Financial Markets in Practice: From Post-Crisis Intermediation to FinTechs delivers an overview of the development of risk-transformation undertaken by the financial services industry from the perspective of quantitative finance. It provides an instructional and comprehensive explanation of the structure of the financial system as a network of risk suppliers and risk consumers, where different categories of market participants buy, transform, net, and re-sell different kinds of risks. This risk-transformation oriented view is supported by the changes that followed the last global financial crisis: consumers of financial products asked for less complex risk transformations, regulators demanded limiting risks inside financial institutions to the maximum extent possible, and market participants turned to run mass market-like businesses and away from bespoke 'haute couture'-like businesses.
This book portrays the network of intermediaries that compose the financial system, describes their most common business models, explains the exact role of each kind of market participant, and underlines the interaction between them. It seeks to reveal the potential disintermediation that could occur inside the financial sector, led by FinTechs and Artificial Intelligence-based innovations.
Readers are invited to reconsider the role of market participants in the post-crisis world and are prepared for the next wave of changes driven by data science, AI, and blockchain. Amid these innovations, quantitative finance will be increasingly involved in all aspects of the financial system. This handy resource helps practitioners from both the buy-side and sell-side gain insights to, and provides an overview of, business models in the financial system from an intermediation perspective, and guides students to comprehensively understand the complex ecosystem in which they will evolve.
Contents:
- Financial System as a Network of Intermediaries
- Intermediation of Trades, Market Microstructure and Liquidity Provision
- Intermediation of Risks Via Structured Products
- Asset Management as an Intermediary Between the Investors and the Real Economy
- Risk Management at the Scale of an Investment Bank
- Could AI and FinTechs Disintermediate Historical Participants?
Readership: Graduates in Mathematics and Financial Engineering, researchers on financial markets, and financial-sector professionals.
'The financial system in 10–15 years will only be vaguely recognizable from today's perspective. The system of the future will have five key features: efficiency (including absence of monopoly power), inclusion, security, transparency, and interoperability. Our current infrastructure fails on each of these dimensions. However, to grasp the potential of the future, it is crucial to fully understand our complex current system. Lehalle and Raboun provide a comprehensive analysis of today's landscape. Highly recommended.' - Campbell R HarveyProfessor, Duke University and Co-author, DeFi and the Future of Finance
'Charles-Albert Lehalle has been for many years an invaluable member of our Scientific Advisory Committee at the French AMF. For a regulator/supervisor it was a privilege to rely on such an expert of the micro-structure of financial markets, combining an exceptional background both academic and operational and a perfect and updated understanding of the financial regulations. I commend him and Raboun for sharing their deep knowledge of the financial markets and the appropriate tools for analyzing them in this sharp but luminous book;an undisputed reference in this field.' - Robert OphèleChairman, Autoritédes marchés financiers (AMF)
'This is a unique, masterful, and insightful new interpretation of the global financial system as an ecosystem of asset management firms, financial products, and intermediaries, working together as the components of a giant risk-processing network. The ambition, scope, and authoritativeness of this academic-practitioner blend of scholarship immediately make it the go-to source for graduate students, practitioners, and policymakers who need a way to make sense of modern finance.' - Darrell DuffieAdams Distinguished Professor of Management and Professor of FinanceGraduate School of Business, Stanford University
'This book is offering a unique approach to the financial world by reviewing the objectives and constraints of the main financial agents. Without a deep understanding of the interactions between those market participants it is almost impossible to fully comprehend how financial markets function.' - Jean-Paul VillainDirector, Strategy and Planning DepartmentAbu Dhabi Investment Authority (ADIA)
Key Features:
- Inspired by a course delivered at UniversitéParis Dauphine for the last 12 years, during which authors have benefited from the advice and the support of French top-notch practitioners in their respective business lines in each of the thematics discussed in the book
- No competing titles that inform the evolving organization and business models of the financial markets since the global financial crisis
- A first attempt to explain business models and roles with an angle adapted to "quants"
