Network Theory and Financial Risk - Risk Books
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Network Theory and Financial Risk

Edited By Kimmo Soramäki and Samantha Cook

Overview

"The Global Financial Crisis drove home the limitations of traditional statistical analysis to identify systemic risks stemming from structural weaknesses.  Many observers have come to realize that economic and financial markets are examples of complex, highly interconnected, dynamic, adaptive systems.  Network analysis is increasingly seen as an important tool for categorizing and tracking the key characteristics of such systems and for identifying areas of potential vulnerability.  Network Theory and Financial Risk is a timely introduction to this essential topic.  While not for the mathematically faint of heart, it will serve for many years to come as a vital resource for those seeking solid technical grounding in this area." 

David M. Rowe, Ph.D.
President, David M. Rowe Risk Advisory and long-time Risk Analysis columnist for Risk magazine


"‘Financial networks are all around us’ - this is how the book starts. Is there a better way to express the powerfulness of the use of network theory to tackle financial problems? Network Theory and Financial Risk gives a comprehensive view on financial networks and takes the next step towards applications and visualization. Kimmo and Samantha have provided an exhaustive overview of financial networks techniques combined with many examples that bring the abstraction of the subject to practical understanding."


Tiziana Di Matteo
Professor of Econophysics, Department of Mathematics, King's College London


About the book

The financial crisis of 2007-2009 demonstrated the dangers of ignoring connections in complex systems for economics and finance: Lehman Brothers and AIG weren’t the biggest players in terms of size, but were very highly connected in the markets and their failures led to shocks across the financial system which are still being felt today.

As a result, applications of network theory are becoming ever more present in finance, with network analysis providing answers to questions where traditional analysis methods are weak; and also leading to improved models across wide types of risks. In fact, networks underlie virtually every type of risk, including liquidity, operational, insurance, and credit risk. However, while network approaches are very useful, understanding complex networks is not easy.

Network Theory and Financial Risk is a hands-on guide to analysing and modelling financial networks.  Authors Kimmo Soramaki and Samantha Cook provide an in-depth introduction to network theory and examine general tools for network analysis, detailing coverage of four types of widely-occurring financial networks: payment systems, exposure networks, trade networks, and asset correlation networks.


Download your free sample of Network Theory and Financial Risk here today.

Publish date: 25 Mar 2016

Availability: In stock

Product Unit Price Qty
Book - Network Theory and Financial Risk
£145.00
eBook - Network Theory and Financial Risk
EPUB
£110.00
OR

Book description

Almost all areas of financial risk have an underlying network that is relevant for measuring this risk. Understanding market risk involves understanding an entire network of assets; understanding liquidity risk involves understanding the network of liquidity flows; and understanding systemic risk necessitates understanding the network of counterparty exposures.

Network Theory and Financial Risk
presents detailed examples of financial networks, which the reader can then put to use in practice analysing asset, payment, exposure, and supply chain networks for improved assessment and analysis of risk.  Moreover, with an improved knowledge of network theory and the understanding that networks are literally everywhere, the reader may apply the concepts of network theory to new areas within and beyond finance.

Network Theory and Financial Risk is geared primarily towards practitioners, quantitative analysts, data scientists, economists and managers who have some knowledge of network theory and want to put that knowledge to use in analysing real network data. By making network analysis accessible, the book will also be of interest to researchers, professors, and students whose subject area contains network data.

Book details

ISBN
Book - 9781782722199 / eBook - 9781782722878
Publish date
25 Mar 2016
Format
Paperback
Size
155mm x 235mm

Editor biography

Kimmo Soramäki and Samantha Cook

Kimmo Soramäki is the Founder and CEO of Financial Network Analytics Ltd. (FNA), a software vendor specializing in mapping, modeling and visualizing interconnected financial systems. Before founding FNA in 2010, Kimmo worked for 15 years in policymaking and multidisciplinary research positions at several central banks, including the European Central Bank and the Federal Reserve Bank of New York.  He is also the Editor in Chief of The Journal of Network Theory in Finance.

Dr. Samantha Cook is the Chief Scientist at FNA. Before joining FNA in 2012, she worked as a Quantitative Analyst at Google's Research Group in New York and as a Professor of Statistics at Universitat Pompeu Fabra in Barcelona. She has published in financial networks and statistics as well as psychology, economics, and public health, including work on Google Flu Trends. Sam holds a PhD in Statistics from Harvard University.

Table of contents

Chapter 1: Introduction to Financial Networks

Chapter 2: The Basics: Categorizing, Summarizing, and Generating Networks

Chapter 3: Identifying important nodes? Connectedness and Centrality

Chapter 4: Uncovering Latent Structure: Clustering and Community Detection

Chapter 5: Finding Hidden Links: Projection Networks

Chapter 6: Fast Insights: Visualizing Networks

Chapter 7: Financial Cartography: Network Layouts

Chapter 8: Brass Tacks: Complexity Reduction

Chapter 9: Market Risk: Asset Correlation Networks

Chapter 10: Liquidity and Operational Risk: Payment Networks

Chapter 11: Counterparty and Systemic Risk: Exposure Networks

Chapter 12: Supply Chain Risk: Trade Networks

Testimonials

"The Global Financial Crisis drove home the limitations of traditional statistical analysis to identify systemic risks stemming from structural weaknesses.  Many observers have come to realize that economic and financial markets are examples of complex, highly interconnected, dynamic, adaptive systems.  Network analysis is increasingly seen as an important tool for categorizing and tracking the key characteristics of such systems and for identifying areas of potential vulnerability.  Network Theory and Financial Risk is a timely introduction to this essential topic.  While not for the mathematically faint of heart, it will serve for many years to come as a vital resource for those seeking solid technical grounding in this area." 

David M. Rowe, Ph.D.
President, David M. Rowe Risk Advisory and long-time Risk Analysis columnist for Risk magazine

“Financial networks have not only attracted substantial academic and industry research but have also been a subject of popular interest. In the last few years, physicists, economists, mathematicians, and computer scientists with different perspectives have studied networks and the field has greatly improved both in the fundamental and application domains. This book is therefore timely.

‘Financial networks are all around us’ - this is how the book starts. Is there a better way to express the powerfulness of the use of network theory to tackle financial problems? Network Theory and Financial Risk gives a comprehensive view on financial networks and takes the next step towards applications and visualization. Kimmo and Samantha have provided an exhaustive overview of financial networks techniques combined with many examples that bring the abstraction of the subject to practical understanding.

The book is full of real applications guiding the reader to a point where tools of practical use to industry can be directly developed. The particular emphasis on visualisation makes Network Theory and Financial Risk unique and enjoyable. This is a splendid book, with simplicity and accessible presentation being the key aspects; it deserves the highest recommendations not only to practitioners but also to scientists studying network theory and finance. To conclude this is a must-read for everybody interested in financial networks. I strongly recommend you have it on your shelves!”

Tiziana Di Matteo
Professor of Econophysics, Department of Mathematics, King's College London

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