3/5  Second, a potential increase in economic and geopolitical uncertainty stemming from escalating trade tensions could adversely impact global growth. In this regard, the latest forecasts by international organisations already reflect some impact and, indeed, global growth and global trade has already begun to lose momentum. In addition to protectionist escalation, sources of geopolitical risk have also grown in Europe as a result of Brexit negotiations and the fiscal situation in Italy. But how have financial conditions actually evolved in this new scenario? Until very recently, financial conditions in advanced economies remained loose, while conditions in emerging markets had tightened. Interestingly, US interest rates have increased at the longer maturities, but still modestly. Nevertheless, a materialisation of current risks might lead to a “snap-back” scenario of sharply rising long-run yields, driven by a sudden decompression of term premia, that might amplify market stress and harm the economy. In this context of growing near-term risks, a better understanding of volatility, the second topic of the conference, is also crucial for central banks, given the implications for monetary policies and financial stability. The period of ultra-loose monetary policy has driven a prolonged period of low volatilities. Nevertheless, global markets could be entering a new phase of higher volatility or more frequent short-lived bouts of instability as interest rates increase. Moreover, volatility markets – in particular, volatility-linked derivatives – have become more popular in this low-uncertainty environment.

Let me mention a few of them: (i) the reinforcement of policy measures to address bank-like risks stemming from the activities of non-banks, which have significantly increased in recent years; (ii) the emergence of new risks, such as those derived from financial technology or cybersecurity; 4/5  (iii) the strengthening of sustainable finance to address environmental risk, and (iv) the creation or expansion of global and regional backstops. I am certain that our speakers in this conference will address these and other interesting matters. Indeed we will have the opportunity to explore this subject in depth through nine selected articles by prominent researchers. Actually, we are most privileged to have with us two distinguished keynote speakers, Ricardo Reis and Torben Andersen, who will no doubt illuminate us on these important matters. This two-day conference is organised in four sessions: the first will address certain money and market-related aspects. During the second session we will try to shed some light on the propagation of shocks when considering higher-order statistical moments of economic and financial variables. The third session will deal with two issues related to risk which are important for central banks, namely the credit risk associated with monetary policy operations and the evaluation of systemic risk measures. Finally, the fourth session on uncertainty will deal with the spillovers from the uncertainty on certain financial markets to the macroeconomy or to other markets. And now, allow me to introduce you to our first speaker, Ricardo Reis. We are particularly honoured to have him here today.