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Volatility shocks from growth, inflation, or liquidity do not act directly on the economy. They are filtered, absorbed, or amplified through balance sheets and capital structures. These are the transmission mechanisms that determine whether volatility is dampened into resilience or magnified into fragility.

Why do we need these normalizations? If you want to know the relationship between, for example, time spent in higher education and post-education salary, you don’t want to worry about whether “time spent” is measured using hours, days, months, or years; and you don’t want to worry about whether salary is measured using dollars, thousands of dollars... See more

When we talk about the “terminal rate” in short-term interest rate markets, what we’re really looking for is the end of the road, the point where policy is expected to settle once the current cycle of cuts or hikes has run its course. It’s visible in the strips: SOFR in the US, Euribor in the Euro area, and SONIA in the UK.