Dr Andrei Kirilenko
Five minutes with Dr Andrei Kirilenko, Director, Centre for Global Finance and Technology
1. Tell us about your research in a nutshell
My research is positioned at the intersection of Finance, Technology and Regulation"
My research is positioned at the intersection of Finance, Technology and Regulation.
Perhaps my best-known piece of academic research is the analysis of the Flash Crash on May 6, 2010, in which my colleagues and I analyzed the brief period when the US Financial Markets dropped by 6-9% - that’s by trillions of dollars - and then regained its value in the space of approx. 30 minutes.
This event happened during an intense technological arms race in the global Financial Sector but at a time when regulators were also very busy dealing with the aftermath of the global financial crisis and were stretched too thin. The event shook public trust in the new automated markets that had been built.
My work looked at the underlying causes and the regulatory consequences of this event and, more broadly, how Financial Economics interact with technology and these technologies can be responsibly adopted by markets.
2. What impact can your research have outside of the lab, especially for industry?
Since a lot of financial markets are basically robotic... At the end of the day robots trade at prices and these prices feed into personal and professional decisions and these are decisions that we all make. So that’s why it matters. It matters, basically, on a massive scale."
What happens in Financial markets affects – especially in the developed world, but in the developing world as well – pretty much everyone. Your pension is being managed in these markets, the prices of produce on supermarket shelves are affected by these markets, the price of gas at the pump are all determined by these markets.
Everything that we do is, in one way or another, related to economic exchange and is affected by prices. We decide to take a bus instead of a tube or to ride a bike instead of taking a bus or we decide to take a train instead of a car based on some internal calculation that we’re running and those internal calculations are all based on prices. Decisions that people make depend on the prices that they see.
Since a lot of financial markets are basically robotic and robots are programmed to run on data, it is critical that we understand how robots make trading decisions and what data they use. At the end of the day robots trade at prices and these prices feed into personal and professional decisions and these are decisions that we all make. So that’s why it matters. It matters, basically, on a massive scale.
3. You are Director of Imperial’s new Centre for Global Finance and Technology. What are your aims for the Centre on a larger scale than your own research?
The Centre’s mandate is to both catalyze Fintech research and to serve as a hub for researchers who are studying it."
What I started noticing – and I’m not alone in this – is that the technological advances in Computing and Telecommunications that led to automated trading started entering into broader finance – into borrowing, into lending, into payments, into transfers, into what kind of money people use; whether it’s cards or cash or their mobile phones - and the effects they are having is a heavily, heavily under-researched area academically, just as algorithmic and high frequency trading were a decade ago when I started working on them.
The Centre’s mandate is to both catalyze Fintech research and to serve as a hub for researchers who are studying it.
In addition, there’s a tremendous demand from both start-ups going into this space and incumbents – i.e. banks, asset managers and insurance companies – for trained talent who understand even the basics of these technologies. In response, another thing that the Centre provides are courses to train professionals to answer fundamental questions such as: What is FinTech? What can the technologies do? What are the consequences of the digital identities they create? What are the business models behind it? How does it manifest itself in various ways?
4. Who/what sectors would be interested in hearing more about your research?
- Finance - You cannot not pay attention to this area if you work in Finance
- Healthcare - Currently Healthcare is in the same place Finance was in the mid-80s. The industry has become a much more data-rich environment and would benefit from applying the financial models of Valuation and Risk.
- Everything that runs a transactions-based business model from real estate to transportation and hospitality industries. You certainly need to pay attention to how blockchain and cryptocurrencies are penetrating finance, because after finance these technologies will spread to these other areas.