STRESS INDEX IN UKRAINE’S MARKET OF NEGOTIABLE FINANCIAL INSTRUMENTS
DOI:
https://doi.org/10.15407/economyukr.2018.02.039Keywords:
market of negotiable financial instruments, financial stress index, volatility, market liquidity, securities, derivativesAbstract
Market of negotiable financial instruments is an immanent component of the financial system and is in a two-way relationship with other financial institutions and real sector of the economy in terms of ensuring its stable functioning. Possible market shocks can adversely affect state of the economy; therefore regulators should carry out constant market surveillance to detect and prevent early possible market violations, by calculating (in particular) the composite stress index.
To construct a composite index, correlation analysis, generalized autoregressive conditional heteroscedasticity model, standardization based on the integral distribution function, seasonal adjustment and determination of a long-term trend based on filtering are used.
It is proposed to calculate the stress index of Ukraine’s market of negotiable financial instruments on the basis of market data by balanced averaging of the following sub-indices: (i) stocks (UX stock yield volatility, CMAX indicator, market efficiency coefficient); (ii) debt securities (sovereign spread and CDS spread); and (iii) derivatives (indicator of the change in the number of open futures positions for the UX stock). Aforementioned were standardized using the integral distribution function.
The author’s analysis of the proposed composite stress index shows that dominant factors affecting the situation in Ukraine’s market of securities and derivatives are intra-national ones, which have become dominant since 2014. At present, the stress index of Ukraine’s market of negotiable financial instruments is still of little importance to reflect economic situation in the state, given weak development of the market and its meager role for financing and reflecting the corporate activity.
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