Analyzing the Relationship Between Financial Contagion and Crisis Transmission in Global Capital Markets

Posted: Oct 20, 2023

• Sophia Clark
• Sophia Hill
• Sophia White

Abstract

This research introduces a novel methodological framework for analyzing financial contagion and crisis transmission in global capital markets by integrating quantum-inspired computational techniques with traditional econometric approaches. We develop a Quantum Financial Contagion Model (QFCM) that represents market interdependencies through quantum entanglement principles, allowing for the simultaneous analysis of multiple crisis transmission pathways across 47 major financial markets. Our approach fundamentally differs from conventional correlation-based methods by capturing non-linear, multi-dimensional relationships that traditional models often overlook. The methodology employs quantum state vectors to represent market conditions and uses entanglement measures to quantify the strength and direction of contagion effects. We analyze data spanning three major financial crises (2008 global financial crisis, 2010 European debt crisis, and 2020 COVID-19 market crash) and demonstrate that our model identifies contagion patterns with 37