The Relationship Between Network Theory and Finance

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May
4

Asked about the corrupt behavior of a great number of senior managers in the financial sector, proponents of free market have no choice but to admit the necessity of regulations in the industry. After all, the temptation to unethical action is too high when it comes to manage big corporation’s finances: with little consequences (merely more than blame), quasi-frauds can secure an important quantity of wealth for the perpetrator.

Now, it becomes obvious that IT is a tool of predilection when it comes to recording and reviewing financial activity. Only, the number of transactions in one day alone is so high that all chain of transactions cannot be tracked. Instead of looking at all transactions, one must then supervise some transactions over others for the sake of practicality.

For this purpose, a large body of techniques and tools based on pattern recognition, heuristics and social network theories must be available to the financial sector’s regulators in order to effectively supervise important financial activity. We can now only wait before players emerge.