Risk-adjusted performances of world equity indices

This paper investigates whether equity indices of 24 emerging and 28 developed markets compensate their investors equally after taking risk into account. We place special emphasis on downside risk by calculating both nonparametric and parametric value at risk. We find that when all 52 markets are ranked based on their alternative reward-to-risk ratios, almost all of the countries in the top quartile are emerging markets whereas almost all of the countries in the bottom quartile are developed markets. These results are supported by the finding that pooled means of the reward-to-risk ratios are significantly higher for emerging markets compared to those of developed markets. Focusing on the period after the initiation of the recent financial crisis reveals that, although both developed and emerging markets suffered in terms of generating higher returns per unit risk, emerging markets continued to outperform developed markets and the outperformance became more pronounced

Life expectancy associated with different ages at diagnosis of type 2 diabetes in high-income countries: 23 million person-years of observation

Summary Background: The prevalence of type 2 diabetes is increasing rapidly, particularly among younger age groups. Estimates suggest that people with diabetes die, on average, 6 years earlier than people without diabetes. We aimed to provide reliable estimates of the associations between age at diagnosis of diabetes and all-cause mortality, cause-specific mortality, and reductions in life expectancy. Methods: For this observational study, we conducted a combined analysis of individual-participant data from 19 high-income countries using two large-scale data sources: the Emerging Risk Factors Collaboration (96 cohorts, median baseline years 1961–2007, median latest follow-up years 1980–2013) and the UK Biobank (median baseline year 2006, median latest follow-up year 2020). We calculated age-adjusted and sex-adjusted hazard ratios (HRs) for all-cause mortality according to age at diagnosis of diabetes using data from 1 515 718 participants, in whom deaths were recorded during 23·1 million person-years of follow-up. We estimated cumulative survival by applying age-specific HRs to age-specific death rates from 2015 for the USA and the EU. Findings: For participants with diabetes, we observed a linear dose–response association between earlier age at diagnosis and higher risk of all-cause mortality compared with participants without diabetes. HRs were 2·69 (95% CI 2·43–2·97) when diagnosed at 30–39 years, 2·26 (2·08–2·45) at 40–49 years, 1·84 (1·72–1·97) at 50–59 years, 1·57 (1·47–1·67) at 60–69 years, and 1·39 (1·29–1·51) at 70 years and older. HRs per decade of earlier diagnosis were similar for men and women. Using death rates from the USA, a 50-year-old individual with diabetes died on average 14 years earlier when diagnosed aged 30 years, 10 years earlier when diagnosed aged 40 years, or 6 years earlier when diagnosed aged 50 years than an individual without diabetes. Using EU death rates, the corresponding estimates were 13, 9, or 5 years earlier. Interpretation: Every decade of earlier diagnosis of diabetes was associated with about 3–4 years of lower life expectancy, highlighting the need to develop and implement interventions that prevent or delay the onset of diabetes and to intensify the treatment of risk factors among young adults diagnosed with diabetes.Summary Background: The prevalence of type 2 diabetes is increasing rapidly, particularly among younger age groups. Estimates suggest that people with diabetes die, on average, 6 years earlier than people without diabetes. We aimed to provide reliable estimates of the associations between age at diagnosis of diabetes and all-cause mortality, cause-specific mortality, and reductions in life expectancy. Methods: For this observational study, we conducted a combined analysis of individual-participant data from 19 high-income countries using two large-scale data sources: the Emerging Risk Factors Collaboration (96 cohorts, median baseline years 1961–2007, median latest follow-up years 1980–2013) and the UK Biobank (median baseline year 2006, median latest follow-up year 2020). We calculated age-adjusted and sex-adjusted hazard ratios (HRs) for all-cause mortality according to age at diagnosis of diabetes using data from 1 515 718 participants, in whom deaths were recorded during 23·1 million person-years of follow-up. We estimated cumulative survival by applying age-specific HRs to age-specific death rates from 2015 for the USA and the EU. Findings: For participants with diabetes, we observed a linear dose–response association between earlier age at diagnosis and higher risk of all-cause mortality compared with participants without diabetes. HRs were 2·69 (95% CI 2·43–2·97) when diagnosed at 30–39 years, 2·26 (2·08–2·45) at 40–49 years, 1·84 (1·72–1·97) at 50–59 years, 1·57 (1·47–1·67) at 60–69 years, and 1·39 (1·29–1·51) at 70 years and older. HRs per decade of earlier diagnosis were similar for men and women. Using death rates from the USA, a 50-year-old individual with diabetes died on average 14 years earlier when diagnosed aged 30 years, 10 years earlier when diagnosed aged 40 years, or 6 years earlier when diagnosed aged 50 years than an individual without diabetes. Using EU death rates, the corresponding estimates were 13, 9, or 5 years earlier. Interpretation: Every decade of earlier diagnosis of diabetes was associated with about 3–4 years of lower life expectancy, highlighting the need to develop and implement interventions that prevent or delay the onset of diabetes and to intensify the treatment of risk factors among young adults diagnosed with diabetes

Credit derivatives in emerging markets

Credit Derivatives are securities that offer protection against credit or default risk of bonds or loans. The credit derivatives emerging market has grown rapidly and credit derivatives are widely used. This paper describes the emerging credit derivatives market structure. The current market activity is analyzed through elementary pricing dynamics and the study of the term structure of default risk. Focusing on the performance of credit derivatives in stress situation, including legal and market risks, we discuss the potential consequences of a debt restructuring in a large emerging market borrower. The contribution of credit derivatives to the risk sharing in emerging markets is also examined.Emerging markets, derivatives, sovereign debt, debt restructuring

How strong is the global integration of emerging market regions? An empirical assessment

In recent years, various emerging market regions have actively taken part in the movements of globalization and world market integration. However, the process of financial integration appears to vary over time and differs significantly across emerging market regions. This paper attempts to evaluate the time-varying integration of emerging markets from a regional perspective (Asia, Latin America, Middle East, and Southeast Europe) based on a conditional version of the International Capital Asset Pricing Model (ICAPM) with DCC-GARCH parameters that allows for dynamic changes in the degree of market integration, global market risk premium, regional exchange-rate risk premium, and local market risk premium. Overall, our findings reveal several interesting facts. First, the time-varying degree of integration of four emerging regions, satisfactorily explained by the regional level of trade openness and the term premium of US interest rates, has recently tended to increase, but these markets still remain substantially segmented from the world market. Second, the local market risk premium is found to explain more than 50% of the total risk premium for emerging market returns. Finally, we show that conditional correlations usually underestimate and overstate the measure of time-varying market integration. The empirical results of this study have some important implications for both global investors and policy makers with respect to dedicated portfolio investments in emerging markets and policy adjustments.time-varying integration, emerging markets, ICAPM, risk premium, DCC-GARCH

Emerging Risks in the Dutch Food Chain report on project 2: Application of indicator analyses on several critical points in the salmon production chain and identification of related data sources

An indicator analysis was performed on the fish production chain by assessing the indicators which may be of importance for the detection of emerging risks. The indicators were embedded in a “risk pathway”, in which the relations between different indicators could be illustrated. The risk pathways illustrate the main characteristics of the salmon production chain. However further research is required in order to develop further interaction with other sectors, and production chains to bring emerging risk detection to the next level. In relation to the assigned indicators, a selection of (electronic) data sources were identified in order to be able to combine data flows with indicators and risk pathways. The indicators were analyzed for availability, sources of data entry, validation of data sources, update frequency and delay in input. The combination of risk pathways, indicators and data sources, will be one of the key information sources for the further development of an Emerging Risk Detection Support System (ERDSS)

Domestic Debt Structures in Emerging Markets : New Empirical Evidence

This paper explains why public domestic debt composition in emerging economies can be risky, namely in foreign currency, with a short maturity or indexed. It analyses empirically the determinants of these risk sources separately, developing a new large dataset compiled from national sources for 33 emerging economies over 1994-2006. The paper finds that economic size, the breadth of the domestic investor base, inflation and fiscal soundness are all associated with risky public domestic debt compositions, yet to an extent that varies considerably in terms of magnitude and significance across sources of risk. Only inflation impacts all types of risky debt, underscoring the overarching importance of monetary credibility to make domestic debt compositions in emerging economies safer. Given local bond markets' rapid development, monitoring risky public domestic debt compositions in emerging economies becomes increasingly relevant to global financial stability.Public domestic debt, composition, risk, emerging economies.

Why Do Emerging Economies Borrow Short Term?

We argue that emerging economies borrow short term due to the high risk premium charged by bondholders on long-term debt. First, we present a model where the debt maturity structure is the outcome of a risk sharing problem between the government and bondholders. By issuing long-term debt, the government lowers the probability of a rollover crisis, transferring risk to bondholders. In equilibrium, this risk is re‡ected in a higher risk premium and borrowing cost. Therefore, the government faces a trade-o¤ between safer long-term debt and cheaper short-term debt. Second, we construct a new database of sovereign bond prices and issuance. We show that emerging economies pay a positive term premium (a higher risk premium on long-term bonds than on short-term bonds). During crises, the term premium increases, with issuance shifting towards shorter maturities. The evidence suggests that investor risk aversion is important to understand the debt structure in emerging economiesemerging market debt; financial crises; investor risk aversion

Pricing Rare Event Risk in Emerging Markets

This paper solves the pricing problem of an merging market debt contract in which the borrower’s economy is subject to rare event risk. Our model combines elements of a reduced form and a structural model of debt pricing. Rare event risk is modeled as a sudden event in fundamentals, and we study the role of the debt contract in providing risk sharing between the borrower and the lender. The two main frictions under consideration in our equilibrium model are limited participation of the lender through the debt contract, and heterogeneous beliefs between the borrower and the lender about the likelihood of a rare event. We solve for the rate of interest, the credit spread, the risk premium, the write-off (recovery rate) in case of default, and the dynamics of the debt contract in non-default times. We find that limited participation combined with heterogeneous beliefs has strong e®ects on the level and variability of the debt contract propertiesRare Event Risk, Emerging Markets, Exchange Economy, Heterogeneous Beliefs, Incomplete Market

Capital Regulation and Credit Risk Taking : Empirical Evidence from Banks in Emerging Market Economies

The primary purpose of this article is to investigate the relationship between bank capital and credit risk taking in emerging market economies. We also investigate the influence of several regulatory, institutional and legal features on the relationship between risk and capital. We apply a simultaneous equations framework following Shrieves and Dahl (1992) and Jacques and Nigro (1997). Our results corroborate the existing findings for US and other industrial economies, putting forward the impact of capital regulation on banks’ behavior. We also show empirical evidence on the role of the regulatory, institutional and legal environment in driving bank capitalization and credit risk taking behavior in emerging market economies.bank capital and risk taking, bank regulation, emerging market economies, regulatory, institutional and legal environment