From the financial supervisor's point of view, an early warning system involves an ex ante approach to regulation, targeted to predict and prevent crises. An efficient EWS allows timely ex ante policy action and can reduce the need for ex post regulation. This chapter builds on existing...

This paper develops an extended financial stress measure that considers the supervisory objective of identifying risks to the stability of the financial system. The measure provides a continuous and bounded signal of financial stress using daily public market data. Broad coverage of material...