Question

Financial Risk Management

Assessment Task 1

Question 1

The COVID-19 pandemic has had widespread and severe impacts upon financial markets and financial products globally. Outline and explain the potential impacts of the global pandemic of COVID-19 on financial markets and financial institutions and suggest possible policy interventions that can mitigate the consequences on financial markets and products.

Answer 1

1. The fast spread of coronavirus (COVID-19) impacts affects financial markets everywhere throughout the world. It has made an extraordinary degree of risk, making speculators endure noteworthy misfortunes in a brief timeframe. More than 170 nations are influenced, the US has the most affirmed cases. The flare-up has had clear huge monetary effects. For the time being, the same number of nations embrace exacting isolate approaches, their monetary exercises are fundamentally constrained. The more drawn out term results of this pandemic may emerge from mass joblessness and business disappointments. A few businesses, for example, the travel industry and avionics, will unquestionably confront difficulties.

Along with the US crash, stock markets in Europe and Asia have likewise plunged. FTSE, the UK's principle record, dropped over 10% on 12 March 2020, on its most exceedingly awful day since 1987. The stock market in Japan plunged over 20% from its most noteworthy situation in December 2019. National banks and specialists reacted promptly by tossing their policy instruments into the market. For instance, on 15 March 2020, the Federal Reserve (Fed) reported a zero-percent loan cost policy and in any event a $700 billion quantitative facilitating (QE) program. Following the negative reactions to this policy in the market, the FED reported a boundless QE policy eight days after the fact. Albeit most stock markets have as of late started bouncing back, a lot of vulnerability stays as the pandemic proceeds.

The measurements revealed affirming that the pandemic has impacted stock markets. The risk levels of the considerable number of nations have expanded generously, from a normal of 0.0071 in February to 0.0196 in March. Such sensational development can't just in light of long haul desires, rather, it is practically sure that wistful variables assume significant jobs. The market assumption because of the flare-up can be immediately enhanced through web-based social networking, which at that point invigorates exchange exercises and cause outrageous value developments.

The UK and Spain supplant Germany and the Netherlands to turn into the center individuals, which is reliable with the direction of the COVID-19 flare-up. In spite of the fact that Germany remains exceptionally influenced, its casualty rate is far lower than that of the various nations that appeared here. Four Asian stock markets dissipated before the declaration; in any case, they structure a group after the declaration. Albeit a neighborhood center is yet to develop, these four Asian markets are certainly progressively coordinated.

Generally speaking, the proof here shows that territorial market coordination/cooperation is probably going to show up even with this significant emergency. The US stock market, regardless of whether before the emergency got worldwide or after, has neglected to play a main job on the planet.

In the interim, money related specialists have executed escalated policy measures to spare these pained financial markets. In the short-run, these arrangements may fill in as they have in the US – the boundless QE has by one way or another halted the frenzy of speculators. Notwithstanding, these arrangements may make irregularities between financial specialists' present moment and long haul desires. The US' strategies may bring further vulnerability into the worldwide markets and make inconvenience for rising economies, for instance, find that the US QE after the 2008 worldwide financial emergency contributed altogether to the expanded fundamental risk at that point.

The infection has just asserted a huge number of lives and carried critical difficulties to nations from everywhere throughout the world. The financial markets have seen emotional development on a remarkable scale. The current outcomes show that worldwide financial market risks have expanded generously in light of the pandemic. Singular stock market responses are plainly connected to the seriousness of the episode in every nation. The extraordinary vulnerability of the pandemic and its related monetary misfortunes has made markets gotten profoundly unstable and capricious.

Policy responses to contain the infection and level the stock markets are required; be that as it may, non-ordinary policy mediations, for example, the US' boundless QE, make further vulnerability, and may cause long haul issues. What's more, nations are not cooperating to adapt to these difficulties, as markets in the nation bunch concentrated here are reacting contrastingly to national-level approaches and the overall advancement of the pandemic. At last, this inclination toward breaking down in the worldwide network is even more a danger than the infection.