Our approach has some similarities to the epidemiological literature on the spread of disease in networks (see, for example, Anderson and May (1991), Newman (2002), Jackson and Rogers (2007), or the overview by Meyers (2007)). But there are two key differences. First, in epidemiological models, the susceptibility of an individual to contagion from a particular infected `neighbour' does not depend on the health of their other neighbours. By contrast, in our set-up, contagion to a particular institution following a default is more likely to occur if another of its counterparties has also defaulted. Second, in most epidemiological models, higher connectivity simply creates more channels of contact through.
