Thursday, April 18, 2013

Financial Networks -- Putting a Special Issue to Bed

I have always been fascinated by networks from transportation and supply chains to electric power and the Internet.

Two decades ago, I began work on financial networks in a project that was funded through the USDA and involved Merritt Hughes (a UMass Amherst graduate alumna) and a former doctoral student of mine, who is now an award-winning Full Professor, Dr. June Dong.

Since a series of papers that we wrote I have periodically returned to the financial networks theme since I am a systems thinker and it is intriguing to see how money flows and to determine analogies between/among different network systems.

With Dr. Stavros Siokos, who was also a former PhD student of mine, and is now a renowned financier based in London, we wrote the book, Financial Networks: Statics and Dynamics, and it was published by Springer in 1997. In 2003, I edited the volume, Innovations in Financial and Economic Networks, and it was published by Edward Elgar Publishing.

The global economic and financial crisis of 2008 and 2009 brought further attention to financial networks, systemic risk, fragility and vulnerability issues, so our research (with now Dr. Patrick Qiang) also addressed the criticality of nodes and links (and their importance and ranking) in financial networks.

In 2008, I wrote a survey on financial networks which was published in the Handbook of Information Technology and Finance, edited by  D. Seese, C. Weinhard, and F. Schlottmann.

Invitations to speak on Financial Networks at conferences, including the Measuring Systemic Risk Conference at the University of Chicago in 2010, demonstrated the growing interest in viewing financial issues, problems, and relationships through a network prism with a focus on the system. Although those of us in operations research and the management sciences as well as in economics had realized this, the finance community was slower to recognize this.

So, when the invitation from the Editor of the journal, Computational Management Science, Professor Berc Rustem, came last Spring, to guest edit a special issue on Financial Networks, I agreed, and the call for papers went out with a deadline for submission of July 15, 2013.

I am pleased to report that the edited volume is now being "put to bed." The collection consists of 8 peer-reviewed papers, plus my editorial. The contributions are from academics and practitioners and cover such timely topics as stock market graphs with applications to the US stock market, Russia, and Sweden; financial contagion, dynamic network formation using game theory, financial network equilibria and corporate social responsibility as well as the co-evolution of supply chains and corporate financial networks with insolvency risk. Methodological approaches in the formulation, analysis, and computations include network and graph theory, statistics, game theory, and variational inequality theory.

I will let my readers know when the volume is published -- it will be a double volume and, in the meantime, you can find and read some of the preprints already in the Online First Articles.

Reviewers are essential to the quality of papers and I am so grateful to all those, who, although they remain anonymous, contributed so much with their helpful comments and suggestions to the authors on their original manuscripts and their subsequent  revisions.