- Smart Contracts This article was written by Allan Mendelowitz and me and published in the American Banker on November 17, 2016: Here we argue that on the Transaction Processing Level the concept of “Smart Contracts” has existed for thirty years, however in a very imperfect way. This imperfection causes multitudes of problems on the Analytic level. The current solution to this problem are intermediary data pool such as Data Warehouses. We show that this aggravates the problem. We also argue, that the concept of Smart Contracts should not be linked to the idea of distributed ledgers such as Block-Chain. What is needed is a standard for financial contracts that standardizes beside data also the cash-flow generation throughout the process. Such a smart contract will overcome the current dichotomy between the Transaction Processing and the Analytic level. Needless to say, that ACTUS represents this standard.
- ACTUS Standardized Contracts This article was written by several members of the ACTUS team for an internal publication of the Swiss Cantonal Banks. It explains the ACTUS initiative and the benefits for the banks and the financial industry as a whole.
- Limits and Opportunities of Big Data for Macro-Prudential Modeling of Financial Systemic Risk In this article written with Allan Mendelowitz we explore the use of “big data”, i.e. large unstructured data sets, within financial risk analysis. We conclude it has value, but structured data remain critical. We show that forward-looking financial analysis on the systemic level needs a data structure that represents financial contracts as algorithms that produce state contingent cash flows. Currently the industry lacks such a standard, which precludes meaningful systemic forward-looking analysis. We introduce ACTUS as an emerging standard that will enable consistent analysis on all levels. This standard will also create an infrastructure for macro financial analysis.
- Improving Systemic Risk Monitoring and Financial Market Transparency- Standardizing the Representation of Financial Instruments: The task of the OFR is to define two Standards: One for the counter-parties and one for financial instruments. The definition of the Legal Entity Identifier (LEI) which is a unique counter-party ID is well underway. Parallel to this ACTUS has started it’s work. The target of ACTUS is to set the standard for financial instruments for the analytic use case. This is a world standard unifying financial analysis on the basis of “Unified Financial Analysis”. This internal paper was delivered at the OFR/FED (Federal Reserve Board Cleveland) conference in Washington on May 30, 2013 “Financial Stability Analysis: Using the Tools, Finding the Data”. It describes the state of ACTUS. At the same conference, the ACTUS website was demonstrated for the first time where contract data got entered and results were presented both graphical and numerical.
- The Operational Risk of the Office of Financial Research (OFR) “To be inundated in a mass of undecipherable data” is considered the prime operational risk of the OFR. The taks of the OFR, from a conceptual standpoint, were described in “The Regulatory Revolution”, which is the starting point of this article. From this the data need is derived. A main finding is the fact, that semantics on the data level alone – however clear and brilliant – is not sufficient. What is needed is a semantic, which can express – with computer code – the nature of a financial contract unambiguously. The notion of contract types fulfills this need. A study in order to prove the concept is proposed.
This article has about 10’000 words. It is published under: Lemieux, Victoria L, Ed. “Financial Analysis and Risk Management” Frankfurt: Springer 2013, Chapter 3.
- The Regulatory Revolution: This article is written with Allan Mendelowitz and published in the August issue of GARP’s Risk Professional. Allan is one of the prime movers behind the Office of Financial Research (OFR) which is part of the sweeping Dodd/Frank Act signed in July 2010. Although considered by insiders as the section with the highest potential to change the financial market, it is not recognized yet as such by mainstream. The article argues that the OFR to become effective as hoped by the lawmakers, it has to implement structures as laid down by “Unified Financial Analysis”. The background of the OFR and the necessary structures are described in a 3000 words article.
- Standardization of Financial Contracts: Financial contracts constitute the pivotal center of finance and must therefore be the pivotal center of any financial analysis. This is however not the case and the reason for the analytical chaos (silo structures) found in banks and the industry as a whole. Sensible regulation is not possible without this standardization. This short 700 word articles discusses the main arguments.
- Risk and Regulation: This article was published in Vol. 18, No 1, 2010 of “The Journal of Financial Regulation and Compliance”. It discusses the relationship between modern financial analysis and regulation.
- Risk Taxonomy: This article I wrote with Rami Entin and it was published in GARP’s Risk Professional, December 2009. It shows the difference between the main risk classes, that they are more different than commonly assumed and what it takes, to aggregate them.
- Tear Down those Silos: The infamous silo architectures found in today’s banks have helped blurring the picture and aggravated the financial crisis. As an example: Big famous banks took up to six month to figure out their CDO positions. This article was published in Waters, July 2009 issue.