The Louis Bachelier Group research: Together, we seek answers for a world in transition.
The Louis Bachelier Group (Institut Louis Bachelier + the two foundations FdR and EIF) plays a leading role in the development of research programs and initiatives with the participation of experts from the academic sphere, economic actors and the public authorities. The interdisciplinary program FaIR is a key example of this.

The « Finance and Insurance Reloaded » (FaIR) Interdisciplinary Research Program (IRP) targets to foster innovations driven by new technologies (from Artificial Intelligence to blockchains) in the financial and insurance sectors. Read more about the project in the interview below:


FaIR – FINANCE AND INSURANCE RELOADED
INTERVIEW WITH SCIENTIFIC DIRECTOR CHARLES-ALBERT LEHALLE

WHAT IS THE INTERDISCIPLINARY RESEARCH PROGRAM FINANCE & INSURANCE RELOADED ? WHO CAN TAKE PART IN IT AND HOW?
While the financial sector broadly understood – banks, insurance companies, investment funds, regulators, etc. – has very large calculation and storage capacities, it has not been the most innovative in terms of machine learning and scoring techniques. Recently, actors in this industry have been trying to catch up and are looking to build on the success of other sectors and start to devise innovative applications. We believe that the Institut Louis Bachelier (ILB), with its long-standing experience in this sector, together with its interdisciplinary network of researchers, has all the tools needed to support this transformation. There are numerous unresolved scientific issues associated with the FaIR program: designing new open and shared computer architectures, highlighting forms of interaction between actors suited to future innovations, formulating a statistical theory to compare micro-based structural models to purely non-parametric data-driven approaches, and devising solutions to deal with the “curse of large dimensions”, among others.

WHAT SOCIETAL, POLITICAL (IN THE BROAD SENSE) AND SCIENTIFIC ISSUES DOES THE FAIR PROGRAM RESPOND TO?
Traditional actors are confronted with new issues of governance and accountability (the diversity and reliability of data, security of storage). In the interest of good regulation, the industry needs to question the concept of compliance and responsibilities in a “platformed” and “disintermediated” world. First, we will try to map the various possibilities and help the industry to position itself. We hope this will allow those in the industry to launch research programs in collaboration with the academics of the Louis Bachelier Network. To facilitate interpretation of the fields of application, we will group initiatives around three focal points: the finance and insurance industry in relation to its customers, focusing on the distribution of products; better connection with the real economy, which will focus on business financing cycles and new data sources in order to gain a better understanding of the real state of the economy, if possible in real time; and the third group of topics will focus on better risk intermediation and will address the issue of estimating market and bank portfolio risk. We must not forget the risk to jobs stemming from the introduction of large-scale automation either. This is why the FaIR program involves thinking about initial and continuing training programs that could accompany the transformations.

ILB AND ITS FOUNDATIONS ALREADY HOST A NUMBER OF PROGRAMS, CHAIRS AND RESEARCH INITIATIVES. WHAT VALUE DOES THE FAIR INTERDISCIPLINARY RESEARCH PROGRAM ADD TO THIS ECOSYSTEM?
The key aspect of the program is its interdisciplinarity. Experience shows that privately funded research has a rather “short-term view”. We need to rely on the talent and vision of various individuals holding a chair (for industry actors and academics alike) so that the results can contribute to global thinking about the industry. This is not the usual goal of these initiatives, which often give rise to “local” innovations. It is not a matter of minimizing their importance, nor of questioning the scientific quality of such work in general, but we believe that the magnitude of the issues raised by the arrival of new data, new algorithms, and functionalities entailing strong disintermediation calls for global and interdisciplinary responses. The FaIR program is essentially a platform for exchange which aims to map efforts, that are inherently dispersed and local, so as to help the industry and academics position themselves better and acquire the critical mass needed to accompany these very profound transformations.

WHAT ARE THE MAIN STAGES AND UPCOMING EVENTS FOR THIS IRP IN ITS LAUNCH YEAR?
During its first year, the FaIR program will be structured around two axes: mapping the current efforts and exploring the “blind spots” that will emerge from this analysis. We are organized around three committees: customer services, better connection to the real economy, and improvement of intermediation of risk. We rely on existing chairs and their conferences and seminars, as well as a “permanent” seminar and an annual conference specific to this program. We are already seeing the emergence of topics such as roboadvisors, the ethics of algorithms, the “tokenization” of assets, risk assessment techniques for banks, and the evolution of economic models. We encourage researchers and industry actors who have a stake in these areas to contact us.

WHAT ARE THE PROSPECTS AND AMBITIONS ON THE EUROPEAN AND INTERNATIONAL SCALE OF THIS IRP?
In France, we are fortunate to have banks, insurance companies and management companies that are international in scale. In addition, French researchers have contributed greatly to recent innovations in statistical learning. We also have academic traditions of great stature in economics and sociology. It is therefore possible for us to start in our immediate geographical environment and then to become implicated in scientific collaborations, that today are inherently international. We are seeing similar initiatives emerging abroad, and we are discussing with some of those involved in these projects how best to link our efforts. We also very much count on the regulatory authorities for trans-border activities. Let us not forget that the European Regulatory Agency is based in Paris and that the European Banking Authority will be relocating here following Brexit.