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Risks 2015, 3(3), 420-444; doi:10.3390/risks3030420

The Financial Stress Index: Identification of Systemic Risk Conditions

1
Economist, Supervision and Regulation, Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA
2
Nonprofit Research Fellow, Case Western Reserve University, Euclid Ave 10900, Cleveland, OH 44106, USA
3
Economic Analyst, Supervision and Regulation, Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA
4
Vice President, Supervision and Regulation, Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA
*
Author to whom correspondence should be addressed.
Academic Editors: Andrea Consiglio and Stavros A. Zenios
Received: 17 April 2015 / Accepted: 8 September 2015 / Published: 16 September 2015
(This article belongs to the Special Issue Financial Engineering to Address Complexity)
View Full-Text   |   Download PDF [1228 KB, uploaded 16 September 2015]   |  

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. View Full-Text
Keywords: financial stress; systemic conditions; crisis identification; financial system stability; systemic risk; early warning system financial stress; systemic conditions; crisis identification; financial system stability; systemic risk; early warning system
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Oet, M.V.; Dooley, J.M.; Ong, S.J. The Financial Stress Index: Identification of Systemic Risk Conditions. Risks 2015, 3, 420-444.

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