Risk Management Post Financial Crisis: A Period of Monetary Easing (Contemporary Studies in Economic and Financial Analysis, 96) by Jonathan A. Batten

PART I
 APERSPECTIVE ONTHE
 FINANCIAL CRISIS AND GLOBAL
 RISK MANAGEMENT

INTRODUCTION TORISK
 MANAGEMENTPOSTFINANCIAL
 CRISIS: A PERIOD OF MONETARY
 EASING
 Jonathan A. Batten and Niklas F. Wagner
 ABSTRACT
 Financial markets have experienced considerable turbulence over the
 past two decades. The recent subprime and sovereign debt crises in the
 United States and Europe, respectively, have resulted in significant new
 regulatory responses. They also prompted the re-evaluation of how best
 to manage and measure financial risk. The 20 chapters in this volume
 provide a number of different perspectives on financial risk in the post-
crisis period where monetary easing has become a predominant monetary
 policy. While asset price volatility has now returned to levels experienced
 in the mid-2000s many lessons remain. Among the most important is the
 need to accurately measure and manage the complex risks that exist in
 financial markets. Our hope is that the chapters presented here provide a

 better understanding of how best to do this, while also giving insights for
 next suitable steps and further developments.
 Keywords: Subprime crisis; global financial crisis; sovereign debt
 crisis; monetary easing; risk management; risk measurement
 JEL classifications: G01; G1; G2
 In recent years the focus of much of the risk management literature has
 been on the measurement of financial and related risks, rather than necessa-
rily the management of the underlying risky positions of financial sector
 intermediaries or corporations. This is not surprising given the impetus for
 increased regulation of the financial sector arising from revised capital ade-
quacy guidelines and the events surrounding the 2007 2012 Global
 Financial Crisis (GFC). As is well known, these events had an unprece-
dented overall impact on the world economy (see, e.g. Stiglitz, 2009, 2010).
 As the vast impact of the GFC on the real economy was anticipated,
 policy makers worldwide decided to take determined action. The given eco-
nomic policy responses included three major fields, namely (i) global bank
 and other financial institution rescues, (ii) immense economic stimuli from
 fiscal spending packages and finally (iii) monetary policy that provides
 ample liquidity and applies non-standard bond buying techniques often
 called ‘monetary easing’ or ‘quantitative easing’. Needless to say, these
 market interventions caused massive externalities. As many developing
 countries are depended on external capital flows and typically cannot
 afford large rescue packages, the impact of the GFC on emerging econo-
mies should not be underestimated, which became apparent with capital
 flows to emerging economies after the GFC and their recent abrupt reversal
 in 2013/2014. Although the European sovereign debt crisis of 2010 2012
 has its own roots, it can well be seen as a follow-up crisis to the initial U.S.
 subprime crisis as subprime-related bank rescues in Europe led to massive
 increases in the amounts of government debt, which in turn, among other
 events, triggered several country crises more or less simultaneously. These
 coherences illustrate that the GFC and its evoked policy actions still
 impact, and for quite some time will continue to impact, the state of global
 economies and financial markets.
 The GFC arose in part due to the complexity of many products traded
 by financial market participants, and their lack of ability in managing and

Risk Management Post Financial Crisis: A Period of Monetary Easing (Contemporary Studies in Economic and Financial Analysis, 96) by Jonathan A. Batten