Risk management in emerging markets : issues, framework, and modeling / edited by Sabri Boubaker, Bonnie Buchanan, Duc Khuong Nguyen.

Format:

Book

Contributor:

Boubaker, Sabri, editor.

Buchanan, Bonnie G., 1965- editor.

Nguyen, Duc Khuong, 1978- editor.

Language:

English

Subjects (All):

Financial risk management--Developing countries.

Financial risk management.

Physical Description:

1 online resource (746 pages)

Edition:

First edition.

Place of Publication:

Bingley, England : Emerald, 2016.

Summary:

Academic finance research has shown that emerging markets still suffer from a myriad of risks such as credit, operational, market, legal and exchange rate risks. The onset of the subprime crisis 2007, the global financial crisis 2008-2009, and the Eurozone public debt crisis since the end of 2009 has brought to the light a number of emerging markets facing tumbling currencies, rising inflation, slowing growth, heavy dependence on foreign capital, and high levels of vulnerability to external shocks due to increased market integration. This context calls for not only a reconsideration of recent risk assessment models and risk management practices, but also the improvement and innovation of these models and practices. Factors such as liquidity, tail dependence, comovement, contagion, and timescale interactions have thus to be part of an integrated risk assessment and management framework. This book addresses three main dimensions of risk management in emerging markets: 1) the effectiveness of risk management practices; 2) current issues and challenges in risk assessment and modelling in emerging market countries; 3) the responses of emerging markets to the recent financial crises and the design of risk management models.

Contents:

Front Cover

Risk Management in Emerging Markets

Copyright Page

Contents

About the Editors

About the Authors

Preface

Foreword

Part I: Framework

1 Realized Volatility of the Spread: An Analysis in the Foreign Exchange Market

Introduction

Literature Review and Propositions Development

Data and Methodology

Dependent Variable - Volatility of Liquidity

Independent Variables

Methodology

Empirical Results

Descriptive Statistics

Dynamic Panel Regression Results

Augmented Dynamic Panel Regression Results

Conclusion

References

2 Global Responsibility and Risks of Compliance Failure in Emerging Markets

Global Responsibility and Compliance Risk

Compliance Risk in the BRICS

Corporate Governance, Internal Control, and Risk Management in the BRICS: Legislative and Regulatory Framework

Brazil

Russia

India

China

South Africa

Compliance Failure in the BRICS Companies: Selected Case Studies

Vale SA (Brazil)

Gazprom (Russia)

Maruti Suzuki (India)

China National Petroleum Corporation (China)

Harmony Gold Mining Ltd (South Africa)

3 The Dynamics of Value Comovement across Global Equity Markets

Data

Constructing the CAPE

Value Spreads

Results

Benchmark

Correlations

America

Europe

Asia

Value Portfolio: The Risk Angle

Conclusions

Appendix

4 The Adoption of Political Risk Assessment in Emerging Markets

Risk, Uncertainty, Political Risk, and Political Risk Assessment

Risk and Uncertainty

Political Risk and Country Risk

Political Risk Assessment

The Determinants of the Adoption of Political Risk Assessment

Firm Size

Firm Complexity.

Level of Internationalization

Ownership

Location of Subsidiaries

Leverage

Investment Opportunities

Auditor Type

Industry

5 Rethinking Framework of Integrated Interest Rate and Credit Risk Management in Emerging Markets

Scope and Data

Historical VaR Modeling of Economic Capital

Derivative-Based Segregated Approach to Risk Assessment

Derivative-Based Integrated Approach to Risk Assessment

Capital-Wise Elasticity of Interest Rate Risk and Credit Risk

Components of a Bond Yield

Yield-Based Integrated Approach to Risk Assessment

Estimating Liquidity Component

IRB Foundation Approach to Unexpected Loss Assessment

Results and Discussion

Derivative-Based Integrated versus Segregated Approach to Risk Assessment

Derivative-Based Studies of Expansion and Contraction Phases of Business Cycle

Derivative-Based Capital-Wise Elasticity of Interest Rate Risk and Credit Risk

Derivative-Based Integrated Approach versus Yield-Based Approach to Risk Assessment

Benchmarking the Derivative-Based Integrated Approach against the Basel III Regulation

Derivative-Based Modeling of Economic Capital for the 2007-2014 Period

6 Auditing Bank Financial Statements in Emerging Market Countries: The Use of the Benford Distribution

The Benford Distribution

Russian Bank Accounting Practices

Identifying Failing Banks in Real Time

Implications of Scale Invariance

Concluding Lessons

7 Emerging Markets Carry Trades and Financial Crises

Interest Rate Parity and Carry Trades

Emerging Markets' Carry Trade: Opportunities and Threats

Forecasting Financial Crises: Can Emerging Markets Carry Trades Help?

References.

8 Risk Management in Islamic Banking: An Emerging Market Imperative

The Nature of Risk in Islamic Banking

Credit Risk

Benchmark Risk

Liquidity Risk

Operational Risk

Legal Risk

Withdrawal Risk

Fiduciary Risk

Displaced Commercial Risk

Operation of Islamic Banks in Emerging Markets

Unique Counterparty Risks in Islamic Modes of Finance

Muraba'ah Financing

Salam Financing

Istisnā Financing

Mushārakah (Profit and Loss Sharing) Mudārabah (Profit Sharing) (M-M) Financing

Sukuk Financing

Counterparty Risk in Emerging Markets

Bank Risk Management Practices in Emerging Markets

9 Value at Risk Prediction under Illiquid Market Conditions: A Comparison of Alternative Modeling Strategies

Introduction and Motivation

Literature Review and Underlying Principle of the Chapter

Literatures Associated with Liquidity-Adjusted Value at Risk (L-VaR) Modeling

Underpinnings and Particular Objectives of Present Research Study

Incorporating Asset Liquidity Risk into Parametric Trading Risk Modeling

Statistical Foundation of a Coherent L-VaR Approach

Modeling Asset Liquidity Trading Risk in L-VaR Context

Comparing and Testing the Performance of L-VaR Models - Empirical Analysis of the GCC Stock Markets

Estimation of Conditional Volatility with GARCH-M (1,1)Technique

Statistical Analysis and Testing for Non-Normality

Liquidity Trading Risk Management - A Comparison of Alternative L-VaR Modeling Strategies

Summary and Concluding Remarks

Part II: Applications and Case Studies

10 Enterprise Risk Management and Bank Performance: Evidence from Eastern Europe during the Financial Crisis

Literature Review

Appendix.

11 The Informational Content of Issuer Credit Rating Changes in Emerging Stock Markets: Evidence from China

Literature Review and Hypothesis Development

Literature Background

Hypotheses

Event Study Results

Regression Analysis

Regression Models

Regression Results

12 How Should Banks Support SMEs to Manage Funding Risks in China? The Role of Relationship Banking

The State of SME Financing and the Problems Faced by SMEs in China

Theoretical Framework and Hypotheses

Literature Review: The Positive Side of Relationship Banking

The Soft-Budget Problem and the Hold-up Problem

Description of the 2010 Survey of SMEs in Zhejiang Province

Model and Data

Concluding Remarks

13 Risk Management in a Transition Economy: The Chilean Case

The State of Risk Management in Emerging Markets: The Chilean Case

Physical Risk

Social Risk

Economic Risk

Political Risk

Financial Risk

Technology Risk

Outsourcing as Management Risk in Emerging Markets

Environmental Risk

Schwager S.A.

La Polar S.A.

Hites S.A.

South American Steamship Company SA (CSAV)

Soquimich SA

14 Regional Integration and Risk Management of African Stock Markets

Developments in African Stock Markets and Beyond

Empirical Methodology for Measuring Return Spillover

The Diebold-Yilmaz Spillover Index.

Return Spillover among African Stock Markets Around Financial Crises

Developments in Regional Integration of African Stock Markets.

Individual Response to the Global Shocks and to the African Regional Integration

Perspectives from the Sub-Regional Level

Sub-Regional Integration

Regional Hub Interactions

Risk Management in African Stock Markets

Financial Integration, Financial Development, and Economic Growth

Capital Control, Foreign Banks, and Foreign Investors

Policy Recommendations for African Stock Markets

15 Foreign Currency Borrowing in Hungary: The Pricing Behavior of Banks

Specific Features of the Problem of Hungarian Foreign Currency Debt

Important Differences to Other CEE Countries

The Sectoral Character of Foreign Currency Debt in Hungary

Facts and Consequences of Household Foreign Currency Borrowing

The Causes of Rising Interest Rates of Swiss Franc Mortgage Loans

Some Important Characteristics of the Hungarian Banking Market

Theoretical Hypotheses Concerning Factors Determining Interest on Loans

Investigation Database

Vector Error Correction (VEC) Modeling

Result Implications for Economic Policy

Summary and Conclusions

16 Intraday Volatility Smiles, Day of the Week Effect, and Risk Management at Borsa Istanbul Stock Exchange

Trading Hours and Opening Procedures at the BIST

17 Dynamic Linkages between Hedge Funds and Traditional Financial Assets: Evidence from Emerging Markets

Constructing Emerging Market Hedge Fund Indices

Methodology and Empirical Results

Multivariate Cointegration Analysis

VEC Granger Causality

Variance Decompositions (VDC)

Impact of the 2008-2009 Financial Crisis

Appendix: Test for Structural Breaks.

Part III: Looking Ahead.

Notes:

Includes bibliographic references and index.

Print version record

ISBN:

9781786354518

1786354519