ILB RISING TALENTS IN FINANCE AND INSURANCE

On the sidelines of the virtual award ceremony, presided over by Elyès Jouini, Scientific Director of the IEF and Philippe Trainar, Risk Director at SCOR, Kim Peijnenburg answered questions from the Institut Louis Bachelier (ILB).

ILB: What does the IEF / SCOR Foundation for Science award for the Best Young Researcher in Finance and Insurance mean to you?

Kim Peijnenburg: It is a great honour to have won this prize. It also gives visibility and relevance to my research work, beyond the academic sphere, which is the goal of any researcher.

Can you give us more details and explain briefly the main research themes you are working on?

K. P.: My main research theme is household financial decision-making and its impact on general well-being. I am particularly interested in how behavioural processes and traits shape household choices.

What are the next topics you will work on?

K. P.: I will continue to work on the area of personal finance, as there are still many research questions to be answered in order to learn more about household decision-making processes. To do this, I will use Danish administrative databases and combine them with laboratory experiments involving a thousand people.

Finally, why study the case of Denmark?

K. P.: Each country has different databases, but Denmark has extremely rich data that are more easily exploited for my research. Also, the data is more suitable for laboratory experiments than data from other countries.

On the sidelines of the virtual award ceremony, presided over by Elyès Jouini, Scientific Director of the IEF and Philippe Trainar, Risk Director at SCOR, Matthieu Bouvard answered ILB’s questions.

ILB: What does the IEF/SCOR Foundation for Science Award for Best Young Researcher in Finance and Insurance mean to you?

Matthieu Bouvard: It is an honour and a satisfaction to receive this prestigious award. Looking at the history of this award, I find it very flattering to find my name in the company of recognised researchers such as my colleagues Thierry Mariotti and Sophie Moinas or Johan Hombert. I would also like to underline the efforts made by the ILB and the Scor Foundation for Science to bring scientific research and financial industry professionals closer together.

Can you give us a detailed description and brief explanation of the main research themes you are working on?

M. B.: I am particularly interested in fintechs, which evolve at the crossroads between information technology and financial services. Generally speaking, the angle I have chosen to study concerns the notion of financial risk, which is constantly fluctuating and in parallel with financial innovations. With new entrants to the market, new risks appear. It is therefore very important to identify and understand them in order to manage them properly. To further illustrate my research, let’s take two recent examples of work. The first concerns the blockchain, which is the technological infrastructure underlying cryptocurrencies, notably bitcoin. This protocol allows transaction data to be recorded, but if there is a loss or lack of consensus between the parties, the stability of the infrastructure can be disrupted and this raises many questions, particularly about security. The second example concerns the increasingly fast functioning of markets and its impact on the real-time risk management of large financial institutions.

You are interested in blockchain in general and bitcoin in particular, how do you analyse the current boom in cryptocurrencies?

M. B.: Crypto-currencies, especially bitcoin, are similar to traditional currencies, which are not asset classes like stocks or bonds whose valuation can be based on a fundamental analysis, i.e. an estimate of the future flows that these assets will generate (dividends, coupons). It should be remembered that it is very difficult to predict the movements of currencies issued by central banks, as these mechanisms are not well understood in finance. This difficulty in explaining price movements also applies to bitcoin, which is much more volatile. Nevertheless, the possibility and ease of trading in Bitcoin can be interpreted as part of the fundamental value of Bitcoin. For example, in the recent period, major companies such as Tesla, Visa, Mastercard, Paypal and even BlackRock, have announced the possibility of trading or investing in Bitcoin, which are tangible elements in its favour that can explain its appreciation. It remains that a significant part of bitcoin’s volatility does not seem to be explained by the movement of these fundamentals.

To conclude, what are the next topics you will work on?

M. B.: I will continue to focus on new payment systems, which is a very evolving area. Historically, this was the domain of the banks, but some segments have migrated to new players. China is certainly the most advanced example with the development of mobile payment solutions by Alipay and WeChat that compete with the banking system. This movement can also be observed in the United States with major players such as Amazon and Facebook. This trend raises many research questions: Why is this competition emerging? What are the synergies between social networks, their users and payment methods? How can we understand and apprehend these new risks? How can the new players be regulated?