Risk Management in Volatile Financial Markets

1. Front Matter

   Pages i-xii

   PDF

2. Central Bank Perspectives

   1. Front Matter

      Pages xiii-xiii

      PDF

   2. Volatility is Here to Stay — Some Thoughts on Its Implications

      • Markus Lusser

      Pages 1-11

   3. The Changing Structure of Financial Institutions and Markets: A Central Bank Perspective

      • Andrew D. Crockett

      Pages 12-22

3. Volatility and Risk

   1. Front Matter

      Pages 23-23

      PDF

   2. Financial Innovations and The Incidence of Risk in the Financial System

      • Martin F. Hellwig

      Pages 24-39

   3. Has Financial Risk Really Worsened?

      • C. A. E. Goodhart

      Pages 40-58

   4. The Anatomy of the Bond Market Turbulence of 1994

      • Claudio E. V. Borio, Robert N. McCauley

      Pages 60-84

   5. Volatility and Risk in Integrated Financial Systems: Measurement, Transmission and Policy Implications

      • Colm Kearney

      Pages 86-114

   6. Volatility, International Trade and Capital Flows

      • Ad C. J. Stokman, Peter J. G. Vlaar

      Pages 115-132

4. Institutional Issues and Practices

   1. Front Matter

      Pages 133-133

      PDF

   2. Institutional Investors, Unstable Financial Markets and Monetary Policy

      • E. Philip Davis

      Pages 134-159

   3. Internal Organisation of Risk Control and Management in a Bank with Large International Operations

      • Robert S. Gumerlock

      Pages 160-169

   4. Currency Exposure Management within Philips

      • Arjen E. Ronner, Dirk A. M. Trappeniers

      Pages 170-182

   5. Measuring Value-at-Risk for Mortgage Backed Securities

      • Svend Jakobsen

      Pages 184-206

   6. Does the Paris Warrants Market Present a Systemic Risk?

      • Bruno Caillet, Georges Gallais-Hamonno

      Pages 208-222

   7. Asset and Liability Management in Retail Banking

      • Mervyn K. Lewis, Phillip Morton

      Pages 224-251

5. Policy Implications

   1. Front Matter

      Pages 253-253

      PDF

   2. Is Central Bank Intervention Effective in Stabilizing Exchange Rates?

      • Axel A. Weber

      Pages 254-282

   3. The Emerging Framework of Bank Regulation and Capital Control

      • Julian S. Alworth, Sudipto Bhattacharya

      Pages 284-325

intense competition on banks and other financial institutions, as a period of oligopoly ends: more rather than less innovation is needed to help share undi­ versifiable risks, with more attention to correlations between different risks. Charles Goodhart of the London School of Economics (LSE), while ques­ tioning the idea that volatility has increased, concludes that structural changes have made regulation more problematic and calls for improved information availability on derivatives transactions. In a thirteen country case study of the bond market turbulence of 1994, Bo­ rio and McCauley of the BIS pin the primary causes of the market decline on the market's own dynamics rather than on variations in market participants' apprehensions about economic fundamentals. Colm Kearney of the Univer­ sity of Western Sydney, after a six country study of volatility in economic and financial variables, concludes that more international collaboration in man­ aging financial volatility (other than in foreign exchange markets) is needed in Europe. Finally, Stokman and Vlaar of the Dutch central bank investigate the empirical evidence for the interaction between volatility and international transactions in real and financial assets for the Netherlands, concluding that such influence depends on the chosen volatility measure. The authors sug­ gest that there are no strong arguments for international restrictions to reduce volatility. INSTITUTIONAL ISSUES AND PRACTICES The six papers in Part C focus on what market participants are doing to manage risk.

• Banking
• Bond Market
• Financial Market
• Financial Markets
• Retail Banking

• Bocconi University, Milan, Italy

  Franco Bruni

• Royal Bank of Scotland, London, UK

  Donald E. Fair

• Global Business Network, London, UK

  Richard O’Brien

Policies and ethics