Taxonomy of Global Risk, Uncertainty, and Volatility Measures

49 Pages Posted: 26 Nov 2017

See all articles by Deepa Datta

Deepa Datta

Board of Governors of the Federal Reserve System

Juan M. Londono

Federal Reserve Board of Governors

Bo Sun

Board of Governors of the Federal Reserve System - Division of International Finance

Daniel O. Beltran

Federal Reserve Board

Thiago R.T. Ferreira

Board of Governors of the Federal Reserve System

Matteo M. Iacoviello

Federal Reserve Board - Trade and Financial Studies

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System

Canlin Li

Board of Governors of the Federal Reserve System

Marius Rodriguez

Board of Governors of the Federal Reserve System

John H. Rogers

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section

Date Written: 2017-11-21

Abstract

A large number of measures for monitoring risk and uncertainty surrounding macroeconomic and financial outcomes have been proposed in the literature, and these measures are frequently used by market participants, policy makers, and researchers in their analyses. However, risk and uncertainty measures differ across multiple dimensions, including the method of calculation, the underlying outcome (that is, the asset price or macroeconomic variable), and the horizon at which they are calculated. Therefore, in this paper, we review the literature on global risk, uncertainty, and volatility measures drawing on internal and external academic research as well as ongoing monitoring conducted by the Federal Reserve Board’s economics divisions to catalog measures by method of data collection, computation, and subject. We first explore a set of non asset-marketbased measures of risk and uncertainty, including news-based and survey-based uncertainty measures of monetary policy and macroeconomic outcomes. We then turn to asset-market-based measures of risk uncertainty for equity prices, interest rates, currencies, oil prices, and inflation.

Keywords: Risk, Uncertainty, Volatility, Monetary policy, Geopolitical risk, Equities, Interest rates, Exchange rates, Commodities, Inflation, Variance risk premium

JEL Classification: E6, G1, G15

Suggested Citation

Datta, Deepa and Londono-Yarce, Juan-Miguel and Sun, Bo and Beltran, Daniel O. and R.T. Ferreira, Thiago and Iacoviello, Matteo M. and Jahan-Parvar, Mohammad R. and Li, Canlin and Rodriguez, Marius and Rogers, John H., Taxonomy of Global Risk, Uncertainty, and Volatility Measures (2017-11-21). FRB International Finance Discussion Paper No. 1216. Available at SSRN: https://ssrn.com/abstract=3076392 or http://dx.doi.org/10.17016/IFDP.2017.1216

Deepa Datta (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Juan-Miguel Londono-Yarce

Federal Reserve Board of Governors ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

Bo Sun

Board of Governors of the Federal Reserve System - Division of International Finance ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Daniel O. Beltran

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Thiago R.T. Ferreira

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Matteo M. Iacoviello

Federal Reserve Board - Trade and Financial Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://sites.google.com/site/mrjahan/

Canlin Li

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States
202-452-2227 (Phone)

Marius Rodriguez

Board of Governors of the Federal Reserve System ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

John H. Rogers

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2873 (Phone)
202-736-5638 (Fax)

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