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This article combines two sources of data to shed light on the nature of transactional legal work. The first consists of stories about contracts that circulate among elite transactional lawyers. The stories portray lawyers as ineffective market actors who are uninterested in designing superior contracts, who follow rather than lead industry standards, and who depend on governments and other outside actors to spur innovation and correct mistakes. We juxtapose these stories against a dataset of sovereign bond contracts produced by these same lawyers. While the stories suggest that lawyers do not compete or design innovative contracts, their contracts suggest the contrary. The contracts, in fact, are consistent with a market narrative in which lawyers engage in substantial innovation despite constraints inherent in sovereign debt legal work. Why would lawyers favor stories that paint them in a negative light and deny them a potent role as market actors? We conclude with some conjectures as to why this might be so.

The social protests on the streets of indebted sovereigns in crises across the Eurozone have made debt restructuring an imperative. Further delay in achieving this expeditiously and equitably significantly exacerbates the social costs of crises from which current and future generations will struggle to recover. This article examines the feasibility of the drastic and widespread debt restructuring needed to resolve the problem in the face of existing private law sanctions that protect individual creditor rights. It relies on an analysis of US policy in the transition to a securitized market and of key sovereign debt cases to reveal the historical contingency of private law protections. It concludes by showing that the effectiveness of private law protections have always been constrained by the overriding imperative to achieve debt sustainability with negotiated and consensual workouts. This can be achieved in the Eurozone with statutory constraints on enforcement action pending the settlement of debt workouts as suggested in a recent proposal.

The purpose of this paper is to discuss and evaluate the sovereign default restructuring options in the European Monetary Union (EMU).

The paper examines financial policy options from a politico‐economic‐legal perspective. It relies primarily on secondary data analysis.

Sovereign default restructuring an unthinkable phenomenon in the hitherto affluent EMU could now be a possibility because of the lack of political cohesion and the realities of two‐speed European Union.

The paper relies extensively on secondary data. Future research through empirical multiple case studies would enrich the insights of this paper.

Insights from the paper would be of benefit to lawmakers, financial supervisors, financial institutions and investors in general.

The paper's main value lies in its use of multiple lenses to evaluate a serious financial issue in the EMU.

This introduction unpacks the key question that informs the articles in this special issue. How does a social sphere inform regulation and, more specifically, how can the regulatory capacity of a social sphere be harnessed, as an alternative or significant complementary force to state regulation and reliance on the self-regulatory capacity of markets? This question is salient and topical also in light of the search for new regulatory strategies and perspectives in the aftermath of the 2007 financial and subsequent EU sovereign debt crises, which have led to a major realignment of economy and society in a number of countries.

This introduction argues that economic sociology is a crucial reference point for understanding more about the social practices that constitute business behavior. It enables to explore the scope and significance of often interlinked social and legal norms for regulating various transnational risks that economic activity can give rise to. The introduction therefore locates the quest for understanding more about the regulatory capacity of a social sphere in debates that draw on Karl Polanyi’s analysis of the embedding, disembedding, and re-embedding of economic activity into social norms. The introduction highlights one of the key themes developed in this special issue, the idea of society within economy which questions an assumed conceptual distinction between economy and society.

This introduction concludes by specifying how the accounts of risk regulation developed in this special issue chart a path that is different from recent explorations of the role of a social sphere in regulation, which were conducted under the banner of “the sociological citizen,” “regulatory sociability,” and “collaborative governance.”

The purpose of this paper is to examine the effect of trading volume and open interest on volatility of futures markets. The authors capture the size and change in speculative behaviour in futures markets by examining the role of liquidity variables (trading volume and open interest) in the behaviour of futures prices.

The sample includes daily data covering the period 1996-2014 from 36 international futures markets (including currencies, commodities, stock indices, interest rates and bonds). The authors employ a two-stage estimation methodology: first, the authors employ a E-GARCH model and consider the asymmetric response of volatility to shocks of different sign. Further, the authors consider a regression framework to examine the contemporaneous relationships between volatility, trading volume and open interest. To quantify the percentage of volatility that is caused by liquidity variables, the authors also regress the estimated volatilities on the measures of open interest and trading volume.

The authors find that: market depth has an effect on the volatility of futures markets but the direction of this effect depends on the type of contract, and there is evidence of a positive contemporaneous relationship between trading volume and futures volatility for all futures contracts. Impulse-response functions also show that trading volume has a more relevant role in explaining market volatility than open interest.

These results are recommended to financial managers and analysts dealing with futures markets.

To the best of the authors’ knowledge, no study has yet considered a complete database of futures markets to investigate the empirical relation between price changes (volatility), trading volume and open interest in futures markets.

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.

This chapter provides a comprehensive overview of the young, but rapidly growing sovereign credit default swap (CDS) market, describes the function, trading, history, market participants, key statistical and stylized facts about CDS prices, determinants, price discovery, and risk issues.

This paper aims to provide an overview of the market for corporate and sovereign credit default swaps (CDS), with particular focus on Europe. It studies whether the subprime crisis of 2007/2008 and, particularly, the European debt crisis 2009/2010 led to a differential development on corporate and sovereign CDS markets and investigates the primary use (speculative risk-trading or risk-hedging) of the two markets in recent years.

The authors use aggregate market data on the size of the respective markets and on the structure of market participants and their changes over time to assess the main research question. They enhance existing data from public sources such as the Bank for International Settlements and Depository Trust and Clearing Corporation with their own statistics on European sovereign CDS and combine their conclusions with observations regarding standardisation efforts and regulatory changes in the CDS market.

The authors show that after the subprime crisis 2007/2008 and the European debt crisis 2009/2010, the corporate and sovereign CDS markets developed quite differently. They provide evidence that since mid-2010, market participants started to use the sovereign CDS market more strongly for speculative purposes than for risk-hedging. This shows both in the shift of risk-quality of sovereign CDS contracts and in the changing structure of market participants. The ongoing standardisation and regulation in the CDS market – leading to further increases in transparency and reductions in transaction costs – may be expected to trigger a similar change also for corporate CDS.

Based on a broad variety of market infrastructure data, the authors show a diverging development of corporate and sovereign CDS markets in Europe in recent years. Particularly the sovereign CDS market appears to have shifted from a risk-hedging instrument to being used more strongly for speculative risk-trading. The authors combine their findings with recent regulatory action and market standardisation schemes and draw conclusions for the future development of CDS markets.

The sovereign debt crisis in Europe increased the demand for asset manager worldwide to monitor and manage their sovereign risk. While using information from the credit derivatives and bond markets has been used widely in the corporate sector its usage for sovereign risk is novel. The paper aims to discuss these issues.

The basis between a sovereign credit default swap (CDS) and the government bond contains valuable information for assets managers and traders alike. The paper demonstrates the use of the basis between the announcement date and the issue date of a new government bond to decide whether an investment in this bond is profitable.

With this strategy, the authors are able to generate both over all excess returns with a European sovereign portfolio since 2008 as well as a constant outperformance of simple average euro government bond portfolios. The paper furthermore tests the economic rationale behind this trading strategy and confirms prior findings from the corporate market. CDS market liquidity is among the main driver and it follows that the CDS market is faster in anticipating risks than the bond market not only for corporate but also for sovereign entities.

The authors are the first to study the sovereign basis in a sound trading and asset management environment. The paper provides economic explanations and checks for the robustness of the results before the primary issuance of a new government bond.

This paper aims to explore whether the market perceives liquid international sovereign sukūk as distinct from comparable bonds and as an asset class of their own that could shield investors against turbulences in the bond markets.

If sukūk and bonds belong to the same asset class, then basically the same supply and demand factors determine inverstors’ activities in both markets. This should lead to matching patterns of yield curves for sukūk and bonds comparable in terms of issuers, maturity, currency, size, liquidity and rating. Only a rough analysis of holding and trading patterns of conventional and Islamic sukūk investors was possible, as most sukūk market transactions are “over-the-counter” and not registered in the Bloomberg database. However, price information could be used for an analysis of yield curves of liquid sovereign sukūk and comparable bonds.

Conventional investors participate in the sukūk market, but their influence on prices is rather small, as they act primarily as intermediaries (i.e. market makers) as opposed to price setters. The yield curves of the selected bonds and sukūk widely match. This suggests that bonds and liquid sovereign sukūk belong to the same asset class. Furthermore, as turbulences in conventional markets are also reflected in the sukūk markets, Islamic investors themselves play a role in the transmission.

The study of holding patterns and of the market perception of sovereign sukūk and bonds required a focus on four countries with deep and (potentially) liquid sukūk markets (Malaysia, Turkey, Indonesia and Hong Kong) and US$-denominated international securities. Some suitable combinations of sukūk and bonds are relatively young issuances with time series data for two to three years only. Data on holding patterns are sketchy and require interpretations based on market knowledge.

Parallel yield curves indicate that conventional investors do not perceive international sovereign sukūk as an asset class of their own distinct from conventional government bonds. This market perception of liquid international sovereign sukūk could have an impact on other types of sukūk (e.g. on international corporate sukūk) if sovereign sukūk are taken as pricing and performance benchmarks.

The paper sheds light on institutional investor behavior in the bond and sukūk markets and outlines data availability issues that constrain quantitative analyses in over-the-counter markets.