A Spanish Financial Market Stress Indicator (FMSI)

52 Pages Posted: 7 Jun 2019

See all articles by María Isabel Cambón

María Isabel Cambón

Comisión Nacional de Mercado de Valores

Leticia Estévez Cerqueira

Comisión Nacional del Mercado de Valores (CNMV)

Date Written: 2015

Abstract

The relevance of systemic risk was highlighted by the economic and financial crisis starting in mid-2007. Supervisors and regulators recognised the need to improve the process of identification, management and mitigation of systemic risk. This paper introduces a Spanish Financial Market Stress Indicator (FMSI), similar to the “Composite Indicator of Systemic Stress” that Holló, Kremer and Lo Duca (2012) pro-posed for the euro area as a whole. This indicator, which represents a real-time measure of systemic risk, tries to quantify stress in the Spanish financial system and describes the contribution of each financial market segment (bond market, equity market, money market, financial intermediaries, forex markets and derivatives) to the total stress in the system. The methodology takes into account time-varying cor-relations between market segments. The study analyses the ability of the FMSI to identify past periods of high financial stress and presents two econometric approaches with the aim of classifying observations into different stress regimes and of determining if financial stress has a negative impact on the real economy.

Keywords: systemic risk, financial crisis, composite indicator, real economy

JEL Classification: G01, G10, G20, E44

Suggested Citation

Cambón, María Isabel and Cerqueira, Leticia Estévez, A Spanish Financial Market Stress Indicator (FMSI) (2015). CNMV Working Paper No. 60 April 2015. Available at SSRN: https://ssrn.com/abstract=3400675 or http://dx.doi.org/10.2139/ssrn.3400675

María Isabel Cambón (Contact Author)

Comisión Nacional de Mercado de Valores ( email )

Edison 4
Madrid, 28006
Spain

Leticia Estévez Cerqueira

Comisión Nacional del Mercado de Valores (CNMV) ( email )

C/ Miguel Ángel, 11
Madrid, Madrid 28010
Spain

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