Editor’s Introduction for the 2026 Special Issue on Emerging Risks
The study of risk occupies a central place in finance because financial systems, institutions, and markets are continually shaped by uncertainty. Yet the sources of uncertainty that matter most to investors, policymakers, and financial institutions are not static. Over time, changing technologies, evolving market structures, geopolitical developments, demographic trends, and regulatory environments create new challenges for risk management and decision making.
This special issue focuses on emerging risks: risks whose importance is increasing because of structural changes in the economic, technological, political, or financial environment. While emerging risks often attract attention because they are new, their greater significance lies in their potential to challenge existing assumptions, create new transmission channels, and expose vulnerabilities that may not be fully captured by traditional analytical frameworks.
Read the full Editor’s Introduction here. Individual articles can be viewed below.
Optimal Currency Exposure When Interest Parity Fails
Executive Summary: Most institutional investors view foreign-exchange risk primarily as a problem to be hedged. This paper challenges that conventional wisdom by demonstrating that currency exposure can play a broader
The End of Crisis Insurance? Reassessing the U.S. Dollar and the Case for Currency Hedging
Executive Summary: For decades, many global investors have viewed exposure to the U.S. dollar as a form of built-in crisis insurance. During periods of market stress, the dollar has often
The Hedging Cost of Forgetting the Exchange Rate
Executive Summary: Many institutional investors build globally diversified portfolios but often assess risk primarily through the lens of domestic-currency returns. This paper demonstrates why overlooking exchange-rate dynamics can create important
The Mandate Blindspot in Your Portfolio: Why Missing Suppliers Means Lost Performance
Executive Summary: Many institutional portfolios appear well diversified when viewed through traditional classifications such as sectors, geographies, and asset classes. However, these conventional frameworks may conceal important vulnerabilities embedded in
Chokepoint Shock Maps: Firm-Level Portfolio Stress for Geoeconomic Risk
Executive Summary: Events such as sanctions, export controls, trade restrictions, shipping disruptions, and critical mineral shortages are becoming an increasingly important feature of the global economy. Yet many investment and
Measuring Tail Geopolitical Risk
Executive Summary: Geopolitical developments have become an increasingly important source of market volatility, inflation pressures, supply-chain disruptions, and financial instability. Yet many commonly used measures of geopolitical risk focus on
Closing Europe’s Risk Capital Gap: The Role of Funded Pensions
Executive Summary: Europe faces a growing challenge: mobilizing sufficient long-term capital to support innovation, infrastructure, productivity growth, and economic competitiveness. This paper examines how pension system design influences the availability
Indigenous Equity Participation and Non-Market Risk in Infrastructure Investment
Executive Summary: Infrastructure investors have traditionally focused on engineering, operational, financing, and regulatory risks. However, many major projects increasingly face delays, cost overruns, and even cancellation as a result of
Artificial Intelligence as a Source of Risk in Asset Management
Executive Summary: Artificial intelligence is rapidly becoming embedded in investment research, due diligence, manager selection, portfolio construction, and risk management. Much of the industry discussion has focused on the productivity
Model Risk in Preference-Learning Robo-Advisors
Executive Summary: Robo-advisors are increasingly using machine-learning systems to infer investor preferences and tailor recommendations accordingly. While this promises more personalized financial advice, it also introduces new risks that remain
Agentic AI in Finance: Emerging Risks and the Regulatory Gap
Executive Summary: Financial institutions are increasingly experimenting with agentic AI systems that can plan, initiate, and execute complex multi-step tasks with limited human intervention. These technologies have the potential to