassim Taleb's antifragility framework, the index measures three components: (1) Debt overhang — debt-to-GDP ratios, debt service costs relative to revenues; (2) Structural coupling — how tightly interdependent the components of a financial system are; (3) Resilience erosion — the degree to which buffers (capital ratios, foreign reserves, fiscal space) have been depleted. High fragility does not mean crisis is imminent; it means that when a shock arrives — from any direction — the system will amplify rather than absorb it.

In the SIGMA Engine

The Fragility Index is Layer 2 (L2) in the SIGMA Engine and carries a 22% weight — the highest of any single layer. Countries like Japan (high debt overhang), Ukraine (depleted resilience), and Turkey (structural currency coupling) receive high fragility scores despite different surface-level risk profiles.

Frequently Asked

How is fragility different from SIGMA Score?

The Fragility Index measures structural vulnerability — the amplification potential of a system. The SIGMA Score integrates fragility with 7 other signals to produce a holistic risk number. A country can have high fragility but low SIGMA if current conditions are benign; but high fragility means any future shock will produce a much larger SIGMA spike.

Related Concepts

SIGMA Score Systemic Risk Early Warning System (EWS)