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Financial Network Analytics @ ECB


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Seminar at European Central Bank on 17 August 2011

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Financial Network Analytics @ ECB

  1. 1. Presentation at European Central Bank<br />17 August 2011<br />Financial Network Analytics<br />Kimmo Soramäki<br /><br />
  2. 2. Katsushika Hokusai. The great wave off Kanagawa ~1830<br />
  3. 3. Eratosthenes' map of the known world, c. 194 BC<br />
  4. 4. Go is a board game that originated in China more than 2,000 years ago. <br />
  5. 5. Data deluge<br />Data tsunami - digital information is doubling every 1.2 years<br />Regulatory response to recent financial crisis was to strengthen macro-prudential supervision with mandates for more regulatory data<br />The challenge will be to understand and analyze the data (public, commercial and regulatory)<br />Data enables “Analytics based policy”, i.e. the application of computer technology, operational research, and statistics to solve regulatory problems<br />
  6. 6. Network maps<br />Erastothenescreated the first known map of the world and is considered the father of geography and the concepts of latitude and longitude (i.e. ways to measure it)<br />Recent financial crisis brought to light the need to look at links between financial institutions<br />Network are a natural way to present financiallinkage data. Mapping of the financial systemhas only begun<br />Maps reduce uncertainty about interconnections <br />Garrett, Mahadeva and Svirydenska (2011)<br />Soramaki, Bech et al (2006)<br />
  7. 7. Intelligence<br />Pattern recognition is hard for computers -> the best Go programs only manage to reach an intermediate amateur level<br />Financial crisis are different and rare <br />The patterns to be recognized must be frequent enough for computers to learn<br />A solution is to augment human intelligence (in contrast to AI)<br />Intelligence amplification (William Ross Ashby 1956)<br />
  8. 8. Financial Network Analytics Platform<br />
  9. 9. Objectives<br />Provide a tool for exploration, analysis and visualization of regulatory financial data <br />Provide a extendible platform for custom functionality, agent based models and other simulation models<br />Make advances in research available to policy<br />
  10. 10. Situation around March 2010<br />Furfine algorithm<br />Payment System Simulator<br />FNA 1.1<br />
  11. 11. Because analyzing financial microdata is difficult<br />Files are large, content is difficult to understand<br />Data is incomplete and messy<br />Data is confidential<br />Most analysis packages are opaque<br />Error and trial<br />Paradigm<br />
  12. 12. Platform + modules + sharing<br />
  13. 13. Current modules<br />
  14. 14. The network model<br />N3 Prop1=Aaa; Prop2=Bbb;…..<br />N2 Prop1=Aaa; Prop2=Bbb;…..<br />A1<br />Source=V1<br />Dest=V2<br />Props…<br />Network 1 – N1<br />Prop1=Abc<br />Prop2=Def<br />…<br />A2<br />Source=V2<br />Dest=V3<br />Props…<br />14<br />V2<br />Prop1=20<br />Prop2=Ab<br />Prop3=Bc<br />A3<br />Source=V2<br />Dest=V1<br />Props…<br />V1<br />Prop1=20<br />Prop2=Ab<br />Prop3=Bc<br />V3<br />Prop1=20<br />Prop2=Ab<br />Prop3=Bc<br />Time Series<br />
  15. 15. Explain screen<br />Screen elements<br />Result panel shows command output<br />Access via browser in intranet, internet or desktop<br />And creates files (charts, data, etc)<br />Operation based on commands<br />Submit command<br />Each command has different parameters<br />‘Visualize’ screen shows created charts and layouts<br />Switch between ‘point-and-click’ and command line view<br />Files and database connections are in file panels<br />15<br />
  16. 16. Tabs allow multiple visualisations open<br />All visualisations are html documents that work also outside FNA<br />16<br />
  17. 17. Dashboard (concept)<br />The dashboard can combine multiple views to the data on a single screen<br />17<br />It can be available e.g. on the intranet and updated daily<br />
  18. 18. Command line<br />All commands can be submitted using command syntax <br />History provides an easy way to make new scripts for research or for the dashboard<br />All commands submitted (also from point-and-click) are shown in history<br />18<br />
  19. 19. Command line<br />Scripts can be run from the scripts panel or as regular jobs by the server<br />19<br />
  20. 20. FNA is available at<br /><br />(as from 29 August 2011)<br />Contact us<br /><br />
  21. 21. Technical details<br />Performance<br />Client server architecture allows use of high performance servers, computer clusters and cloud computing<br />High-performance graph engine ( <br />Fast client application (Google web toolkit e.g. as in<br />Security<br />Sensitivity and confidentiality of data creates addition constraints for analysis<br />Data is stored on server where it can be protected better (vs analysts desktops)<br />Each user accesses FNA with her own account<br />SSL encryption of traffic<br />Logging and analytics, audit trail<br />Integration to corporate IT<br />Integration to databases possible<br />FNA accounts can be managed centrally by IT (integration to LDAP systems)<br />Can run on most application servers<br />Modular structure allows easier updates<br />