TrAffic LIght system for systemic Stress: TALIS3

Abstract For the purposes of financial stability, identifying institutions that, when in distress, could have a significant adverse impact on markets is important. A TrAffic LIght System for Systemic Stress (TALIS-cube) proposed that provides comprehensive color-based classification grouping companies according to both stress reaction level system company distress and company’s level. TALIS3 can integrate multiple signals from interaction between different risk metrics. Starting specific indicators, are classified by combining two loss functions—one one each company—evaluated over time as cross section. An aggregated index also obtained companies. be used enhance performance robustness existing systemic measures. empirical analysis U.S. market provided.