Stock Risk

MacroVar monitors global stock markets risk by monitoring indicators of implied volatility in the United States and Europe. Stock Risk is one of the components of MacroVar Risk Management model. Learn more about how MacroVar risk management model monitors stock risk.

Stock Risk Model

Stock risk is the financial risk involved in holding stocks in an investment portfolio. Stock risk is modeled by monitoring the implied volatility of major global stock markets. The stock market is a leading indicator of future economic growth and financial coditions. When the stock market senses elevated finncial risk, implied volatility increases and vice-versa.

MacroVar calculates for each of the fixed implied volatility indicators tracked the five year z-score. Extreme values of z-scores greater than two indicate elevated credit risk conditions and vice-versa. MacroVar credit risk index is the average of z-scores of the six indices tracked.

MacroVar monitors the following volatility indicators to model global stock risk:

  • VIX: VIX is the implied volatility index of the S&P 500
  • VXN: VXN is the implied volatility of Nasdaq 100
  • VSTXX: VSTXX is the implied volatility of the European major stock index Eurostoxx 50.
  • VIX term structure: VIX term structure monitors the slope of the VIX futures contracts term structure.
  • VSTOXX term structure: VSTOXX term structure monitors the slope of hte VSTOXX futures contracts term structure.