Financial services: ageing society and systemic risks

Financial services, such as services offered by banks, insurances and investment companies, are a central part of modern economy. They are gaining not only macrosocial relevance but also importance for the individual; not least due to the demographic changes. The ageing of our society has dramatic consequences for retirement provisions and health costs. The result: the risk of old-age poverty is rising. For this reason, the individual person should be enabled to make provisions in all three columns, i.e. in the form state, company and increasingly also private pensions. The government's job in this endeavour is to create appropriate incentives and frame conditions, while companies need to offer and secure suitable service products.

Science can help with the assessment and controlling of the systemic and individual risks in order to keep the system stable. What consequences do the behaviours of central actors such as individual persons and companies have? What roles do frame conditions created by the government and fiscal policy play, such as the interest rate policy of the central banks or legal regulations and taxation? What innovative new financial services can be of benefit in this context? The scientists in Ulm have a keen interest in enabling financial service providers to reliably and independently measure business processes and risks, and successfully control them. After all, a professional risk management is the only way to ensure the stable development of the financial services system.

Funding
Deutsche Forschungsgemeinschaft (DFG)
Federal Ministry for Economic Affairs and Energy (BMWi), various foundations
Werner Kress Endowed Professorship 'Strategic Corporate Management and Financing'
Péter Horvath Endowed Professorship for Business Management/Administration with focus on business information management
Endowed Professorship (City of Ulm) 'Sustainable Knowledge, Sustainable Education, Sustainable Economic Management'

Institutes
Institute of Mathematical Finance
Prof. Dr. Robert Stelzer, Prof. Dr. Alexander Lindner, Prof. Dr. Mitja Stadje
Institute of Finance
Prof. Dr. Gunter Löffler
Institute of Sustainable Corporate Management
Prof. Dr. Sebastian Kranz, Prof. Dr. Martin Müller
Institute of Numerical Mathematics
Prof. Dr. Karsten Urban, Prof. Dr. Stefan Funken, Prof. Dr. Dirk Lebiedz
Institute of Optimization and Operations Research
Prof. Dr. Dieter Rautenbach, Prof. Dr. Henning Bruhn-Fujimoto
Institute of Accounting and Auditing
Prof. Dr. Kai-Uwe Marten, Prof. Dr. Heribert Anzinger
Institute of Statistics

Prof. Dr. Jan Beyersmann, Prof. Dr. Markus Pauly
Institute of Stochastics

Prof. Dr. Evgeny Spodarev, Senior-Prof. Dr. Volker Schmidt
Institute of Strategic Management and Finance
Prof. Dr. Andre Güttler
Institute of Technology and Process Management
Prof. Dr. Leo Brecht, Prof. Dr. Matthias Klier, Prof. Dr. Mischa Seiter
Institute of Insurance Science
Prof. Dr. An Chen, Prof. Dr. Hajo Zwiesler
Institute of Economics
Prof. Dr. Georg Gebhardt, Prof. Dr. Sandra Ludwig, Prof. Dr. Gerlinde Fellner-Röhling

Collaborations
Involvement in NETSPAR (Dutch Network for Studies on Pensions, Aging and Retirement)
Close contacts to operators in the practical field

Contact
Prof. An Chen, Institute of Insurance Science

Interdisciplinary competence and collaboration across subjects

Interdisciplinary research in this field has a long-standing and successful tradition at Ulm University. In 1977, the University created a study programme that not only combines mathematics and management but also teaches expert knowledge in computer sciences and data processing. This degree programme is a well-established trademark of Ulm University with national and international visibility. Moreover, it is an expression of the scientific standards at Ulm's Faculty of Mathematics and Economics: to tackle relevant economic questions of our society at the highest possible methodological level of mathematics. The University's specialisation in Actuarial Science, which graduates experts in the assessment and management of financial risks, sets professional standards in the financial sector for early detection and the successful management of crises.

Help for regulatory authorities with the control of financial markets and players

Another scientific challenge taken on by Ulm's researchers: the development and investigation of methods and tools to help regulatory bodies and authorities - such as the Federal Financial Supervisory Authority (BaFin) and the central banks - effectively control financial markets and institutions with minimal effort and in line with the basic principles of the market economy. The purpose is to prevent the occurrence of new financial crises long-term and secure the macrosocial welfare in a sustainable way.

Mathematics and economics provide the scientific tools

The research focus Financial Services at Ulm University involves the departments Financial Mathematics and Economics, Insurance Mathematics and Economics as well as other areas of the faculty.

  • These include stochastics and statistics, which provide suitable methods and help investigate mathematical models on a fundamental level. Extreme value theory and statistics are optimally suited to assess risks, for instance. Extreme and rare events are usually the ones that involve the highest risks. While their infrequency is, of course, a good thing, it is also the very reason why they are more difficult to understand.

  • Spatial statistics is used to analyse the spatial distribution of damages in a variety of insurance matters. The resulting mathematical models are often highly complex. To achieve satisfying results in due time requires the most modern calculation and interpretation methods, such as offered and investigated by numerics.

  • Macroeconomics as scientific discipline, on the other hand, offers important insights into the regulation of markets. This way, it supports not least politics in creating legal provisions and regulations that help prevent massive crises and upheavals on the financial market in the future.

  • Behavioural economics investigates further-reaching scientific questions: financial market actors do by no means always behave rationally, after all. Why that is and what fundamental factors shape the decision behaviour of humans is something the 'Ulm Laboratory for Economics and Social Sciences' (ULESS) explores.

  • The mathematical speciality Optimisation gives answers to questions around reciprocal relationships - often highly complex networks - of financial markets.

The global financial and bank crisis of the last decade has highlighted the importance of an in-depth understanding of financial markets, how they operate and the resulting risks. For this reason, financial and insurance experts at Ulm University conduct research together with mathematicians to develop complex models and methods for the ascertainment and controlling of systemic risks. Their shared goal is to keep those crises a matter of the past.