The Institute’s USP is rooted in linking research in finance and technology – the latter in two senses, technology in finance itself, and technology in the wider economy – the customer of financial services. A subsidiary aim is to link academic research with industry and the public services. This stance demands interdisciplinarity and it is useful to explore what this means. In this contribution, our Director of Research, Professor Sir Alan Wilson, presents the framework for interdisciplinarity offered in his recent book, Being interdisciplinary.

A first step is to define a system of interest for a research project. In broad terms, this will demand specifying the components of the financial services ecosystem, and those of its customers that are relevant to the project. To fix ideas, consider a project to explore the maximisation of ESG objectives in portfolio construction by an asset management company. The system of interest is based in the elements of the portfolio and hence the wider economy, risk and uncertainty, the companies own market, and the elements of ESG to evaluate those dimensions of the portfolio. The drive into interdisciplinarity comes from posing the question: what is the requisite knowledge base needed by the company to be efficient and effective? This will embrace all the elements of portfolio management (and hence mathematics and statistics), the companies represented in the portfolio (economics, geography and business – national and international), the government and regulatory context (hence politics and public administration), and the elements of ESG (environment, including climate change, the social impacts of investment, and governance – business again). This is a huge agenda, demanding both breadth and depth in the company’s staff and access to top-class reference material. Parcelling the knowledge into disciplinary siloes will be a very inefficient way of handling this hence the need for interdisciplinary teams. There is a big challenge here that can be research-informed.

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During the summer heat in Rome, Professor Francesca Medda, our Institute Director, likes to escape to the Vatican Museum. In this blog, she reflects on why we have named this platform Parnassus, in celebration of Rafael’s painting by the same name. Rafael’s work pictures a host of artists from Sappho to Dante, surrounded by the muses on the mythological mountain, Parnassus, where the arts and study are protected. This painting is our inspiration – a blog that will be a sounding board for new ideas and discussions on digital finance. 

We live in chaotic times. Covid-19 is not yet over, the war in Ukraine rages on, and the climate crisis is not only accelerating the digitalisation of the financial market, but also highlighting the chronic difficulties – of time and sometimes complex procedures – that we face to supply capital from conventional financial services.

The implementation of effective finance and economic solutions calls for responses to several preliminary concerns, including applicability, types of technology, time frame, budget constraints, acceptability and awareness of stakeholders, and declining central government revenues. Solutions must also correspond with levels of risk and the uncertainty posed by an unknown future. Importantly, however, these concerns cannot be resolved by ‘one-size-fits-all’ or ‘try-everything’ strategies for digital transition, particularly when future uncertainty is likely to exacerbate social and income inequality.

Given the interdependency characterised by the financial market today – and noting that digital silo-based solutions have fallen short of expectations – we can take the position of curatorship in this era of exponential change, as in The Parnassus of Rafael, where solving problems takes priority over incremental solutions.

From the perspective of a curator, we are indeed on the cusp of finance change and new technologies in digital finance that arise from the need for sustainable and efficient financial market systems. However, managing innovation for the financial market is not easy-peasy, given the current and predicted global trends. These include:

• demographic and social imbalances, often dramatic and diverse in different countries, from sharp growth in migration patterns in many emerging economies, and aging and population decline in cities of several of the richer economies;
• risks and hazards in the form of natural and human-caused disruptive events, particularly to infrastructure, and to assets that are complex systems and therefore potentially most vulnerable to threats; and
• issues relating to resource protection and steady supplies required to maintain productivity and welfare.

Writing from the vantage point of IFT, it seems that these complex issues can be transformed from challenges into opportunities only if we focus on research and apply our knowledge towards enhancing access to information and communication technologies, to the better management of resources, and to improving our financial systems by reducing waste, to mention just a few. Fortunately, the research panorama is very fertile; scholars from a variety of organisations, not only from established academic institutions, are responding to these challenges by developing solutions and merging instruments that leverage excellence in research and knowledge and also within the social and environmental impacts they produce. In this context, our blog is indeed a sounding board, a protected area, as in The Parnassus, where we can benefit from the exchange and development of ideas.

This blog also aligns with the spirit of the Institute of Finance & Technology’s work and research generally. Three words encapsulate our objectives and vision.

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With nearly $700 trillion in notional value – over seven times the market capitalisation of global stocks or over five times global GDP – the sheer volume of Financial Derivatives dwarfs any other forms of financial instrument. In this blog, derivatives expert Philippe Dufournier reflects on the challenges and opportunities presented by these mechanisms.

By definition, Financial Derivatives are a contract by which two parties agree to exchange in the future (i) cash flows or assets (ii) the values of which are indexed to changes in financial variables such as foreign exchange, interest rates, commodities, equity and credit and (iii) at terms agreed upon today. Contracts are bilateral, confidential in nature and involve either two private parties in what is called the Over-the-Counter (OTC) market or a private party and a Derivatives Exchange, in the case of an exchange-traded contract.

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Credit: UCL Press / Alan Wilson

Global challenges such as climate change, the future of work, and smart cities increasingly require input from a range of subject experts.

Professor Sir Alan Wilson, Director of Research at IFT, reflects on the importance of interdisciplinarity for skills and capacity building, and for research.

His book Being Interdisciplinary was published on 3 May 2022. It is now available for free Open Access download or to purchase via UCL Press here.

For those unfamiliar with the concept, how would you define interdisciplinarity, or what it means to be interdisciplinary?

Disciplines can be defined in terms of ‘systems of interest’ – in the broadest terms, the physical, the biological and the social – often subdivided into specialisms. These disciplines all have their research challenges; but most research problems demand the application of elements of more than one discipline – and hence are interdisciplinary. To be interdisciplinary means being prepared to respond to this challenge to have the depth of what might have been your first discipline, and the breadth to be able to draw on concepts more widely.

Can you provide more concrete examples?

Start with perhaps the biggest challenge of all: climate change. It involves all disciplines and perhaps surprisingly, the most important might be social science. Or take cities, my own field. Professional areas such as medicine or engineering are inherently interdisciplinary because their focus is on identifying problems and solving them whether through clinical interventions or innovative, disruptive design.

What is the value of interdisciplinarity in a university setting?

There is an old joke: industry has problems and universities have departments – usually discipline-based. Introducing the idea of interdisciplinarity adds a new kind of thinking to a discipline-based core.

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