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Risk Management and Financial Derivatives
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Risk Management and Financial Derivatives

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Financial Markets".

Deadline for manuscript submissions: closed (20 March 2022) | Viewed by 23666

Special Issue Editors

Prof. Dr. Eleftherios I. Thalassinos

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Guest Editor
1. Faculty of Maritime and Industrial Studies, University of Piraeus, 185-33 Piraeus, Greece
2. Faculty of Economics, Management and Accountancy, University of Malta, 2080 Msida, Malta
Interests: sustainability; risk management; finance and financial institutions; business models
Special Issues, Collections and Topics in MDPI journals
Dr. Noja Grațiela Georgiana

E-Mail Website
Guest Editor
Faculty of Economics and Business Administration, West University of Timisoara, 300223 Timisoara, Romania
Interests: labor economics; international economics; environmental economics; econometric modelling
Special Issues, Collections and Topics in MDPI journals
Prof. Dr. Mirela Cristea

E-Mail Website
Guest Editor
Faculty of Economics and Business Administration, University of Craiova, 200585 Craiova, Dolj, Romania
Interests: banking; insurance; private pension funds; economics
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

Financial derivatives are increasingly important credentials in a globalized modern economy, significantly shaped today by the COVID-19 outbreak. Companies’ risk exposure has reached extremely high levels, and managers are facing volatile situations of financial distress, digital challenges, stock market instability and financial losses. Derivative products are effective instruments that firms can use to mitigate financial risks and that are no longer nationwide but global and widely complicated. However, the debate is still open on whether derivatives are inherently detrimental financial instruments leading to companies’ financial failures or a positive innovation for risk management in global financial markets. This Special Issue addresses several important topics related to risk management and financial derivatives, and enhances advanced instruments and methods for optimal portfolio management using financial derivatives, to countervail the uncertainties of risk exposure. It welcomes submissions that represent original, high-quality theoretical and empirical research, as well as policy-oriented research papers, that confer clear-cut findings to strengthen the knowledge in this scientific field. Empirical articles on optimal portfolio management, by applying financial derivatives, for various types of companies and groups of countries are particularly encouraged.

Prof. Dr. Eleftherios I. Thalassinos
Prof. Dr. Noja Grațiela Georgiana
Prof. Dr. Mirela Cristea
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Financial econometrics
  • Risk management and analysis
  • Quantitative finance
  • Firm value and performance
  • Derivative products
  • Hedging
  • Financial markets
  • Financial distress
  • Foreign exchange market
  • Market volatility
  • Applied econometrics

Published Papers (5 papers)

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Research

13 pages, 905 KiB  
Article
Breakdown of Government Debt into Components in Euro Area Countries
by Török László
J. Risk Financial Manag. 2022, 15(2), 64; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15020064 - 01 Feb 2022
Cited by 4 | Viewed by 2556
Abstract
The pandemic that erupted in 2020 generated a significant increase in public debt, which is likely to draw the attention of economic policy and the economic profession to the evolution and sustainability of debt. This study first shows how the gross sovereign nominal [...] Read more.
The pandemic that erupted in 2020 generated a significant increase in public debt, which is likely to draw the attention of economic policy and the economic profession to the evolution and sustainability of debt. This study first shows how the gross sovereign nominal consolidated government debt of the euro area member states developed between 2011 and 2019. Using conventional breakdown and correlation calculation methods, the study analyzes how closely the three components are related to the government debt ratio. The three components are: budget balance, economic growth, and real interest rates. The study then groups the member states into groups using the hierarchical cluster analysis of the SPSS program. The “composite” rankings formed on the basis of the correlation coefficients proved to be well-understood, and the examined countries were given a clear position within the cluster. Finally, a verbal macroeconomic analysis of the member states in the same group follows in terms of the relevance of each component in the evolution of their public debt. The analysis shows that each independent variable had a significantly different effect on the change in the government debt ratio of each member state. The results and the correlations established can also be used later to examine the sustainability of public debt in the euro area. Full article
(This article belongs to the Special Issue Risk Management and Financial Derivatives)
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28 pages, 951 KiB  
Article
Risk Management and Agency Theory: Role of the Put Option in Corporate Bonds
by Manish Tewari and Pradipkumar Ramanlal
J. Risk Financial Manag. 2022, 15(2), 61; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15020061 - 30 Jan 2022
Cited by 1 | Viewed by 2981
Abstract
This study sets out a new methodology to exemplify, through a set of risk metrics called the Greeks, impact of a bond’s structured provisions (e.g., call, put, and conversion options) on its risk characteristics and its propensity for agency conflicts. The methodology is [...] Read more.
This study sets out a new methodology to exemplify, through a set of risk metrics called the Greeks, impact of a bond’s structured provisions (e.g., call, put, and conversion options) on its risk characteristics and its propensity for agency conflicts. The methodology is assessed by applying it to a sample of 159 non-convertible bonds, with time-scheduled call and put provisions issued between 1977 and 2005. A structural contingent-claims valuation model is used to value the bonds and estimate the Greeks. The methodology is used to assess the impact of the call and put provisions on the bond’s credit risk and interest-rate risk, as well as the provisions’ ability to mitigate the agency conflict associated with over-investment, under-investment, asset-substitution, and information asymmetry about the firm’s true risk among stakeholders. The main findings of this study are that the put option plays a key role in reducing credit risk, mitigating agency conflict, and protecting against volatility shocks; conversely, the call option plays a key role in reducing interest-rate risk. The methodology is sufficiently general to apply to bonds and preferred stock with any set of structured provisions. Full article
(This article belongs to the Special Issue Risk Management and Financial Derivatives)
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14 pages, 692 KiB  
Article
Price Transmission in Cotton Futures Market: Evidence from Three Countries
by Amrinder Singh and Tarun Kumar Soni
J. Risk Financial Manag. 2021, 14(9), 444; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14090444 - 14 Sep 2021
Cited by 3 | Viewed by 2918
Abstract
This study examines the price transmission between cotton prices in U.S., Indian, and Chinese futures markets. We focus on studying the long-run price movements using cointegration and alternate causality tests. The empirical results indicate the following: (a) the U.S. cotton futures market continues [...] Read more.
This study examines the price transmission between cotton prices in U.S., Indian, and Chinese futures markets. We focus on studying the long-run price movements using cointegration and alternate causality tests. The empirical results indicate the following: (a) the U.S. cotton futures market continues to be the most dominant market, and it leads price changes in India and China; (b) the cotton prices in India also impacts the cotton prices in China as we report a unidirectional relationship flowing from India to China; (c) there is duality of direction of price transmission for U.S. and Chinese commodity markets as we document bi-directional causality between U.S. to Chinese cotton futures for the entire period and uni-directional causality from U.S. to Chinese markets for the two sub-periods; (d) the long-term relationship between the three markets has seen a significant shift as documented by the absence of cointegration which may be due to changes in government policy, especially in India and China specifically after 2014. Overall, results provide support for further reforms especially for Indian and Chinese commodity exchanges so that they can play a vital role in the price discovery process especially for commodities that are largely produced or consumed in these economies. Full article
(This article belongs to the Special Issue Risk Management and Financial Derivatives)
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16 pages, 1817 KiB  
Article
Predicting Firms’ Financial Distress: An Empirical Analysis Using the F-Score Model
by Mahfuzur Rahman, Cheong Li Sa and Md. Abdul Kaium Masud
J. Risk Financial Manag. 2021, 14(5), 199; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14050199 - 01 May 2021
Cited by 11 | Viewed by 7098
Abstract
Financial performance of firms is very important to bankers, shareholders, potential investors, and creditors. The inability of firms to meet their liabilities will affect all its stakeholders and will result in negative consequences in the wider economy. The objective of the study is [...] Read more.
Financial performance of firms is very important to bankers, shareholders, potential investors, and creditors. The inability of firms to meet their liabilities will affect all its stakeholders and will result in negative consequences in the wider economy. The objective of the study is to explore the applicability of a distress prediction model which uses the F-Score and its components to identify firms which are at high risk of going into default. The study incorporates a prediction model and vast literature to address the research questions. The sample of the study is collected from publicly listed firms of the United States. In total, 81 financially distressed firms wereextracted from the UCLA-LoPucki Bankruptcy Research Database during 2009–2017. This study found that the relationship of the F-Score and probability of firms going into financial distress is significant. This study also demonstrated that firms which are at risk of distress tend to record a negative cash flow from operations (CFO) and showed a greater decline in return on assets (ROA) in the year prior to default. This study extends the existing literature by supporting a model which has not been widely used in the area of financial distress predictions. Full article
(This article belongs to the Special Issue Risk Management and Financial Derivatives)
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20 pages, 1212 KiB  
Article
The Interplay between Board Characteristics, Financial Performance, and Risk Management Disclosure in the Financial Services Sector: New Empirical Evidence from Europe
by Gratiela Georgiana Noja, Eleftherios Thalassinos, Mirela Cristea and Irina Maria Grecu
J. Risk Financial Manag. 2021, 14(2), 79; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14020079 - 17 Feb 2021
Cited by 17 | Viewed by 4722
Abstract
This paper empirically evidences the role played by board characteristics (skills, diversity, structure, independence) in supporting risk management disclosure and shaping the financial performance of European companies operating in the financial services sector. We exploit data selected from Thomson Reuters Eikon database in [...] Read more.
This paper empirically evidences the role played by board characteristics (skills, diversity, structure, independence) in supporting risk management disclosure and shaping the financial performance of European companies operating in the financial services sector. We exploit data selected from Thomson Reuters Eikon database in 2020 for the last fiscal year 2019 (FY0) on a longitudinal sample of 144 companies with the head offices in Europe (25 countries). Following an original empirical approach based on two modern financial econometric techniques, namely structural equation modelling (SEM) and network analysis through Gaussian graphical models (GGMs), the research endeavor outlines the decisive importance of an optimal board size, enhanced management skills, upward gender diversity (encompassed by women participation on board management), and structure (mainly a two-tier type, one management board, and a distinctive supervisory board) as fundamentals of risk management strategies, leading to improved financial achievements and a higher profitability for the analyzed companies. Full article
(This article belongs to the Special Issue Risk Management and Financial Derivatives)
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