The Financial Stress Index: Identification of Systemic Risk Conditions

By Mikhail V. Oet, Ryan Eiben, Timothy Bianco, Dieter Gramlich, S. Ong. 2011

130 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/32070cb3d01c454ce509b85a7688b33a7409668d

How researchers see this paper

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In Economics and Econometrics

1. Benjamin Klaus
2. Tuomas A. Peltonen
3. Thibaut Duprey
4. Michael T. Owyang

In Finance

1. Tuomas A. Peltonen
2. Thibaut Duprey
3. Benjamin Klaus
4. Michael T. Owyang

Citations in the corpus

• Disentangling diverse measures: a survey of financial stress indexes (2012, background): “After classifying their indicators into those sectors, Oet et al. average the z-proportion across the number of indicators in the sector.9 Figure 2 shows several FSIs for the United States. The shaded bars denote recessions as determined by the National Bureau of Economic Research (NBER) Business Cy”
• CISS - A Composite Indicator of Systemic Stress in the Financial System (2012, unknown): “The “Cleveland Financial Stress Index” (CFSI) developed by Oet et al. (2011) integrates 11 daily financial market indicators which are grouped into four sectors (debt, equity, foreign exchange and banking markets).”
• Dating systemic financial stress episodes in the EU countries (2017, background): “, 2012) or by creating indices of financial stress that are best able to replicate or predict a given sequence of expert-identified crises events (e.g. Illing and Liu, 2006; Oet et al., 2011; Jing et al., 2015).”
• Financial Stress and Economic Dynamics: The Transmission of Crises (2015, unknown): “See also Oet et al. (2011). The Kansas City Fed’s index (KCFSI) is constructed using principal components of 11 monthly financial market”