Despite widespread usage, financial stability is difficult to define let alone measure. This is in contrast to price stability which can be defined and quantified. Some define financial stability as the absence of financial instability which, of course, is tautological. From a macroprudential perspective, financial stability can be defined as a situation where the financial sector functions without any discontinuity.
This definition is conceptually neat but is not useful for policy purposes unless it can be quantified for measurement purposes. Policy makers and analysts at international fora are actively engaged in fleshing out the definition so that it is precise, measurable and comprehensive.