Contagion
The transmission of trouble from one market participant to others through mutual obligations, shared collateral and forced selling.
How to read the number
Three channels carry it: direct exposure to one another, common collateral that has to be sold, and suspicion — counterparties stop dealing with everyone who looks similar.
When the metric lies
Contagion crosses borders and asset classes: what gets sold is not what has fallen, but what is liquid and happens to be in the portfolio.
Also known as: financial contagion