Financial Network Analytics

Kimmo Soramäkikimmo.soramaki@fna.fi

Presentation at Bank of Canada

Workshop on Understanding Financial Institutions and Markets: Theory and Data

2 June 2011

Perspective

Understanding financial institutions and markets

Theory Data

Focus on the tools and processfor research and policy

Katsushika Hokusai. The great wave off Kanagawa ~1830

Eratosthenes' map of the known world, c. 194 BC

Go is a board game that originated in China more than 2,000 years ago.

Data deluge

• Data tsunami - digital information is doubling every 1.2 years

• Regulatory response to recent financial crisis was to strengthen macro-prudential supervision with mandates for more regulatory data

• The challenge will be to understand and analyze the data (public, commercial and regulatory)

• Data enables “Analytics based policy”, i.e. the application of computer technology, operational research, and statistics to solve problems

Network maps

• Recent financial crisis brought to light the need to look at links between financial institutions

• Way to present data. Mapping of the financial system has only begun

• Reduce uncertainty about interconnections

Soramaki, Bech et al (2006)

Garrett, Mahadeva and Svirydenska (2011)

Intelligence

• Financial crisis are different and rare

• Pattern recognition is hard for computers -> the best Go programs only manage to reach an intermediate amateur level

• The patterns to be recognized must be frequent enough for computers to learn

• A solution is to augment human intelligence (in contrast to AI)

Roots of the work• Bof-PSS2

– Bank of Finland, 1997-– Payment system simulator used in ~60 central

banks

• Loki– Sandia National Laboratories, 2004-– Toolkit for network analysis and ABM

• Sponsored by Norges Bank, collaborative efforts with other central banks

Method and features

Data validation

Analysis and modeling Visualization

Data tools in FNA

ValidateCheck field content against

expected values or rules for values

CrosscheckEnsure that different datasets are

consistent with each other

Explore and extractExplore data by enumerating

field values and extract subsets of data. Operate directly on

compressed files.

AnonymizeAnonymize fields consistently

across datasets

Data validation

Network analysis in FNA

AnalyzeMost common network metrics for

centrality, components and connectivity. Aggregate properties.

GenerateGenerate random networks for

comparing results

OperateDelete, add and merge vertices and

networks. Transpose and symmetrize networks.

VisualizeInteractive graph layouts,

geographic layouts + all standard charts

Network analysis

Network visualization in FNA

PlotAll basic chart types (pie, line, bar, scatter), Interactive graph layouts,

geographic layouts

BrowseBrowse networks visually,

visualizations are auto-generated for all networks

InteractShow metadata, interact, move and

highlight, zoom

Share and extendShare independent html

documents, publish & find on web

Visualization

Demo

Versions

– Web – Cloud service– REST API (for accessing FNA engine from web applications)

– Intranet– Operative use– Integration to databases and user management– Browser based GUI

– Desktop – By demand, academic use– Command line version available– Integration with external programs like Matlab, Stata, Excel, etc.

Availability

• Private beta in July 2011

• Official release in August 2011

• Core (graph engine, algorithms, visualizations) is open source (GPL)

• Desktop version is free for academic use

Vision

• Develop tool for explorative analysis of the financial system

• Provide a platform for building agent based and simulation models

• Make advances in research available to policy

• Integrate data feeds and available databases

Thank you

More informationwww.financialnetworkanalysis.com

Contact uskimmo.soramaki@fna.fi