Cross-Asset Contagion Mapping

Cross-asset contagion mapping is the process of visualizing and quantifying the transmission of financial distress from one asset or protocol to another. In the interconnected world of DeFi and crypto derivatives, a failure in a single lending protocol or a massive liquidation of a specific token can trigger a chain reaction that affects the entire market.

Contagion mapping uses network theory to identify the most vulnerable nodes and the pathways through which shocks propagate. By monitoring correlations during stress events, this method allows risk managers to predict which assets are likely to crash together.

It is a crucial framework for understanding systemic risk and the fragility of highly leveraged crypto positions.