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The Financial Stress Index: Identification of Systemic Risk Conditions

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  • Mikhail V. Oet

    (Economist, Supervision and Regulation, Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA
    Nonprofit Research Fellow, Case Western Reserve University, Euclid Ave 10900, Cleveland, OH 44106, USA)

  • John M. Dooley

    (Economic Analyst, Supervision and Regulation, Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA)

  • Stephen J. Ong

    (Vice President, Supervision and Regulation, Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA)

Abstract

This paper develops a financial stress measure for the United States, the Cleveland Financial Stress Index (CFSI). The index is based on publicly available data describing a six-market partition of the financial system comprising credit, funding, real estate, securitization, foreign exchange, and equity markets. This paper improves upon existing stress measures by objectively selecting between several index weighting methodologies across a variety of monitoring frequencies through comparison against a volatility-based benchmark series. The resulting measure facilitates the decomposition of stress to identify disruptions in specific markets and provides insight into historical stress regimes.

Suggested Citation

  • Mikhail V. Oet & John M. Dooley & Stephen J. Ong, 2015. "The Financial Stress Index: Identification of Systemic Risk Conditions," Risks, MDPI, vol. 3(3), pages 1-25, September.
    • Handle: RePEc:gam:jrisks:v:3:y:2015:i:3:p:420-444:d:55870
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    More about this item

    Keywords

    financial stress; systemic conditions; crisis identification; financial system stability; systemic risk; early warning system;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • K2 - Law and Economics - - Regulation and Business Law

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