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Post-crisis policy measures in Asia have focussed on banking sector and market reform. The paper argues that in order to propel growth, banking and market reform in Asia must be undertaken with the view that they are not mutually exclusive competitive tradeoffs. Rather banks and markets must be viewed as complementary supportive pillars in a financial system. Additionally, legal and functional reform must be undertaken simultaneously. The paper proposes that a likely consequence of doing so will enable creating a four-pillared multi-dimensional growth paradigm in the region to help restore and promote growth.

Country‐specific information on risk management is increasingly important, not only for investors and decision makers in international markets but also, for those in national and regional markets. This study reports the results of a cross‐sectional survey of risk management practice and derivatives use by a sample of Australian firms. Overall, the results suggest that firm‐specific factors appear to have some influence on risk management practice with the industry of the respondent being the most important, while the degree of international exposure has the least. Larger and more internationally exposed firms are likely to have more frequent reporting of derivatives use, and are more likely to use swaps and options to manage risks than other types of firms. Issues and implications for international firms are discussed.

We investigate the relationships between the sovereign bonds issued in international markets by major Asia-Pacific issuers (China, Korea, Malaysia, Philippines and Thailand) and various benchmark US Treasury bonds (2, 5, 10 and 30 year maturities). The results suggest that the equilibrium relationship holds only between pairs of bonds of equivalent credit status. The dynamics of these processes highlight aggregation issues for portfolio managers constructing portfolios of sovereign Asian bonds of different credit ratings.

The history and prospects of European integration are both fascinating and exciting. Analysts of every aspect of this process, including its cultural, economic, financial, historical, political, and social dimensions, should recall that its main rationale remains as it has always been, to permanently end conflict and to secure peace and prosperity for all Europeans. As the European Union's (EU's) own website (see http://europa.eu.int) points out Europe has been the scene of many and frequent bloody wars throughout the centuries. In the 75-year period between 1870 and 1945, for example, France and Germany fought each other three times with huge loss of life. The history of modern European integration commenced in earnest with the realization in the early 1950s that the best way to prevent future conflict is to secure more economic and political integration. This led to the establishment of the European Coal and Steel Community in 1951, followed shortly by the European Economic Community (EEC) in 1957. Since then, the process of integration and enlargement has progressed at varying speeds, but always moving forwards. In 1967, the founding institutions of the EEC were merged to form today's European Commission (EC), the Council of Ministers, and the European Parliament. The members of the European Parliament were initially chosen by the member governments of the EEC, but direct elections commenced in 1979, and have continued every 5 years since then. The Treaty of Maastricht created the EU in 1992 and established the process of economic and monetary union (EMU) that culminated in the introduction of the euro in 12 of the 15 Member States in 2002.

The Asia Pacific region is a geographical appellation that many still feel with justification will be the dynamic economic arena for this century. Accepting this premise and acknowledging the importance of the role of finance in that development brings with it the imperative to gain a greater understanding of the unique financial characteristics of the region. This chapter has two major pursuits. The first goal is to provide some background on the various markets of the region. An understanding of institutional detail (size and scope) of the relevant markets affords a view that lends or detracts from the credibility of intermarket comparisons. An exposure to institutional detail also supplies information that may bear on the statistical results of the empirical analysis. The vital roles played by stock markets of pricing capital, issuing new shares, providing a liquidity-creating secondary feature, serving as a vehicle for asset transfer and providing a linkage to international capital markets are as important to emerging markets as to developed countries. However, fixed income markets are still not as well developed in emerging markets and therefore an even heavier capital sourcing burden is placed on emerging stock markets. The Asia Pacific region derivatives markets (futures and options) play their risk-transfer role in equity and fixed income areas and are integral to the scene. The second pursuit in this chapter is to provide a thumbnail sketch of each of the contributions. The summary will include the nature of the empirical work, the type of methodology or statistical technique applied, and the results. In addition the results will be viewed in light of any reinforcement or digression from a priori expectations drawn from other markets. This volume contains 19 original research papers from 36 authors who represent major academic and financial institutions around the globe.

In terms of notional value outstanding, derivatives markets declined in both over-the-counter and exchange-traded transactions during the 2007–2009 global financial crisis (GFC) period, as counterparty and credit concerns became pre-eminent. However, during the 2010–2011 second stage of the GFC, markets rebounded and by June 2011 outstandings reached new levels which highlight the importance these contracts continue to play in the day-to-day risk management and trading activities of corporations and financial intermediaries. The bulk of the contracts traded are interest rate-related instruments and are denominated in either US dollars or Euro. Credit-related instruments remain an important market segment, although outstandings remain at pre-crisis period levels. Of particular concern for regulators is the role of non-bank financial intermediaries, which are the main counterparty to derivatives transactions. While their share of the market remains unchanged over the last decade, outstandings overall have increased more than fourfold. The present volume considers the issues that participants face in today's derivatives markets including the potential impact of derivatives on economic stability, pricing issues, modelling as well as model performance and the application of derivatives for risk management and corporate control.

Zaleha Abdul Shukor is a Senior lecturer in Accounting at the School of Accounting, Universiti kebangsaan Malaysia. She obtained Masters of Commerce from Macquarie Uni, Australia and BSc (Acctg) from Syracuse Univ, NY. She is pursuing her PhD at Universiti Teknologi MARA, Malaysia. Her research interests include, financial reporting and capital market-based research.

Recently East Asian policymakers have focused on facilitating corporate bond market development through a host of financial market reforms including greater foreign participation in the domestic markets as issuers and investors. However, the alternate approach – the encouragement of domestic issuers to further tap international markets – remains largely ignored. The objective of this study is to investigate these issues in the context of reform undertaken by Thailand following the Asian Crisis of 1997. As a small and open economy, Thailand was forced to become more receptive to foreign investment and capital market participation. We raise the significance of bond return volatility and skewness as an impediment to greater involvement by international investors. Empirical analysis highlights the time-varying nature of both variance and skewness of bond returns, which can only be overcome through government policy that focuses upon stabilizing the macroeconomic environment and not simply enhancing domestic and regional financial market infrastructure.

We compare the aggregated international assets and liabilities of banks that report to the Bank for International Settlements (BIS) to establish their gross and net international exposures during recent episodes of financial crisis. Initially we consider these positions worldwide and then focus on the cross-border flows within Europe, considered in terms of core and peripheral countries. These gross and net asset–liability positions are both time-varying and respond to crisis periods, through better matching of international assets and liabilities as well as the realignment of asset positions to reduce balance sheet risks. These conclusions are consistent with other studies that utilise international banking flow data, while the European experience highlights the diversity of international position taking. This is due to the complexity of managing risks within the eurozone (EZ) and peripheral countries, and those emerging European countries that retain legacy currencies.

In the past decade, academic research has been awash with proposals on how Japan should reform, redesign and administer its bank-based financial system (Schinasi & Smith, 1998; Kuratani & Endo, 2000; Hattori, Koyama, & Yonetani, 2001; Rhee, 2001; Baba & Hisada, 2002; Batten & Szilagyi, 2003). Until the late 1980s, this unique regime, involving banks having cross-ownership with industry, was a driving force behind Japan's post-war economic miracle. However, the burst of the asset bubble, and the subsequent prolonged ailing of both the banking sector and the economy as a whole suggests that during the bubble period, the monitoring effectiveness of banks was compromised by a lack of independence from industry and the absence of external discipline. This banking crisis ultimately impaired the corporate sector's fund-raising ability, while trapping excess liquidity in the financial system through a lack of attractive investment choice afforded to risk-averse Japanese investors.