Author Archives: Kimmo Soramäki

The Feasibility of Systemic Risk Measurement

By Kimmo Soramäki | Published: November 3, 2009
A testimony by Andrew Lo for the U.S. House of Representatives Financial Services Committee for its hearing on systemic risk regulation, held October 29, 2009. It proposes two major measures that could alleviate the next big financial crisis. First, new legislation that provides more transparency on a confidential basis to regulators on financial institutions activities. This would [...]
Posted in News | Comments closed

Informational Properties of Trading Networks

By Kimmo Soramäki | Published: November 3, 2009
There is a new interesting paper “On the Informational Properties of Trading Networks” by Adamic, Brunetti Harris and Kirilenko using transaction level data for all regular transactions in September 2008 E-mini S&P 500 futures contracts. They construct networks from executed trades and then look at the structure of these networks and relate them to returns, volatility, [...]
Posted in Research | Comments closed

ECB workshop on “Recent advances in modelling systemic risk using network analysis”

By Kimmo Soramäki | Published: October 9, 2009
European Central Bank (ECB) organized a workshop with the above title last Monday, 5th of October. It was the first event of this scale gathering researchers applying network theory and network analysis on banking, financial stability and systemic risk topics. The introductory remarks to the workshop were given by Gertrude Tumpel-Gugerell, Member of the ECB’s [...]
Posted in Conferences, Research | Comments closed

European Systemic Risk Board to be established

By Kimmo Soramäki | Published: September 23, 2009
A proposal for a new EU institution, European Systemic Risk Board, was published on 23 September 2009. The proposed body will have the mandate to map financial risks and their concentration at the system level for the macro-prudential supervision of systemic stability. European Union central banks will have a prominent role in it and the Secretariat [...]
Posted in News | Comments closed

Receipt reactive gross settlement simulator

By Kimmo Soramäki | Published: September 13, 2009
The Receipt Reactive Gross Settlement (RRGS) method was proposed by Jamie McAndrews in Johnson-McAndrews and Soramaki (2004) as a new, incentive compatible liquidity saving mechanism. The basic idea of RRGS is that banks are sure to use only incoming funds to settle their less urgent payments. Each bank has the incentive to submit payments to [...]
Posted in Research, Tools and software | Comments closed

7th Bank of Finland Simulation seminar

By Kimmo Soramäki | Published: September 4, 2009
The Bank of Finland’s simulation seminar was organized for the 7th time on 24-26 August 2009. I thought both the talks and the discussions on the agenda this year were of high quality. I presented some work done together with Marco Galbiati on central counterparties and the topology of clearing networks. The conference covered analysis [...]
Posted in Conferences, Research | Comments closed

Software for identifying interbank loans from payment data

By Kimmo Soramäki | Published: August 21, 2009
In 1999 Craig Furfine published the article “Interbank exposures: quantifying the risk of contagion” (BIS Working paper, No. 70) where he for the first time used data on individual payments settled in the interbank payment system to construct a time series of the unsecured overnight loan market. The methodology has since been duplicated by numerous [...]
Posted in Research, Tools and software | Comments closed

Is network theory the best hope for regulating systemic risk?

By Kimmo Soramäki | Published: July 10, 2009
I was recently interviewed for the article by Christopher Wright, now published in the CFA magazine (July/August 2009, Vol. 20, No. 4) and entitled "Six degrees of rumination – Is network theory the best hope for regulating systemic risk?". The article discusses whether and how network theory can be used to develop a "financial network [...]
Posted in News | Comments closed

Simulation analyses and stress testing of payment networks

By Kimmo Soramäki | Published: July 10, 2009
The third edition of Bank of Finland series on payment and settlement system simulation studies has been published today. The preliminary versions of the papers have been presented at the annual simulator seminars arranged by the Bank in 2007 and 2008. The main focus of the analyses in this edition is on business continuity arrangements, [...]
Posted in Research | Comments closed

Genetic algorithms in Java

By Kimmo Soramäki | Published: March 26, 2009
As part of another project I revisited some Java code for developing genetic algorithms (GA). I had programmed them earlier as part of our Agent-based simulations where banks’ decision making evolved through the use of genetic algorithms. I decided to make the general purpose GA code available in case someone finds a use for it. [...]
Posted in Research, Tools and software | Comments closed