Contagion vs conditional correlation

CFA Level III
#1

Hi guys,

can someone p,ease explain the difference between contagion and conditional correlation.

thanks

#2

There is no difference. Those terms are related to each other.

Contagion is an appearance of overflow the crisis from one emerging market to another. The law of connected vessels.

Conditional correlation is an appropriate measure to use during contagions because historical correlation simply does not hold or underestimates volatility of assets held on emerging markets.