Overview
Palanor: Risk Appetite is a single 0–100 read of how much risk the market is willing to take. High readings indicate vol compressed, spreads tight, sentiment greedy, equities running, BTC running, gold quiet — the textbook risk-on regime. Low readings invert all of it.
Why these components
The VIX gets the highest weight because realized and implied equity volatility is the most direct read of risk appetite. High-yield OAS is the credit-market mirror — when risk appetite contracts, junk spreads widen. CNN Fear & Greed is the market-sentiment composite, included alongside (not in place of) the structural measures. Equity momentum (S&P 500) and crypto momentum (BTC) read directional flow; gold, sign-flipped, reads safe-haven demand.
Methodology
Each component is z-normalized or transformed to a comparable scale and sign-flipped where negative. The weighted sum maps through a logistic to 0–100. The index is most informative in regime detection and inflection rather than as a level claim.
Interpretation
Readings above 70 indicate a textbook risk-on regime — the regime in which leverage builds and complacency compounds, the conditions Minsky described as the prelude to instability. Readings below 30 indicate risk-off, the regime in which dispersion widens and capital becomes scarce. The most informative divergence is between VIX and HY OAS: when vol stays low but credit spreads widen, credit is seeing what equity is not.
Caveats
Equity-vol-led indices like this one will mechanically run hot whenever VIX is compressed, even if that compression is itself fragile. The BTC component adds noise; we weight it modestly. Gold's sign flip is contestable — gold can rise on inflation as well as on risk-off — and we accept that ambiguity in exchange for the safe-haven information.
Revision — 25 September 2026
The volatility component read Cboe's VIX, which reached us through FRED under permission granted to FRED, not to Palanor. It now reads OFR Volatility Stress, the volatility category of the US Treasury's Financial Stress Index: about ten volatility measures across US, European, Japanese and emerging-market equities, rates, currencies and oil, of which VIX is one. Weight, direction and transform are unchanged. It tracks the VIX closely (correlation about 0.75) but reads higher when rates or currency volatility is elevated while stocks are calm. History was recomputed.