Centre for Quantitative Finance

The Global Financial Crisis (GFC) of 2007-2009 highlighted problems within the banking industry and wider financial sector. CEQUFIN has risen to these challenges by proactively pursuing research that seeks to address key issues raised, including particular issues with incentive problems, culture, governance, risk-taking, efficiency, and the failure of financial institutions.

More conceptually, CEQUFIN carries out research aimed at bridging the gap between academia and industry practice by actively addressing the issues it currently faces. This includes being a point of reference for policymakers, banks, hedge funds and other financial and non-financial institutions.

The 2007-2009 GFC and the frequent recurrence of financial crises in the last 40 years highlighted the rift between academic research and the high-stakes problems faced by industry. Generally speaking, product innovations are led by industry, while academic research tends to lag behind, retrospectively explaining past behaviours, such as the role of culture in financial sector. Nonetheless, academic research informs the design of future regulation and legislation and code of best practice that can be applied to solve existing and emerging problems faced by financial markets, as well as helping to overcome wider problems such as issues with ‘culture’ and ‘excessive’ risk-taking in the financial industry.

To narrow that rift, the centre focusses on conducting research which has a clear and direct application on the wider financial markets. The centre looks into:

1. Corporate finance and corporate governance in corporate and banking sectors
2. The stability and functioning of banking and financial markets
3. Quantitative risk management
4. Innovation in finance, including Financial Technology (FinTech)

The aims of the Centre are:

• To further develop research expertise in the disciplines of banking and finance that addresses contemporary issues in the sector.
• To provide sound advice and consultancy on policy and practical issues, including risk management and investment analyses, to external bodies across the academic spectrum and the finance sector.
• To foster and achieve international collaboration with academics and practitioners at other institutions and finance houses.
• To encourage interdisciplinary research that seeks to address contemporary issues facing the banking and financial sectors.

The centre focusses on the following key research themes:

Corporate governance and corporate finance

CEQUFIN researchers are currently pursuing exciting research that examines ties between corporate governance and firm financial outcomes. Previous research be centre researchers on these themes has been published in world-leading journals in finance. Particular topics of inquiry surround the implications of various observable senior manager traits for firm performance outcomes, capital structure decisions, ownership structure, and mergers and acquisitions.

Structure, conduct and performance of banking and financial markets

A key objective of the centre is to pursue research that explores issues surrounding the operations of banking and financial markets, including issues related to regulation, supervision, financial stability, risk, governance, innovation, the real-effects of banking, and broader issues pertaining to banking sector structure and the conduct of firms within these markets.

Advanced computational techniques for calibration problems in finance

The Centre also focuses on calibration and modelling of risk factors in financial markets. Risk modelling has been neglected by financial institutions and financial literature alike until very recently. Some are even suggesting that the next crisis looming on the horizon will be brought about by a lack of risk modelling. Financial institutions are notoriously opaque regarding their trading platforms but new regulatory regimes insist on greater transparency for the benefit of investors and for greater stability of the financial regime. Ongoing research by CEQUFIN researchers is aimed at developing, comparatively analysing and disseminating new modelling techniques that a) improve the calibration process given the data available and b) account for Knightian model uncertainty. The research covers both low and high-frequency data.