Associate Professor, Administrative Sciences; Director, Finance
PhD, Boston University
MBA, Vanderbilt University
MS, BS, University of Belgrade
Dr. Vodenska is an expert in international finance and investments, with more than fifteen years of hands-on experience in financial analysis and securities trading on Wall Street and in European markets. She is a Chartered Financial Analyst with experience in creating and actively managing hedge funds, specializing in risk arbitrage and convertible fixed-income securities. Vodenska has broad experience in academic teaching and corporate training, and her research focuses on network theory and complexity science applications in economics. She conducts theoretical and applied interdisciplinary research using quantitative approaches for modeling interdependences of financial networks, banking system dynamics, and global financial crises. Vodenska also studies extreme events such as financial market bubbles and crashes, and the domino effects that such events can exert on related global economic systems. More specifically, Vodenska’s research focuses on modeling of systemic risk propagation and spreading of global financial crises throughout interconnected financial and economic networks. As a principal investigator (PI) for Boston University, she has won interdisciplinary research grants awarded by the European Commission (EU) and the National Science Foundation (U.S.).
- Big data analytics and complex economic systems:
- Using big data, including intraday pricing and news streaming, to forecast global financial market returns
- Investigating the relations between news sentiments and risk and return time series for global equities, foreign exchange, and international stock market indices
- Modeling volatility dynamics in financial markets:
- Evaluating predictive power of VIX implied volatility index on the S&P 500 volatility
- Investigating market microstructure based on clustering analysis of short and long volatility return intervals
- Exploring relationship between financial market volatility and Omori processes
- Interdependent network theory and systemic risk modeling:
- Using bipartite network approach to simulate toxic assets contribution to financial crisis propagation across the U.S., European, and Japanese bank networks
- Modeling complex financial and economic systems such as bank liquidity networks and interdependent financial market networks
- Investigating interdependencies in global financial networks using complex principal component analysis and community detection algorithms to study stock and foreign exchange financial markets
- Studying European Sovereign debt crisis and modeling the relationships within the European bank–Government debt coupled (bi-partite) network
- Corporate governance networks:
- Identifying powerful directors in the U.S. corporate governance network
- Using network centrality measures as indicators of influence
- MET AD 713 – Derivative Securities and Markets
- MET AD 717 – Investment Analysis and Portfolio Management
- MET AD 731 – Corporate Finance
- MET AD 763 – Multinational Financial Management
- MET MG 472 – Financial Concepts
Chitkushev, L., Zlateva, T., Vodenska, I., Zlatev, V. “Analytics Dashboard Parameters for Digital Learning Management Systems.” In Proceedings of the 10th Annual International Conference on Computer Science and Education in Computer Science. Albena, Bulgaria (July 4–6, 2014). http://www.csecs.org/ [Accepted Paper at International Peer-Reviewed Conference]
Vodenska, I., and Chitkushev, L. “Innovative tools for teaching complex financial concepts.” In Proceedings of the 9th Annual International Conference on Computer Science and Education. Fulda/Wurzburg, Germany, June 29–2 July 2, 2013.
Vodenska, I., Dehmami, N., Battiston, S., and Stanley, H. E. “Systemic Risk Propagation from Troubled European Economies to Global Banks and Investment Funds.” Workshop on Economic Science with Heterogeneous Interacting Agents (WEHIA). Reykjavik, Iceland, June 18-22, 2013.
Vodenska, I., and Chitkushev, L. “Impact of Euro Adoption on Emerging European Countries.” Management Journal 8, no. 1 (2013): 47-67.
Huang, X., Vodenska, I., Havlin, S., Stanley, E. “Cascading Failures in Bi-partite Graphs: Model for Systemic Risk Propagation.” Nature’s Scientific Reports 3 (February 5, 2013).
Zhou, D., Vodenska, I., Havlin, S., and Stanley, H. E. “Model for Systemic Risk Propagation in Financial Networks.” Latsis Symposium 2012, Economics on the Move, Trends and Challenges from the Natural Sciences. ETH Zurich, Switzerland, September 11-14, 2012.
Chitkushev, L., Vodenska, I., and Zlateva, T. “Integrating Informatics into Graduate Finance Programs.” Proc. 7th Annual International Conference on Computer Science and Education (Sofia, Bulgaria, 2011).
Huang, X., Vodenska, I., Wang, F., Havlin, S., and Stanley, H. Eugene. “Identifying Influential Directors in the United States Corporate Governance Network.” Physical Review E-Journal (2011).
“Innovative Web-Based Tools for Finance Education.” Proc. of the 6th Annual International Conference on Computer Science and Education in Computer Science (Fulda/Munich, Germany, June 2010): 60–69.
Vodenska-Chitkushev, I., F.Z. Wang, P. Weber, K. Yamasaki, S. Havlin, and H.E. Stanley. “Comparison between volatility return intervals of the S&P 500 index and two common models.” The European Physical Journal B 61 (2008): 217-223.
Weber, P., F. Wang, I. Vodenska-Chitkushev, S. Havlin, and H.E. Stanley. “Relation between volatility correlation in financial markets and Omori processes occurring on all scales.” Physical Review E 76, no.1 (2007).
Vodenska-Chitkushev, I., F.Z. Wang, S. Havlin, and H.E. Stanley. “Global implications of Financial Institution investment strategies” (in preparation).
Vodenska-Chitkushev, I., X. Huang, S. Havlin, and H.E. Stanley. “Enterprise size and industry sector impact on the correlations between corporate profitability and executive compensations” (in preparation).
Vodenska-Chitkushev, I., S. Havlin, and H.E. Stanley. “Corporate Governance Networks: Relation between levels of connectivity of corporate board directors and their spheres of influence” (in preparation).
Chitkushev, L., Vodenska, I., and Zlateva, T. “Digital Learning Impact Factors: Student Satisfaction and Performance in Online Courses.” 2014 International Conference on Information and Education Technology, Melbourne, Australia, January 2-4, 2014. (Best Presentation Award)
Vodenska, I., and Chambers, W. “Relation between VIX option-based implied volatility index and S&P 500 index volatility”. 26th Australasian Finance and Banking Conference (AFBC), Sydney, Australia, December 16-19, 2013.
“Multiplex Financial Network Dependencies.” MIT Sloan School of Management. 5th Research Meeting of the Consortium for Systemic Risk Analytics (CSRA), Cambridge, Mass., December 12, 2013. Invited Talk.
“Global Financial Crises Effects on World Trade Relationships.” St. Petersburg State University, School of Economics. Conference on Evolution of International Trading System: Prospects and Challenges, St. Petersburg, Russia, October 31–November 1, 2013. Invited Talk.
“Centrality Measures of Systemically Important Global Financial Markets: Eigenvector Approach.” Financial Networks and Systemic Risk Conference. Kyoto, Japan, July 17-19, 2013. Invited Talk. Co-presented with Aoyama, H., Fujiwara, Y., Zhou, D., Havlin, S., and Stanley, H. E.
“Multiplex network interdependencies of currency markets and global stock market indices.” Horizons in Social Sciences. IMT Lucca, Tuscany, Italy, July 9-11, 2013. Invited Talk. Co-presented with Zhou, D., Dehmami N., Havlin, S., and Stanley, H.E.
“Effects of European Sovereign Debt Crises on Global Financial Markets.” Global Sustainable Finance Conference. Karlsruhe, Germany, July 4-5, 2013. Invited Talk.
“Cascading failures in institutional investor network caused by systemically important banks.” Complexity in Social Systems: From Data to Models (CSS). Cergy-Pontoise University, Paris, France, June 27-28, 2013. Co-presented with Zhou, D., Havlin, S., and Stanley, H. E.
“European sovereign debt (GIPSI) risk effects on global financial institutions.” International Conference on Network Science (NetSci) 2013. Royal Library, Copenhagen, Denmark, June 3-7, 2013. Co-presented with Dehmami, N., Havlin, S., and Stanley, H. E.
“Complexity and Systemic Risk Propagation in Global Economic Networks.” FuturICT Conference at Media Lab, MIT, Cambridge, Mass., February 13-14, 2013. Co-presented with Dehmami, N., and Stanley, H. E.
“Impact of Euro Adoption on Emerging European Countries.” Paper presented at the International Euro Conference on Emerging Markets, Slovenia, July 12-14, 2012.
“Cascading Failures in Bi-partite Graphs: Model for Systemic Risk Propagation.” Paper presented at the International Conference on Net and Web Sciences, Northwestern University in Evanston, Ill., June 18-22, 2012.
“Integrative Technology-Enhanced Approaches (ITEA) to Teaching Complex Financial Concepts.” Boston University Instructional Innovation Conference, March 2, 2012. Co-presented with Chitkushev, L., and Burstein, L.
“Similarity of Investment Strategies and Global Financial Crisis.” Paper presented at the Conference on Perspectives and Challenges in Statistical Physics and Complex Systems for the Next Decade, November 9-11, 2011, Natal, Brazil.
“Using Interactive Synchronous Tablet Tools in Online Finance Courses.” 3rd Instructional Innovation Conference, Boston University, Boston, Mass., March 2011.
“Innovative Web-Based Tools for Finance Education.” 6th Annual International Conference on Computer Science and Education, Fulda, Germany, June 26–29, 2010.
“Advantages of Blended Format for International Programs.” 2nd Annual FABDE Conference on Distance Education, Boston, Mass., May 11, 2010.
“A New Approach for Determining the Influence of Directors in U.S. Corporate Governance Network.” International Conference on Complex Network Science, Cambridge, Mass., May 10–14, 2010.
Scientific Journal Reviewer
Journal of Economic Interaction and Coordination (JEIC) (2013–present)
Nature’s Scientific Reports (2013–present)
Physica A (2009–present)
2014–15: Principal Investigator (PI) for Boston University on National Science Foundation (NSF)-awarded grant titled: “Modeling Systemic Risk: Finding Precursors of Emerging Financial Crises.” EAGER Award number: SES‐1452061. Amount: $57,721.
2012–14: Principal Investigator (PI) for Boston University on European Commission-awarded grant titled “Forecasting Financial Crises.” FET Open Project ‘‘FOC’’ 255987 and ‘‘FOC-INCO’’ 297149. Amount: $3.5 million for the Consortium, of which $300,000 went to BU.
How does your experience in the field of investment banking inform the curriculum for MET’s graduate programs in financial management?
My investment banking experience gave me a basis for creating a plethora of real-world experiences for our students, preparing them for the financial industry and for the corporate world. At MET, we teach our MS in Financial Management (MSFM) students that the real world is dynamic and global, and that they should expect to see that reflected in the financial markets as well. If they would like to become part of this exciting investment fabric, they will need to be prepared and alert.
While working in investment banking, among other learning opportunities, I went through several highly volatile events that dismayed the financial markets. I also witnessed, firsthand, a formation (in the late 1990s) and a bursting (in the early 2000s) of the dot-com bubble. I experienced two particularly notable, volatile events. First was the 1998 Russian sovereign bond crisis, when Russia defaulted on its sovereign bonds and a famous hedge fund operating with extremely high-leverage strategies, Long Term Capital Management, collapsed. The Federal Reserve arranged for a consortium of 16 major financial institutions to step up and keep the fund afloat, in essence bailing it out until it dissolved in 2000.
This bailout, I believe, set the stage for the global financial crisis ten years later in 2008, encouraging moral hazard and low-risk averseness for major financial institutions; Russia’s default on its sovereign bonds sent ripples through global financial markets, the U.S. stock market plunged, and investors panicked.
The second notable and volatile crisis was the terrorist attack in 2001. I was in Manhattan during the September 11 terrorist attack, where I was trading European equities, whose values nosedived immediately after the attacks on the twin towers in New York City. While the U.S. markets did not open that day, the European markets were already in trading session for more than five hours and reacted sharply to the terrorist attacks, losing significant value in a very brief period of time. Again investors panicked.
In a more regular, everyday setting, working in convertible bond trading and convertible arbitrage as well as risk arbitrage, trading fixed income and equity securities in the U.S. and European markets, called for early morning diligence in reading the financial press (the Wall Street Journal, the New York Times, the Financial Times, etc.) in order to prepare strategies for the day. No single day was the same as the one before. The market dynamics constantly reminded each securities trader and investment professional that staying on top of news and transforming the news into actionable strategies was essential.
Throughout the curriculum, we think about and ask numerous intriguing questions. We teach our students to ask the hard questions addressing real-world problems that are often fuzzy and unstructured. We accomplish the real-world experience in the classroom through projects, assignments, and a master’s thesis. This approach, bringing to a close proximity the theoretical instruction and the real-world experiences, is well-suited to prepare our students to be competitive in the corporate world upon their graduation.
How do the courses you teach prepare students to evaluate and adhere to financial regulations?
We incorporate financial regulation and ethics in many of the finance courses offered in the MS in Financial Management program, including corporate finance, investment analysis and portfolio management, or derivatives securities and markets. In 2017 we introduced a new core course, Financial Regulation and Ethics (MET AD 678), that all students in our program are required to take. Rachel Spooner, lecturer at BU’s Questrom School of Management, kindly shared with me her insights from a securities regulation course that she is teaching for Questrom’s MBA program and suggested case studies as I embarked on my journey to develop a financial regulation course for the MET MSFM program. I co-developed and co-taught this course with BU School of Law Professor Tamar Frankel, who graciously offered to co-teach the MET financial regulation course with me in the fall 2017 semester.
Professor Frankel is very inspiring and collaborating with her is an exceptionally enriching experience for me. She offered suggestions for improving the course and for setting the course’s future direction. Out of many hours of discussions with Professor Frankel, an idea was born to write a book together that will serve as a textbook for the MET financial regulation course. So, during the fall 2018 semester, while I am on sabbatical, Professor Frankel and I are working on the new book, titled The Financial System and Regulation.
The financial regulation course focuses on key federal statutes that regulate securities and participants in the securities markets, such as the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company and Investment Advisor acts of 1940, the Sarbanes–Oxley Act of 2002, the Dodd–Frank Act of 2010, the JOBS Act of 2012, and several criminal statutes applicable to securities fraud and related offenses. We use examples and case studies to understand the practical application of the laws that cover the securities industry and the publicly traded companies. Our students learn that financial services participants, such as investment bankers, brokers, dealers, and investment advisors, are all subject to financial regulation. Companies and their employees or directors who violate federal securities laws and regulations can face civil enforcement actions by the Securities and Exchange Commission, and criminal prosecution by the U.S. Department of Justice. We strive to teach our students that the securities laws are important because they are enacted to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. We discuss whistleblower protection under the securities law, the practices that constitute insider trading, as well as the foreign corrupt practices act and the bank secrecy act. MET AD 678 is unique and extremely important for the students in our program. It makes them think, share opinions regarding specific discussion points, engage in idea exchange, and constantly learn from one another.
What real-life examples or case studies do you use in the classroom to illustrate these concepts?
Financial Regulation and Ethics (MET AD 678) includes many case studies to inform on specific securities laws and the application of the securities statutes. We study classic securities cases from the 1940s, such as SEC v. Howey, where the definition of a security and an investment contract was disputed. We also look into the case of Microsoft at the time when the company was planning to offer shares to the general public in the 1980s. Bill Gates was reluctant to take the company public but he made $350 million when Microsoft did its Initial Public Offering, or IPO.
When addressing the importance of materiality and the responsibility of the companies that trade publicly to tell the whole truth to investors at all times, we study TSC Industries v. Northway and Basic v. Levinson. We discuss case studies that cover various types of insider trading and students have an opportunity to learn different aspects of insider trading, and when is it legal or illegal to trade on a non-public information. Some of the insider trading cases that we discuss in class include Chiarella v. U.S., U.S. v. O’Hagan, Dirks v. SEC, and U.S. v. Martoma.
Students also learn about the importance of whistleblowers and the protection that they have under the Sarbanes–Oxley Act of 2002 or under the Dodd–Frank Act of 2010. In class, we discuss the following whistleblowing case studies: Berman v. Neo@Ogilvy LLC and WB Digital Realty Trust v. Somers. The case studies inspire critical thought and motivate students to share their opinions, even if their proposed resolutions of the cases are contrary to the U.S. Supreme Court decisions. Sometimes even the Supreme Court justices can split almost evenly. Students are encouraged to debate the issues covered in the case studies, offer their opinions about how they think the cases should have been decided, and defend their opinions with solid arguments and logic.
Congratulations on the acceptance of your paper, “Macroprudential stress testing of global financial systems,” to the Financial Management Association (FMA) Annual Conference this fall. Can you provide an overview?
Stability of the banking system and macroprudential regulation are essential for healthy economic growth. The paper that I presented at the FMA Annual Meeting conference in October 2018 in San Diego, California, addresses the need for systemic stress testing of the entire financial system by the bank regulators, taking into consideration the common exposures of the financial institutions. Systemic stress testing calls for thorough understanding of the bank network effect, or the risk that the interconnectivity and interdependence of the banking industry brings into the economy. In this paper, we study the European bank network and its vulnerability to stressing different bank assets. The importance of macroprudential policy is emphasized by the inherent vulnerability of the financial system, high level of leverage, similar risk exposure of financial institutions, and susceptibility for systemic crisis propagation through the bank network.
Current stress tests conducted by the European Banking Authority do not take into consideration the connectivity of the banks and the potential of one bank’s distress spilling over to the rest of the system. We create a bipartite network with bank nodes on one hand and asset nodes on the other, with weighted links between the two network layers based on the level of different countries’ sovereign debt holdings by each bank. Based on this network topology of the banking system, we propose a model for systemic risk propagation taking in consideration common bank exposures to specific asset classes. We analyze the dynamics of tier one capital ratio after stressing the bank network and find that while the system is able to withstand shocks for a wide range of parameters, we can identify a critical threshold for asset risk beyond which the system transitions from stable to unstable.
I remember delivering a presentation titled “Causes and Consequences of the 2008 Global Financial Crisis,” at the Federal Reserve Bank of Boston on October 8, 2013, at the fifth anniversary of the 2008 global financial crisis, and at that time we had more questions than we had answers. This year is the tenth anniversary of that crisis, and a conference, “2008 Financial Crisis: a ten-year review,” took place November 8–9, 2018, in New York City, co-organized by the Annual Review of Financial Economics Journal, MIT’s Golub Center for Finance and Policy, and NYU’s Leonard N. Stern School of Business. Experts like Ben Bernanke, Douglas Diamond, Robert Engle, Timothy Geithner, Deborah Lucas, Myron Scholes, and Jean-Claude Trichet offered their insights into the 2008 global financial crisis and talked about the future of finance.
How do countries, in particular the United States, prepare to weather recessions and financial crises that have the potential to impact our interconnected global economy?
The main actors who need to prepare to withstand financial crises are really the banks. It should be the financial institutions’ responsibility to maintain healthy balance sheets and to properly assess their risk exposures in order to be able to live through financial crisis and function on their own without a need by the government to bail them out.
The bailout of large banks in 2008, mandated by the Emergency Economic Stabilization Act of 2008 that authorized the U.S. Secretary of the Treasury to spend $700 billion to inject liquidity into the financial system, invoked quite a bit of revolt and controversy. The notion that the banks could reap the benefits of high-leverage and high-risk investments, while not being responsible for the losses from such strategies, was deemed unfair. The public was generally questioning the right of the banks to have tax payers’ money cover their losses while banks enjoyed extraordinary profits, not subsidizing the government or deciding to build bridges and schools, but instead paying large bonuses to their executives. On the other hand, the supporters of the bailout called for government action in order to save the financial system and prevent a more severe and prolonged crisis, where tax payers too could have suffered for an extended period of time.
An important act that came as a response to the 2008 crisis was the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, signed into law by President Barack Obama. The Dodd–Frank Act primarily addressed the importance of financial stability by improving accountability and transparency of financial institutions. More importantly, it proposed protection of consumers from abusive financial institution practices. An important additional provision of the Dodd–Frank Act was the Volcker Rule, named for Paul Volcker, who was chairman of the Federal Reserve under presidents Jimmy Carter and Ronald Reagan as well as chairman of the Economic Recovery Advisory Board under President Obama. The Volcker Rule prohibits banks from making certain investments with their own funds, i.e., it limits bank proprietary trading operations. I had the pleasure of discussing the evolving economic and banking issues with Paul Volcker on several occasions, which has been quite an enlightening experience for me. As for the Dodd–Frank Act, in February 2017, President Donald Trump issued an executive order for regulators to review the Act and to outline possible reforms, namely rolling back some of the consumer protection provisions outlined in it. Hence, we are experiencing a “yo-yo” effect of too-much or a too-few regulations, while, in reality, we need to think about better regulations instead.
Which course(s) do you teach at MET?
As MET faculty, I have taught the following graduate-level courses:
- Investment Analysis and Portfolio Management (MET AD 717)
- Derivative Securities and Markets (MET AD 713)
- Corporate Finance (MET AD 731)
- Multinational Financial Management (MET AD 763)
- Financial Markets and Institutions (MET AD 712)
- Financial Concepts (MET AD 632)
- Financial Regulation and Ethics (MET AD 678)
How do the concepts students learn in MET’s financial management graduate programs apply in practice?
The MS in Financial Management curriculum is truly as hands-on as is possible in academic setting. Given that most of MET faculty have corporate experience, either having worked in the industry before becoming full-time academics or currently working full time and teaching as part-time faculty at MET, they bring real-world experience to the classroom.
The financial services are developing with a rapid pace, and our program evolves to meet the challenges and the needs of financial services. Today’s finance professional needs to have solid knowledge of finance—i.e., be able to analyze financial statements, understand financial markets, create budgets, and make capital investment decisions. However, this is not enough. Financial regulation is also changing, and finance professionals need to be familiar with the dynamics of the regulatory environment. Besides these aspects, a finance professional of the future needs to possess additional competitive skills, especially because of technology advancements. Technology creates a competitive environment requiring students to learn quantitative methods and acquire analytics skills that will help them with performing financial analysis, creating trading algorithms, analyzing news sentiments, and inferring how certain macroeconomic indicator trends might affect future economic developments, in the U.S. and globally. For any field in finance—including investment banking, money management, or securities trading—students need to have understanding of many different aspects of finance to be successful.
MET’s Master of Science in Financial Management program offers a concentration in International Finance and a concentration in Investment Analysis, which closely follows the Chartered Financial Analyst candidate body of knowledge, or the CFA CBOK. According to the U.S. Bureau of Labor Statistics Occupational Outlook Handbook, financial analyst jobs are projected to grow by 11% through 2026, which is above average for all occupations.
One should also keep in mind that financial advisors will be in high demand, especially because the baby boomers are approaching retirement and they will need to prepare for a financially secure future by having comprehensive financial plans and personal financial advisers to create, maintain, and update these financial plans as needed.
The financial services are very innovative, constantly developing and changing, and the most valuable professionals will be the ones able to restructure, transform, and improve their knowledge constantly, even after obtaining graduate degrees. This is the reason why we teach our students to think, to learn how to learn, and to evolve and excel through implementation.