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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.

We investigate how Korean stock market and its participants react to the sub-prime mortgage crisis. Using data for the ABX sub-prime index, we find strong evidence of information transmission from ABX to KOSPI and VKOSPI during 2007 sub-prime mortgage crisis period. Responding to the drop of ABX, domestic institutional investors buy, whereas foreign investors sell. Furthermore, we find KOSPI reacts to ABX less than the response implied by KOSPI response to S&P 500 and S&P 500 response to ABX, which are considered as an efficient channel of information transmission. This phenomenon occurs because domestic investors buy stocks as ABX drops, thus keeping KOSPI from responding fully to information on ABX. On the contrary, foreign investors sell stocks as ABX drops, which show that foreign investors play as a channel for sub‐prime mortgage information transmission. This evidence supports the hypothesis of Kho (2011) that foreign investors have an informational advantage over domestic investors on overseas information.

The aim of this paper is to provide a grammar for dissecting the financial crisis that began in the housing finance market of industrialized nations in 2007, rapidly becoming a general credit crisis and spreading to all parts of the world and causing a global recession of gigantic proportions. The unexpectedness and force of the crisis has had experts floundering for an explanation and the policy response has been an ad hoc collection of stimulus interventions by governments and central banks around the world, akin to scatter shots in the hope that some will hit the target whatever it be.

The paper is based essentially on a static equilibrium model. The author chose the assumptions carefully to capture some of the features of dynamics in this static model. Also, a static model does not have to mean one period but the infinite repetition of the same kind of world. The aim here is to draw on some existing ideas concerning equilibria where group behavior influences individual preferences, and which give rise to multiple equilibria. Unlike several other works, the model in this paper does not try to explain the collapse in terms of the bursting of a bubble.

As more and more lenders indulged in sub‐prime lending, the share of risky borrowers rose. With a little lag, defaults rose. More and more houses came back on the market, and the value of houses declined. So the value of F (value of the mortgaged property), with which individual lenders had begun their calculations, declined. Clearly, the value of F depends on how many others were indulging in sub‐prime lending. If this aggregate supply was forecast wrongly, some firms would end up discovering that their asset position had weakened since the foreclosed property did not have the value originally calculated.

The model developed is a new frame for conceptualizing the crisis. While there has already been some theorizing on this, the model has the advantage of novelty and simplicity. It provides a stark characterization of how a small credit correction can escalate into a major equilibrium shift with large changes in behavior, in this case, a sudden collapse in the supply of and demand for loans. It is distinct from existing models of collapse in lending, which are based on the idea of bubbles bursting. Despite the model's simplicity, it turns out to be a useful structure addressing policy questions.

This chapter analyses the causes and effects of the financial crisis that commenced in 2008, and it examines the dramatic government rescues and reforms. The outcomes of this, the most severe collapse to befall the United States and the global economy for three-quarters of a century, are still unfolding. Banks, homeowners and industries stood to benefit from government intervention, particularly the huge infusion of taxpayer funds, but their future is uncertain. Instead of extending vital credit, banks simply kept the capital to cover other firm needs (including bonuses for executives). Industry in the prevailing slack economy was not actively seeking investment opportunities and credit expansion. The property and job markets languished behind securities market recovery. It all has been disheartening and scary – rage against those in charge fuelled gloom and cynicism. Immense private debt was a precursor, but public debt is the legacy we must resolve in the future.

The goal of this research is to investigate the time‐varying relationship between REITs and the stock markets in four Asian markets such as Taiwan, Hong Kong, Singapore and Japan.

The Multivariate GARCH‐vech model is used to capture the time‐varying correlation. The extreme value theory (EVT) is then employed to describe the extreme connection between REIT and market returns before and after financial crises.

Empirical results show that the conditional risks in both markets have increased abruptly since the start of the sub‐prime mortgage crisis and soared to a higher level as Lehman Brothers collapsed. Besides, the REIT markets have been positively correlated with stock markets since the sub‐prime crisis unfolded and the increases of correlation coefficients after the crisis are more than two times larger than those before the crisis in most of the countries. Lastly, the size and probability of having extreme positive coefficient are greater than those expected in normal market conditions.

Thus, empirical evidence suggests that REITs are not as defensive as they are in times of stable markets and may not be a good shelter during financial chaos.

To investors, the authors' findings can fortify the understanding of market connections and assist in forming their portfolios. The authors' conclusion, which is drawn given the background of financial market turbulence, is different from those of other works, which mainly focus on the connection of REITs and stock markets in normal market conditions.

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 purpose of this paper is to investigate the recent global economic downturn. Particularly, the study explores the utilization of the concept of Brownian motion in financial risk management in organizations in the USA.

The three assumptions, namely, independence, stationarity, and normal distribution that underlie the concept of Brownian motion are examined.

It is concluded that the widely used risk management strategies predicated on Brownian motion fail to provide a rational understanding of financial turmoil. Consequently, prescriptive insights are offered to aid the industry in developing an apposite mechanism for risk management.

This paper offers new and improved risk management strategies that need to be undertaken to augment our understanding and prediction of financial scenarios.

The paper is useful for managers in all financial organizations, which employ computer models using Brownian motions. Specifically, this study contends that static models are unsuitable and dynamic models are more useful for risk assessment.

The paper reveals the weaknesses of the key assumptions of the risk management models used in financial organizations, namely, normal distribution of stock market price fluctuations, statistical stationarity, and efficient market assumption. Valuable guidelines are provided for financial managers who either do not have the inclination or time to sift through the voluminous literature related to the risk management models and computer software designed on these models.

The global recession has strongly affected the credibility of the international banking system, damaging also the real economy.

Developing countries, not fully integrated with international markets, seem less affected and local microfinance institutions might also allow for a further shelter against recession, even if foreign support is slowing down and collection of international capital is harder and more expensive.

Intrinsic characteristics of microfinance, such as closeness to the borrowers, limited risk and exposure and little if any correlation with international markets have an anti-cyclical effect. In hard and confused times, it pays to be little, flexible and simple.

The purpose of this paper is to examine the literature of CSR before and in the aftermath of the financial crisis in 2008. The aim of the research question is to map out the consequences upon CSR derived from the crisis and to derive new principles of future CSR models to come consistent with the consequences of the financial crisis, and to suggest new research as well as policy-making possibilities to highlight the importance and necessary survival of CSR as an instrument for sustainable and financial progress.

This paper uses a literature review of CSR prior to and after the financial crisis 2008, with an emphasis on academic papers published in peer-reviewed journals.

The findings of the paper reveal that post-crisis CSR-models do not articulate anything that has not been mentioned before; however, they do strengthen former values of CSR, but still lack an overall formula of how the financial sector can adopt CSR in the core of their businesses, and transparently display their products, and the risk adhering to them. The paper proposes a new Four-“E”-Principle that may guide new CSR-models to accomplish this deficit. See under “Originality”.

The paper calls for a discussion on ways in which governments and businesses can enhance social responsibility, though balancing the requirements of more engagement from businesses, as well as public sector companies in CSR. This paper suggests some instrumental mechanisms of how governments can engage, not only multinational companies, but also smaller companies, and other kinds of organizations acting on the market, to make them engage more in CSR.

The paper proposes a new Four-“E”-Principle to guide the development of new CSR-models based upon the core of Schwartz and Carroll's “Three-domain CSR-model”, which the Principle extends and revises to: Economy, L/Egal, Environment, and Ethics. This Principle disentangles the dialectic relationship between economic and social responsibility; takes financial products into consideration; refines the definitions of good stakeholder engagement without the illusions of corporate “Potemkinity”; and considers the benefit of replacing the semiotic meaning of the “C” in CSR from “corporate” to “capitalism's social responsibility” in order to extend the concept towards a broader range of market agents.

Reviews the latest management developments across the globe and pinpoints practical implications from cutting‐edge research and case studies.

This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.

It is late 2008 and the financial systems of the world are in meltdown. Sub‐prime mortgages in the USA have gone bad, the big banks are being propped up by governments, consumer demand has plummeted and the first crisis of the global age is dawning with a vengeance. There are a lot of revered voices pontificating on what went wrong, who was wrong and what will go wrong in the future, but the damage has been done.

Provides strategic insights and practical thinking that have influenced some of the world's leading organizations.

The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy‐to‐digest format.