As announced in a corporate press release this morning, Bank of America Corp (NYSE: BAC) will be issuing a brand new indicator for investors and investment professionals that is designed to be more comprehensive, and perhaps far more accurate, than mere “VIX watching.”
From the release: “BofA Merrill Lynch Global Research has introduced the Global Financial Stress Index (GFSI), a comprehensive, cross-market gauge of risk, hedging demand and investment flows. The index is designed to help investors identify market risks earlier and more accurately than commonly used risk indicators, such as the VIX index.
The GFSI composite index aggregates over 20 measures of stress across five asset classes and various geographies, measuring three separate kinds of financial market stress: risk, as indicated by cross-asset measures of volatility, solvency and liquidity; hedging demand, implied by the skew of equity and currency options; and investor appetite for risk, as measured by trading volumes as well as flows in and out of equities, high-yield bonds and money markets.”
Very cool… Can’t wait to get on the distribution list! Also, the release notes that back testing of the index back to 2000 shows it to be highly accurate in forecasting sell-offs in global equities and commodities. A veritable crystal ball for Merrill traders and clients, in other words.
A version of this article appeared earlier today on Credit Card Outlaw in slightly different form.