Financial Innovation and Risk in Financial Institutions
Participating Faculties: Richard Ivey School of Business (host), Social Science, Science
Project Leader: Stephen Sapp, Jim MacGee, Matt Davison, Chris Nicholls
Total Project Funding: $310,000
Funding Period: Three years
Abstract:
Given the events of the past several years, the importance of improving our understanding
of financial markets can hardly be questioned. The motivation for the creation of the
interdisciplinary Centre for Financial Innovation and Risk Management in Financial
Institutions (the “Centre”) is based in the fact that the blame for the Global Financial Crisis
has frequently been placed on an insufficient understanding of the consequences of the
rapid advances in financial innovation and their impact on overall risk for the financial
services industry and, subsequently, the global economy. The complex mathematics behind
the new products developed to provide better returns to investors within the regulatory
constraints led to products that were not well understood by economics and financial
professionals. The goal of this Interdisciplinary Initiative is to build on the demonstrated
strengths at the University of Western Ontario in the areas most relevant to the
understanding of financial innovation and risk – the Departments of Applied Mathematics
and Statistical & Actuarial Sciences, the Department of Economics, the Faculty of Law, and
the Ivey Business School.
As a first step towards improving our understanding in these areas, the four participating units are currently working together on teaching initiatives such as the new Master of Financial Economics (MFE) program which will have its first intake in the Fall of 2013. The interdisciplinary Centre proposed here is designed to further strengthen the integration between these units in the area of research. Academics, practitioners and regulators need to better understand the impact of financial innovation and risk on firms, and the research from the Centre will be of importance to all three key stakeholder groups at both domestic and international levels. Having such a Centre based at a Canadian university will allow the Centre to benefit from Canada’s reputation for how its financial institutions navigated the financial crisis and provide a Centre of Excellence at Western for work in the areas of Financial Innovation and Risk Management at Financial Institutions.