Discussion Paper
Low Risk as a Predictor of Financial Crises
Abstract: Reliable indicators of future financial crises are important for policymakers and practitioners. While most indicators consider an observation of high volatility as a warning signal, this column argues that such an alarm comes too late, arriving only once a crisis is already under way. A better warning is provided by low volatility, which is a reliable indication of an increased likelihood of a future crisis.
https://doi.org/10.17016/2380-7172.2169
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: FEDS Notes
Publication Date: 2018-05-09
Number: 2018-05-09