Risk Management in Emerging Markets: Issues, Framework, and Modeling

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.

Table of Contents:
PART I: FRAMEWORK 1. Realized Volatility of the Spread: An Analysis in the Foreign Exchange Market - Emawtee Bissoondoyal-Bheenick, Robert Brooks, Sirimon Treepongkaruna and Marvin Wee 2. Global Responsibility and Risks of Compliance Failure in Emerging Markets - Daniela M. Salvioni, Francesca Gennari and Luisa Bosetti 3. The Dynamics of Value Comovement across Global Equity Markets - Jan Novotný and Mayank Gupta 4. The Adoption of Political Risk Assessment in Emerging Markets - John R. Anchor and Hana Benesova 5. Rethinking Framework of Integrated Interest Rate and Credit Risk Management in Emerging Markets - Mariya Gubareva and Maria Rosa Borges 6. Auditing Bank Financial Statements in Emerging Market Countries: The Use of the Benford Distribution - Denis Davydov and Steve Swidler 7. Emerging Markets Carry Trades and Financial Crises - Ehab Yamani 8. Risk Management in Islamic Banking: An Emerging Market Imperative - Mahfod Aldoseri and Andrew C. Worthington 9. Value at Risk Prediction under Illiquid Market Conditions: A Comparison of Alternative Modeling Strategies - Mazin A. M. Al Janabi PART II: APPLICATIONS AND CASE STUDIES 10. Enterprise Risk Management and Bank Performance: Evidence from Eastern Europe during the Financial Crisis - Francesca Battaglia, Franco Fiordelisi and Ornella Ricci 11. The Informational Content of Issuer Credit Rating Changes in Emerging Stock Markets: Evidence from China - Haoshen Hu and Jörg Prokop 12. How Should Banks Support SMEs to Manage Funding Risks in China? The Role of Relationship Banking - Yajing Liu, Kenya Fujiwara, Toshiki Jinushi and Nobuyoshi Yamori 13. Risk Management in a Transition Economy: The Chilean Case - Franco Parisi, Sherwood Clements and Edinson Cornejo 14. Regional Integration and Risk Management of African Stock Markets - Takashi Matsuki, Kimiko Sugimoto and Yushi Yoshida 15. Foreign Currency Borrowing in Hungary: The Pricing Behavior of Banks - Zoltán Schepp and Mónika Mátrai-Pitz 16. Intraday Volatility Smiles, Day of the Week Effect, and Risk Management at Borsa Istanbul Stock Exchange - A. Can Inci 17. Dynamic Linkages between Hedge Funds and Traditional Financial Assets: Evidence from Emerging Markets - Roland Füss, Dieter G. Kaiser and Felix Schindler PART III: LOOKING AHEAD 18. How International Standards Apply to Emerging Countries? - Jocelyn Grira and Chiraz Labidi 19. Market Concentration and Bank Competition in Emerging Asian Countries - Hanh Thi My Phan and Kevin Daly 20. Possible Unintended Consequences of Basel III on Emerging Markets and Developing Economies: Assessment of Stressed VaR and Effects on Banks’ Investment Decisions - Alberto Burchi and Duccio Martelli 21. Before and after the Crisis: A Look at the SMEs in Emerging Economies - Elmas Yald?z Hanedar and Avni Önder Hanedar

About the Author :
Sabri Boubaker is Associate Professor of Finance at Champagne School of Management (Groupe ESC Troyes en Champagne, France) and Research Fellow at the Institut de Recherche en Gestion (University of Paris Est) Bonnie Buchanan is the Howard Bosanko Professor of Economics and Finance at the Albers School of Business and Economics, Seattle University

Review :
This collection reports the responses of emerging markets to the recent financial crises, the effectiveness of risk management practices, and the design of new risk management models. The 21 essays investigate the determinants of the volatility of spread in the foreign exchange market, propose a new approach to political risk assessment in emerging markets, and consider the possible unintended consequences of Basel III on emerging and developing economies. Case studies assess the stock market impact of credit rating changes by Chinese rating agencies, the implications of regional integration for African stock markets, and the high rate of foreign currency borrowing in Hungary.