The CFSI is designed to track distress in the US financial system on a continuous basis giving the financial-system supervisors the ability to monitor stressful episodes as they are building in the economy. Such early detection is important because financial stress can quickly be amplified when stress is occurring in more than one market. The CFSI tracks stress in six types of markets: credit markets, equity markets, foreign exchange markets, funding markets (interbank markets), real estate markets, and securitization markets. The CFSI is a coincident indicator of systemic stress, where a high value of CFSI indicates high systemic financial stress. Units of CFSI are expressed as standardized differences from the mean (z-scores).
The CFSI data for weekends and holidays is extrapolated.
To interpret the stress continuum, CFSI is first divided it into four levels or grades. The grade thresholds are dynamic and move slowly over time. The four grades are:
Grade Description Range
Grade 1 Low stress period CFSI < -0.733
Grade 2 Normal stress period -0.733 ≥ CFSI < 0.544
Grade 3 Moderate stress period 0.544 ≥ CFSI < 1.82
Grade 4 Significant stress period CFSI ≥ 1.82
Release: Cleveland Financial Stress Index
Federal Reserve Bank of Cleveland, Cleveland Financial Stress Index [CFSI], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFSI/, October 13, 2015.
FRED BlogOn financial stress