Abstract
Capital market is propitious for social change. It facilitates free flow of long-term funds and securities. Its essence is to satisfy long-term investment and funding needs of investors and borrowers. There’s a twofold point to this essence. It admits of investors seeking outlet for long-term investment of their idle funds. Then it recognizes the need of borrowers for noninterest based funds for long-term utilization. Capital markets bridge the investment-funding divide implied in foregoing essence. Often, mobilization of idle funds at the disposal of potential long-term investors and channeling the funds to satisfying long-term funding needs of potential borrowers are fraught with market risk. Occasional boom to bust of stock markets is typical. Investors and borrowers alike face the risk. In most cases, the risk borders on volatility of capital markets. I explore how banks mitigate capital this risk in developing economies.
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