Introducing the new editorial team for The Journal of Risk Finance

Citation

Buchanan, B.G. (2014), "Introducing the new editorial team for The Journal of Risk Finance", Journal of Risk Finance, Vol. 15 No. 1. https://doi.org/10.1108/JRF-12-2013-0084

Introducing the new editorial team for The Journal of Risk Finance

Article Type: Editorial From: The Journal of Risk Finance, Volume 15, Issue 1

The field of applied financial risk research has made many advances in recent years. Both institutional and individual investors have sought new sources of return and income while balancing risk concerns. Effective identification, assessment and prioritization of risk (a cornerstone of ISO 31000) are all important for an organization’s internal control framework and corporate governance. As we have learned from the recent financial crisis, when there are failures in effective risk measurement the consequences can be dire ranging from reputational risk to job losses and ultimately company collapse. The recent financial crisis has increased both industrial and regulatory demand for effective risk management in organizations.

At The Journal of Risk Finance we strive to be the premier journal in the field of applied financial risk management. In the first issue of Volume 15, I would like to introduce the new editorial team and new aims and scope of The Journal of Risk Finance. Samantha Kappagoda and David Mordecai (co-founders of Risk Economics, Inc.) were the founding editors of The Journal of Risk Finance and edited the journal for six years from 1999 to 2005. The journal was then acquired by Emerald Group Publishing. For the past nine years the Editor-in-Chief was Michael Powers. David and Samantha will continue to serve as Senior Editorial Advisory Board members at The Journal of Risk Finance. Dr Scott Stewart and Dr Michael Imerman will now serve as Associate Editors at the journal.

I encourage you to visit the journal’s new web site to view its new aims and scope: http://www.emeraldinsight.com/jrf.htm.

The Journal of Risk Finance coverage will now include securitization and structured financial products; financial risk management and its regulation; risk governance; financial innovation; covered bond markets; alternative risk measures; corporate social responsibility and risk management; enterprise risk management; data analytics and risk management; cyber risk management and risk forensics.

I would also like to draw your attention to two special issues that will be published in late 2014 and 2015. The first special issue is titled, “Securitization: catalyst or solution to the financifal crisis?” and will be Guest Edited by Professor Moorad Choudhry, Royal Bank of Scotland. The second special issue titled, “Corporate governance: responses after the financial crisis”, will be on corporate governance and risk finance in financial services and is being Guest Edited by Professor Tom Berglund, Head of the Center of Corporate Governance, Hanken School of Economics, Finland.

An overview of upcoming papers in this issue is now provided. For many years value at risk (VaR) models have become a standard in determining the level of risk capital. Market volatility prediction plays a crucial role in the management trade-off between adequate capital provisions and liquidity demands. In “Multiple-period market risk prediction under long memory: when VaR is higher than expected”, Harald Kinateder and Niklas Wagner model multiple period market risk forecasts under long memory persistence in market volatility. They find their approach improves VaR forecasts for longer horizons and that their approach also enhances efficiency in allocating VaR capital through time.

The importance of reducing commodity price risk has been acknowledged by the World Bank as a priority for economic development (The World Bank, 2005). Piloting and adoption of market-based risk management instruments and the creation of countercyclical safety nets for poor farmers are important policy options for organizations. Quanto options are derivatives that involve two currencies and are considered important price risk hedging tools in developing countries that have no access to futures markets. In “Cross market price support and agricultural development: quanto options valuation for cash grains in Mexico” Leslie J. Verteramo Chiu and Calum G. Turvey develop a dual currency financial derivative model, or quanto, to investigate a market based price insurance product for grain farmers at various locations throughout Mexico. Their conclusions are that the relative prices of quanto options are consistent with the option prices traded at the Chicago Mercantile Exchange and any differences in prices are due to the extra sources of risk that developing countries face.

The financial crisis has also highlighted the need for better credit risk models. In “Models for predicting default: towards efficient forecasts” by Fernando Castagnolo and Gustavo Ferro, the authors examine four existing models widely used in the banking industry: the O-Score, Z-Score, Campbell and the Merton Distance to Default Model (MDDM) and compare their ability to forecast defaults using three techniques: intra cohort analysis, power curves and the discrete hazard rate model. They find that the default prediction ability of scoring models can be improved by incorporating both market and accounting data and by the MDDM structural form.

In “Concentration risk model for Greek bank’s credit portfolio” Constantinos Lefcaditis, Anastasios Tsamis and John Leventides propose a model that modifies the Basel II methodology to include concentration risk. Their data is based on a portfolio of Greek companies which are financed by Greek commercial banks. The simulated portfolios and the credit VaR calculations show a gap between Basel II capital requirements and credit VaR and the authors find their model is easily implementable.

Discount rates in the range of 30-70 percent are typically used by venture capitalists. In the paper, “Why do venture capitalists use such high discount rates?” Sanjai Bhagat provides an economic rationale of why venture capitalists use such high discount rates. He argues that common stock reported returns are relevant for projects that have succeeded in that they have net cash flows. The fact that venture capitalists charge rates of return reflects the fact that not all projects succeed in that they have no net cash flow.

Finally, during this transition period I would again like to thank the former Editor-in-Chief, Michael Powers, as well as the new Associate Editors, Dr Scott Stewart and Dr Michael Imerman. I am also extremely grateful to the Emerald Group Managing Editors Samantha Thompson and Katie Spike. And finally, I am also very grateful to the publisher, Valerie Robillard for all of her gracious and invaluable help, advice and diligence during the transition period these past few months.

Bonnie G. Buchanan