Consortium for Systemic Risk Analytics Joins MIT Research Organizations

Major financial firms to sponsor research on systemic risk in the global financial system

24 Sep, 2015, 16:41 ET from MIT Sloan School of Management

CAMBRIDGE, Mass., Sept. 24, 2015 /PRNewswire/ -- The Consortium for Systemic Risk Analytics (CSRA), a not-for-profit Delaware Corporation, and the MIT Sloan School of Management announced today that it will become part of a joint collaboration among three MIT research centers—the Laboratory for Financial Engineering (LFE), the Center for Finance and Policy (CFP), and the newly launched Institute for Data, Systems, and Society (IDSS)—to continue its mission to foster interdisciplinary research in the measurement of systemic risk in the financial system.

The CSRA was formed to bring together industry, government and academic researchers to collaborate on developing tools and resources to enable a deeper understanding of systemic risk in global financial markets. The consortium was founded in 2010 by researchers at the LFE and at a number of large financial institutions and formally launched for external membership in July 2012 (see www.systemic-risk.org).

"This is an exciting development in the evolution and growth of the CSRA, and will greatly expand our scope and depth in systemic risk analytics," said Roger Stein, CSRA president, one of the initiative's founders, Senior Lecturer in Finance at MIT, and an LFE research affiliate. "We could not be more pleased to be deepening our ties within MIT."

The members of the CSRA formed the consortium in the wake of the global financial crisis because it became increasingly clear that the nature of systemic risk makes it impossible for any single financial institution to independently measure and manage the complexity and interconnectedness of modern financial markets.  This led to the CSRA's innovative approach to sharing research results and fostering bilateral industry-academic research collaborations. From the outset, the CSRA has favored cross-disciplinary approaches to modeling systemic risk, with research topics drawn from disciplines such as computer science, engineering, cryptography, operations research, mathematics and statistics, as well as economics and finance.

The merger of the CSRA with the three MIT organizations is timely.  Financial institutions, data analytics firms and government agencies are all seeking new predictive analytics that can serve as early warning systems for threats to financial stability. 

The new MIT Institute for Data, Systems, and Society focuses on understanding and analyzing vast amounts of data to understand complex systems, such as those in finance, and develop insights and actions to inform how such systems are developed and regulated.

"Addressing issues of systemic risk across financial systems requires a multi-disciplinary approach," says Munther Dahleh, Director of IDSS. "It requires researchers with deep understanding of the dynamics of financial systems, as well as researchers with expertise in data science, statistics and human behavior. CSRA will play a key role in bringing this expertise together."

In its new configuration, the CSRA will further extend its interdisciplinary reach through strengthened ties with several MIT research communities.  In addition to continuing to sponsor research summits and to foster research collaboration, the CSRA will also begin to publish open-source tools and software through a public-access systemic risk dashboard.

The transition will take place over the next 12 months, during which time the CSRA's current not-for-profit corporation will be reconstituted as an LFE/CFP/IDSS research consortium.

"All of us at the LFE, CFP and IDSS are grateful for the opportunity to bring the CSRA to MIT, which will allow a much larger community of researchers to interact with practitioners and policymakers," said Andrew Lo, Charles E. and Susan T. Harris Professor at MIT, director of the LFE, one of the founders of the CSRA, and an affiliated faculty member of both the CFP and IDSS.

"Systemic risk is one of the CFP's target research areas, and we are excited about the new knowledge creation that a partnership with the CSRA will make possible," notes Deborah Lucas, Sloan Distinguished Professor of Finance and Director of the CFP. 

About the CSRA
The Consortium for Systemic Risk Analytics (CSRA) is a not-for-profit Delaware corporation founded in 2010 by core group of researchers from financial and academic institutions who were concerned about the lack of coherent information on the indicators of financial crises.  The interdisciplinary group assembled to pool intellectual and informational resources to study the phenomena that drive systemic market dislocations and to develop analytic tools to better understand these dynamics.  The organization is motivated by a shared realization that systemic risk, by definition, cannot be understood by studying individual institutions or markets in isolation.  The group's members collaborate by sharing data and expertise to conduct joint research and implement computational tools, analytics and data to more deeply understand and map the drivers of global systemic risk, and through participation in semi-annual research summits.

About the LFE
The MIT Laboratory for Financial Engineering (LFE) is a research center created as a partnership between academia and industry, designed to support and promote research in financial engineering and computational finance. The principal focus of the LFE is the quantitative analysis of financial markets using mathematical, statistical, and computational models and methods. The goal of LFE is not only to spur academic advances in financial engineering, but also to reach out to students, industry professionals, regulators, and policymakers to support their applications of financial technology in practical settings. Learn more at http://lfe.mit.edu.

About the CFP
The mission of the MIT Center for Finance and Policy (CFP) is to serve as a catalyst for innovative, cross-disciplinary and non-partisan research and educational initiatives that address the unique challenges facing governments in their role as financial institutions and as regulators of the financial system. The CFP is an Institute-wide initiative that is managed by MIT Sloan's finance group under the leadership of Deborah Lucas (director); Doug Criscitello (executive director); and Andrew Lo, Robert Merton and Jonathan Parker (co-directors). Learn more at http://cfpweb.mit.edu.

About IDSS
The mission of IDSS is to advance education and research in state-of-the-art, analytical methods in information and decision systems; statistics and data science; and the social sciences, and to apply these methods to address complex societal challenges. IDSS research tackles problems in a diverse set of areas such as finance, energy systems, urbanization, social networks and health. Technology advances are rapidly scaling the size and complexity of interconnected systems and networks, and at the same time are generating masses of data that can lead to new insights and understanding. Research at IDSS aims to understand and analyze data from across these systems, which present substantial challenges due to scale, complexity, and the difficulties of extracting clear, actionable insights. Read more at idss.mit.edu.

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