Professor Agostino Capponi Wins NSF CAREER Award

Agostino Capponi
—Photo Credit: Timothy Lee Photographers 

Agostino Capponi, assistant professor in industrial engineering and operations research, has been awarded a Faculty Early Career Development (CAREER) award from the National Science Foundation (NSF). The five-year grant is the NSF’s most prestigious award in support of the early career-development activities of junior faculty who have the potential to serve as academic role models in research and education and to lead advances in the mission of their organization. The reviewing, award, and selection process is one of the most competitive within the NSF.

Capponi won the CAREER award for his proposal, “Systemic Risk and Strategic Formation in Stochastic Networks.” As part of his CAREER research, Capponi will study sources of risks arising in complex network systems, such as supply chain or financial networks, where the performance of one participant can have destabilizing effects on the entire system. His research will break new ground in providing a fundamental understanding of incentives that manage network vulnerabilities, mitigate systemic risk, and resolve failures, when institutions respond to crisis but cannot transparently observe the entire network structure.

His interdisciplinary research will have direct implications on economic welfare and national prosperity. The proposed strategic decision-making framework will be used by supervising authorities to design policies accounting for the reactions of financial institutions to various shocks and failures. Capponi has already established close collaborations with the main regulatory agencies in the United States, including the Federal Reserve Board, the Commodity Futures Trading Commission, and the Department of Treasury’s Office of Financial Research. Together with Columbia Professor and Nobel Laureate Joseph Stiglitz, he recently organized the conference “Financial Networks: Big Risks, Macroeconomic Externalities, and Policy Commitment Devices,” co-sponsored by the Institute for New Economic Thinking and held on the Columbia campus this past February.

The 2008 financial crisis offers an example of systemic risk in a complex network. The U.S. Treasury’s Troubled Asset Relief Program (TARP) prevented a chaotic unwinding of investments and mitigated potentially devastating consequences for the real economy, but the use of taxpayer money for bailouts was criticized for providing banks with an explicit bail-out protection. Network structure was a key consideration at the time, because linkages through derivatives and other risk-sharing arrangements led to heightened systemic risk levels and imposed negative externalities on society.

Capponi, who joined Columbia Engineering in 2014, is also affiliated with Columbia University’s Data Science Institute as a member of its Financial and Business Analytics Center. Three other Columbia Engineering professors, Karen Kasza (mechanical engineering), James Teherani (electrical engineering), and Daniel Esposito (chemical engineering), have won CAREER awards this year.

—by Joanne Hvala

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