Financial institutions face significant analytical demands in areas such as securities trading, portfolio design, risk management, and regulatory compliance. The agencies overseeing the financial system are charged with monitoring a complex network of interacting institutions. Expanding regulatory initiatives; the growing complexity of financial products, markets and institutions; and the availability of massive amounts of data are driving increased demand for innovative analytics at organizations and supervisory agencies. The Center for Financial and Risk Analytics pioneers models, algorithms and numerical tools to address the challenging and important problems arising in this context. The Center’s faculty and doctoral students combine expertise in core areas such as stochastics, optimization, networks and algorithms with a deep understanding of financial markets to make fundamental advances of broad relevance.
Core-periphery banking network. An illustration of the remarkable interconnectedness in the U.S. banking industry. Blue dots represent the biggest banks. Smaller banks are arranged according to their financial exposure, and therefore risk, to default by the larger institutions. Note, for instance, how strongly connected Freddie Mac is.