I-Corps: Scalable Knowledge Management for Risk Analysis in Finance

University Of Missouri-Kansas City, Columbia MO

Investigators

Abstract

The proposed project aims to explore the commercialization potential of an innovative software, which was developed through NSF-funded research, for risk analysis in finance. A financial institution, such as a bank makes investments in different (possibly risky) financial markets, which can either yield a huge profit or lead to a major loss. Thus, effective financial risk analysis underpins the stability of a financial institution. The credit crisis of 2008 exposed the huge risk undertaken by banks in the mortgage-backed securities market with the assumption that the housing prices will not drop. Subsequently, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into federal law in 2010. Since then, there has been a pressing need in the financial industry for a solution to seamlessly integrate data repositories of financial instruments such as deposits, loans, securities, and derivatives. Through such a seamless integration, a financial institution will be able to conduct a more rigorous analysis of the financial risks than ever before. Towards this end, the Enterprise Data Management (EDM) Council in collaboration with financial industry partners is developing a new standard for knowledge representation and data integration. This standard is being designed to enable easy integration of multiple data repositories of financial instruments. This project's software, which is designed for scalable knowledge management, can operate on very large knowledge repositories and provide answers to end-users very quickly. As a result, it can potentially enable rapid risk analysis in a fast-paced, volatile financial market. Therefore, its commercial viability can be potentially transformative in the niche market of financial knowledge management and risk analysis. The anticipated customers of the proposed software are financial risk analysts hired by financial institutions (e.g., banks, trading companies) to assess credit, market, operational, and regulatory risks. The technical goal of the project is to investigate how this project's software, called RIQ, can advance the state-of-the-art in financial knowledge management and risk analysis. RIQ's capability will be extended and its commercialization potential will be explored through the I-Corps Teams program. RIQ has the potential to enable rapid risk analysis through its fast query processing capability. This in turn can enable the customers/end-users to make fast and effective decisions in a dynamic financial market. Through this project, RIQ will be extended to showcase the processing of risk analysis use cases on financial datasets for the final demonstration. RIQ will be offered to potential customers via the Software-as-a-Service model, which is attractive for financial institutions as there is no upfront investment. The I-Corps team will connect with potential customers and stakeholders such as risk analysts, application developers, IT managers, and C-level executives in financial institutions. This project has the potential to advance our understanding of how deep analysis via semantic data representation and integration can unravel risks in the financial markets, which would not have been discovered through conventional risk management software. If RIQ is commercially viable, this project will lead to the creation of a tech startup, which will lead to new jobs and foster economic development in Missouri. RIQ will be provided at no cost to academic users to enhance the infrastructure for education and training, especially for those interested in knowledge management and data analytics in finance.