I have worked with a number of financial stress indicators. They were very effective tools during the Risk-on/Risk-off (RORO) period before and just after the financial crisis. They have been less valuable recently because the variables have all shown low levels of stress. (Maybe they are doing their job effectively.) However, after the last month, I am feeling more stress. Funny how that always happens when the markets move lower.
Hat tip to a friend who show due another stress indicator. The Cleveland Fed has put together a nice site on their take on financial stress. I like the completeness of the site with details on all of the index components. The stress index has 16 components which are broken down into equity, funding, credit, foreign exchange, real estate, and securitization markets. This is all price based which give an indication of cross market stress. There are no volatility indicators which i think are very valuable, but the level of detail and diversity in this stress indicator makes it a winner.
No comments:
Post a Comment