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On September 18, 2007, the Federal Reserve Open Market Committee took a major step by cutting the federal funds rate by one‐half a percent (50 basis points). The only time this had happened in the USA was immediately after the September 11, 2001 attacks. Then the sub‐prime derivatives market threatened to engulf the US economy under a dark cloud of uncertainty. The purpose of this paper is an attempt to draw lessons relevant to international financial strategy from the US sub‐prime crisis.

This paper presents reflections upon the sub‐prime derivatives market that had begun to evolve since 1993. Reviewing the situation from then until as late as of October 18, 2007, five key lessons are conceptualized. Where possible, insights on the major lessons to be drawn are rendered through simple diagrams.

Five major lessons may be drawn from the sub‐prime turmoil. For easy citation, these are presented as idioms: “Do not put all bad eggs in one basket,” “Excessive demand outbalances risk and return,” “Robustness of actions for resolving a crisis,” “Banks to stay respectable as banks,” “Outcome of innovation, greed, and politics.” In conclusion, all these lessons are integrated through an overview.

These lessons are explained in a manner so as to render them useful for both practitioners in the financial industry globally and a broader audience of interested readers. In particular, a thinking approach to learning is emphasized. Financial innovators are reminded of the wisdom of the ancients (eggs in a basket), and the applications of artificially intelligent forecasts of financial futures; specifically, US$ exchange rates are brought into the discussion.

This is an original piece of thinking on what lessons may be drawn from a major highly turbulent event: the sub‐prime crisis. It is an event that is a direct consequence of innovation in the financial markets.

Asian markets have shown immediate response to the financial crisis in the past and stock returns were affected critically. An attempt is made to study the volatility of stock returns in this paper. The authors studied the impact of global crisis on volatility of stock returns; that can help in better policy selection and implementation in the scenario of financial downturn. Looking at the increase in volume of trades between Asia and the world, Asian markets have gained prime position within global financial industry. Thus, it is essential that more researches are employed for better understanding of Asian Markets.

Impact on volatility of stock market returns of Hong Kong, Japan, China and India during sub-prime crisis and Eurozone debt crisis has been estimated using Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model. The analysis is done using time series data of daily returns for the period 2005-2011 of the major indices of these countries (Hang Seng, Nikkei 225, Shanghai Composite and Nifty for Hong Kong, Japan, China and India, respectively). These series show non-normality, thick tails and high persistence in volatility and clustering and asymmetric properties.

It has been found that the sub-prime crisis had a positive impact on the volatility of returns of Japan, China and India while it had no impact on the volatility of returns of Hong Kong. In addition, it is interesting to see that the period of Eurozone debt crisis has had a negative impact on the volatility of already highly volatile stock returns of countries such as India and China. However, no impact on volatility of stock market returns in Japan and Hong Kong was observed of the Eurozone crisis. Also the authors noticed volatility clustering, persistence, asymmetry and leverage effects’ in stock returns series of Hong Kong, Japan, China and India.

As far as limitations of the paper are concerned, the economy per say always has a cyclic tendency. This again has scope for distorting the final result and as again the reason given above the authors think that the effect will be minimized. As the paper is using specific statistical methods to verify the model and so the basic limitations of the statistical methods used will apply to the model also.

The results could be used in better understanding of the nature of sub-prime crisis and Eurozone debt crisis and how they impact different stock markets of Asia. Better policies during different scenarios of crisis could be employed by the countries. Furthermore, it can also prove useful in minimizing the impact on Asian markets from economic crisis in future.

The research is first to indicate the relationship between global crisis and sudden changes in variance of stock returns in Asian markets. The paper attempts to fill the gap of research in this area and also suggests the difference in nature of crisis and how they can affect certain countries. Further research could be done in studying suitable policy measures that can be implemented during different kinds of global crisis.

The collapse of the sub‐prime mortgage market parallels several earlier failures within the financial services sector, begging the question why the lessons of past failures were not learned. Throughout history from the tulip bulb crisis of the 1600s to the most recent economic crisis, decision‐makers keep making the same mistakes. This occurs in part because of a failure to recognize similarities between past and current events. This conceptual paper aims to use systems dynamics tools to examine the crisis and illustrate how seemingly independent events are linked.

The paper provides a fundamental review of systems thinking concepts and uses a tool of systems dynamics, causal loop diagrams (CLD), to provide a visualization of the dynamics of the sub‐prime market collapse over time. This approach provides insights that traditional analytic methods do not, which should be beneficial in understanding future cases where speculative demand drives behavior.

The paper uses the CLD tool to understand the evolution of the recent financial crisis. It finds that the dynamics of the collapse closely mirror many historic financial disasters (the paper cites several) and proposes the fundamental CLD of this phenomenon be elevated to a special category of the “limits to growth” archetype model. The paper makes this recommendation in the hope it will allow investors and policy makers to quickly recognize future speculative events when they happen again.

This paper argues that, despite the surface level uniqueness and complexity of the recent economic collapse, there is an underlying simplicity that links the recent collapse with speculative boom/busts going back over 400 years. The representation that the paper develops applies the language of systems thinking to the most recent financial crisis. A mental model of this system and the corresponding systems structure can be used to not only understand what happened, but also inform decision‐makers when similar speculative behavior occurs in the future.

The purpose of this paper is to examine the impact of Federal Open Market Committee (FOMC) announcements, which includes information about the targeted Federal fund rate and revision to the future path of monetary policy on Southeast Asian stock market performance.

This paper has used a sample of five national equity market indexes over the period 1997-2013 that covers 132 scheduled FOMC meetings. The authors have developed the model of Wongswan (2009) and Kontonikas et al. (2013) to quantify target surprise and path surprise.

The results first show that all the stock markets examined do respond to information in FOMC announcements. Second, the target Federal fund rate has more impact on Southeast Asian stocks performance than information about the future path of monetary policy does. Third, different Southeast Asian equity markets respond similarly to targeting the Federal fund rate, while the responses to monetary policy differ from each other. Fourth, the response of each country to the FOMC announcement is not statistically different in the two periods of financial crisis.

Southeast Asian financial markets are increasingly highly correlated to the US market. The main channel in which FOMC announcement has impact on Southeast Asian stock markets is through US price transmission. This is the case of foreign firms borrowing from the US market. Then, an increase in interest rate, which means that the cost of financing increases, will lower firm equity value.

The understanding of the response of the Southeast Asian stock markets to target surprise and path surprise, and the impact of each surprise in different time periods, would be important to investors and encourage further discussion amongst academics in Southeast Asia, where stock markets have been emerging in recent years.

The purpose of this paper is to examine the way Islamic financial institutions dealt with the recent financial problems in terms of risk management.

In total, 27 Islamic banks and the same number of conventional banks selected from a wide range of countries around the world were analyzed. The capital ratios, based on the Basel Committee, are the primary tools used to analyze the riskiness of the Islamic and conventional banks. The focus on capital ratios is relevant in light of changes in banks' balance sheets due to significant write offs that caused a huge credit crunch in the western world. Capital ratios are considered as a reliable source in predicting potential bankruptcies.

The paper shows that Islamic banks are maintaining better capital ratios than to their conventional counterparts.

The paper presents a new approach to the comparative performance of Islamic and conventional banks in terms of risk management. The research design as well as the findings can be very useful to academicians and banking professionals alike.

The purpose of this paper is to test the efficient market hypothesis for major Indian sectoral indices by means of long memory approach in both time domain and frequency domain. This paper also tests the accuracy of the detrended fluctuation analysis (DFA) approach and the local Whittle (LW) approach by means of Monte Carlo simulation experiments.

The author applies the DFA approach for the computation of the scaling exponent in the time domain. The robustness of the results is tested by the computation of the scaling exponent in the frequency domain by means of the LW estimator. The author applies moving sub-sample approach on DFA to study the evolution of market efficiency in Indian sectoral indices.

The Monte Carlo simulation experiments indicate that the DFA approach and the LW approach provides good estimates of the scaling exponent as the sample size increases. The author also finds that the efficiency characteristics of Indian sectoral indices and their stages of development are dynamic in nature.

This paper has both methodological and empirical originality. On the methodological side, the author tests the small sample properties of the DFA and the LW approaches by using simulated series of fractional Gaussian noise and find that both the approach possesses superior properties in terms of capturing the scaling behavior of asset prices. On the empirical side, the author studies the evolution of long-range dependence characteristics in Indian sectoral indices.

In business, globalization refers to the process of integrating the economies of the world, which results in the emergence of an interdependent business world. Nations are now living in a globalized business world. The globalization process began in the 1980s, developed rapidly in the context of the Washington Consensus of the 1990s, and entered the new millennium with great fanfare. Booming consumerism, rapid economic growth, rising incomes, and massive financial flows and transactions became the order of the day. Hardware-industrial China and software-service India rode the wave. With a high growth rate, prosperity seemed unending.

Then the anticlimax of 2007–2008 and later occurred. Financial crisis emerged from sub-prime crisis, bank failures, sudden credit collapse, market uncertainties, stock market crash, and the disappearance of business confidence. The crises certainly ushered in a “Great Recession,” which through vigorous international efforts stopped falling short of a “Great Depression.” The focus has again turned on China and India who are expected to lead in the recovery.

Where did the world go wrong? Here comes the Gandhian Thought and Philosophy. The paper seeks to explain how “greed” overtook “need,” “speculation” overtook “sensible thinking,” “self-aggrandizement” overtook “trusteeship,” and “consumerism” overtook “modest consumption.” Business everywhere should have been based on trust, transparency, and truth. But this foundation seems to have disappeared. These facts are analyzed, the relevance of Gandhi is brought out, and future perspectives are discussed.

This study analyzes the trends and patterns of strategic and innovative macroeconomic variables during recession or slowdown periods of 10 countries – Brazil, the United States, UK, Germany, France, China, Japan, India, Saudi Arabia, and South Korea for the period 1980–2018, which includes major recessions like the 1982 debt crisis, 1991 economic crisis, 1997 Asian Financial crisis, and 2008 Sub-prime crisis. This study devised two models – Logistic Regression and a Range-based Custom-Made Recession-cum-Economy State indicator, based on Dynamic Ordinary Least Squares (DOLS) model parameters. Results for the logistic regression model show that most of the marginal effect values are positive for variables linked with globalization indicating that increase in adverse impact on such variables increases the probability of recession. The custom-made statistical index provides an individual country-wise range, along with a global range for the weighted total of the variables, the weights for which are derived from the DOLS model, which has a 59.66% accuracy in estimating the condition of an economy. The recent worldwide experience indicates that probability of recessions has decreased, and slowdowns have increased over a period. This is evident from the Cumulative Trend of Economic State analysis that indicates that the recession probabilities of countries have decreased 1990 and that of slowdown have become highly volatile.

The purpose of this paper is to stress the role that several defective theories or views of the world played in generating the subprime financial crisis.

This is done by describing these views, showing that they were widely held by relevant decision makers, and by analyzing the flaws in these views. A considerable amount of literature is surveyed in the process.

It was found that these defective views did play a major role in generating the crisis.

Implications of the analysis for future research are discussed.

Implications of the analysis for reform of private and public sector financial policies are discussed.

While most of the arguments in the paper are not new, no paper of which the author is aware pulls them together with the same emphasis on how faulty mental models interacted with dangerous incentive structures to play a prime role in generating the crisis. The paper also references a much wider range of literature on the crisis than any study of which the author is aware. The paper should be of value to any one interested in the causes of the crisis and ways to make future crises less likely.

The purpose for writing the paper is to emphasize the need for global banking reforms so as to prevent future economics crisis.

The methodology followed is based on literature review and secondary data.

This was found that banking crisis can be prevented in future by the following methods such as regulating systemic risk; separating proprietary trade; information transparency; creating a robust and resilient financial system etc.

The creation of a new systemic risk regulator, either at the national or international level would be helpful if it could warn about the major existing systemic risks, including the exploding debt, central banks' balance sheet, and the bailout mentality. The groups such as the Financial Stability Board, working along with the IMF and G20, are better suited to that role.

In the wake of the crisis, policymakers around the world are looking for ways to fix the international financial system. The paper emphasizes that we have to move towards a planetary governance structure – for the safety of the financial system. Reform of financial regulation needs clearly to be in order. It is essential with the objective of supporting global economic recovery and putting the economy back on track to sustainable growth.