First Cross-Disciplinary Finance Lab Opens

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Earlier this week Stevens Institute of Technology unveiled the nation's first cross-disciplinary financial research and teaching lab with a focus across financial systems, software engineering and cyber security. Called the Hanlon Financial Systems Lab, it recreates the trading floor environment to support integrated research and education in financial systems, quantitative finance, software engineering and cyber security

The Hanlon lab sits at the heart of Stevens's Financial Systems Center (FSC). Noted as the first of its kind in the United States, the FSC will serve as a platform for financial systems research, and the development, testing and evaluation of software for financial networks and the investigation of cyber-security challenges in the financial domain. The Center was formed to apply systems thinking and related methods to analyze, understand, and characterize the behavior of the complex global financial system.

For CFOs, the FSC may provide prime recruitment ground for talent trained in leading edge financial approaches. Overall, 28% of Stevens grads last year went in Finance.

According to Stevens, the FSC will support academic programs at the undergraduate, masters and doctoral levels by applying systems thinking to analyze the behavior of the complex global financial system and confront the most urgent problems in contemporary finance. The Hanlon Lab was a gift of Stevens's alumnus and Board of Trustees member Sean Hanlon (B.E. in Mechanical Engineering, 1980), now CEO and chief investment officer of Hanlon Investment Management.

At the launch event, Stevens brought out financial industry notables to comment on the state of the industry. Dr. Lou Crandall, chief economist at Wrightson ICAP, summarized the current problems facing the financial industry and outlined lessons from the turbulence of the last five years. He said preceding the economic crisis, the industry had blinders to what problems would have a ripple effect through the system – especially those at the periphery – which left us vulnerable to being blindsided.

Dr. Robert Engle, a Finance professor at NYU's Stern School of Business and the winner of the 2003 Nobel Prize in Economics, discussed how widespread underestimation of risk and excessive incentives for taking risks contributed to the recent global financial crisis. He noted that a broader, cross-disciplinary viewpoint, as being presented at FSC, could be instrumental in preventing future crises by revealing better notions and products for measuring systemic risk.

Chief economist for the U.S. Commodity Futures Trading Commission, Dr. Andrei Kirilenko pointed to the necessity of bringing rigor and data validation to how we analyze and work with the markets so as to prevent small decisions from resulting in large losses. He said the discipline of systems engineering is excellent at doing this through both engineering and technological solutions.

Other schools have trading labs but they are not designed for cross-disciplinary study. They include Baruch College (CUNY), University of Connecticut, and William Paterson (University of New Jersey). Stevens's FSC, however, is the most advanced in terms of integrating not just trading room functions but also systems security and cyber-security, data analytics and data visualization. This broad cross-disciplinary focus should make it a valuable asset in the support of the financial industry.

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