Moodys and State Streets Global Markets division have teamed up with Massachusetts Institute of Technology professor Andrew Lo to create a consortium that will study global systemic risk in the financial system.
Lo, who is a professor at the MIT Sloan School of Management and the director of the schools Laboratory for Financial Engineering, was featured in Time magazine’s annual 100 Most Influential People in the World” list. The magazine cited his rejection of the rational markets theory in favor of adaptive markets, and his multidisciplinary approach to finance, using everything from statistical analysis to neuroscience.
Two conferences have been held promoting the consortium, which intends to increase collaboration between academic and professional financial research to better understand financial risk. It will be titled the Consortium for System Risk Analytics (CSRA). A third conference is planned for later this year.
Understanding the interconnectedness of markets has become an increasingly critical topic for investors and academics alike, says Lo. My collaboration with the consortium members will provide additional resources from various areas of expertise aimed at developing new approaches that institutional investors require to better manage risk.
The market fluctuations of the last several years have led to increased concern among our institutional client base in the measurement and analysis of risk, says Jessica Donohue, senior managing director at State Street Global Markets and a founding board member of CSRA. This consortium will help bring quantitative research insights and risk management tools to an even broader academic audience with the goal of creating a collective forum to examine this complex and important issue.
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