Risk Management in Capital Markets

Dear Colleagues,

Capital markets play a critical role in facilitating financial intermediation and mobilizing monetary savings to provide timely access to finance, support risk management and propel economic growth. More importantly, efficient capital markets are effective in helping long-term investment and fostering investors’ portfolio diversification and risk-taking. While supporting individuals to grow their wealth over time, these markets also allow businesses to diversify their sources of investment and to raise cheaper financial capital required for growth. Capital markets often enhance international linkage and foster stock markets correlations so as to influence asset returns, price volatility and risk-sharing among investors. Given today’s unprecedented financial disruption, many economies have undertaken continuous reforms to manage cross-border trade and investment uncertainties. Therefore, global international markets are, today, more integrated with the rest of the world and these institutions do respond rapidly to adverse shocks from global economic outlook and key foreign macroeconomic announcements. On the other hand, capital market liberalizations over the last two decades have significantly supported the correlation between emerging and advanced markets while also helping in the reduction in volatility challenges in most emerging markets. However, overtime, challenges of market volatility represent a major uncertainty that play a significant role in influencing variations in stock returns and equity risk premiums. Notably, while investors generally tend to seek stability and predictability, market volatility means a higher cost of managing risks. Finally, in the context of rapidly changing international business environments, greater trade networks, increased communication and closer connectedness patterns have enhanced the possibilities for commodity markets to react rapidly and instantaneously to new information and innovation. In conclusion, it is not only important to examine risk management strategies in today’s marketplace, as investments are highly volatile, but also the impact of institutionalization, digitalization, modernization and globalization. 

Therefore, papers analyzing the impact of risk management in enhancing business growth and capital performance and in the context of financing investment decision-making are welcomed.

Prof. Dr. Abdullahi Dahir Ahmed
Guest Editor

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• financial market linkages
• risk management and regulatory reforms
• risk connectedness and economic policy uncertainty
• equity capital dynamics
• volatility management
• return and volatility spillover
• price discovery process
• funding/lending in today’s volatile markets
• risk and social connectedness
• stock price volatility connectedness
• financial product innovation
• capital mobility and investment opportunities
• capital market integration
• financial risk management
• intermediation and monetary policy challenges