A second important research area deals precisely with the assessment of contagion risks, which was addressed in Session III. Contagion within the financial system can occur in several ways, as illustrated by Franklin Allen this afternoon.
7 Most commonly, shock propagation within the financial system is thought to occur via interbank networks or via  1  See IMF (2010) “The IMF-FSB Early Warning Exercise: Design and Methodologies Toolkit”, September. 2  See e.g. Borio, C. and P. Lowe (2002), “Asset prices, financial and monetary stability: Exploring the nexus”, BIS Working Paper No.