The Systemic Perspective on Finance
The financial world has been transformed in the last twenty years by the introduction of advanced technologies and new quantitative methods. Financial markets today operate at a much higher speed, and are much more interconnected. Trading volumes have exploded. Volatility and "correlation" are spiking. The Global 24/7 Market is the new reality.
This complexity creates a new Upside and a huge new Downside. There are opportunities to enhance financial performance, but also new threats to many traditional franchises. It has exploded our perspective on risk. In addition to traditional concepts of market risk and credit risk, we must address a new set of issues such as model risk, execution risk, business process risk, software systems integrity, cyber-security threats, and looming over everything the risks of financial contagion that arise from the heightened interconnectedness of the financial system. In the wake of the 2008-2009 financial crisis, the gap in our understanding of these new risks and complexities is a headline concern.
The key emerging insight is that the financial markets and risks possess a Systemic character which means that events or actions in one sector of the financial world can propagate quickly into many other sectors, interacting across old boundaries and breaching the traditional "fire-walls"- with complex consequences that are often difficult to predict, and impossible to navigate, without a comprehensive understanding of the financial system as a whole.
The Stevens Financial Systems Center
The FSC is focused on research and educational agendas driven by this new complexity. Our aim is to broaden the meaning of Finance as a discipline, beyond its traditional focus on capital structure, asset management and portfolio returns, to encompass the new regulatory, risk, and technology management perspectives that are increasingly required to ensure successful outcomes in a global systemic framework.