  We study how the phenomenon of contagion can take place in the network of the
world's stock exchanges due to the behavioral trait "blindeness to small
changes". On large scale individual, the delay in the collective response may
significantly change the dynamics of the overall system. We explicitely insert
a term describing the behavioral phenomenon in a system of equations that
describe the build and release of stress across the worldwide stock markets. In
the mathematical formulation of the model, each stock exchange acts as an
integrate-and-fire oscillator. Calibration on market data validate the model.
  One advantage of the integrate-and-fire dynamics is that it enables for a
direct identification of cause and effect of price movements, without the need
for statistical tests such as for example Granger causality tests often used in
the identification of causes of contagion. Our methodology can thereby identify
the most relevant nodes with respect to onset of contagion in the network of
stock exchanges, as well as identify potential periods of high vulnerability of
the network. The model is characterized by a separation of time scales created
by a slow build up of stresses, for example due to (say monthly/yearly)
macroeconomic factors, and then a fast (say hourly/daily) release of stresses
through "price-quakes" of price movements across the worlds network of stock
exchanges.
