Toby Segaran and Jesper Anderson are the guys behind FreeRisk.org, which has set out on the ambitious task of making Moody’s, S&P and Fitch obsolete. The idea is to create a huge open data store of financial data taken primarily from company filings, and making the data available for downloading and queries. On top of that, there will be a way for individuals to build custom-designed risk models.
The hope is that the financial system will work better once data is more accessible and risk modelling more diversified.
FreeRisk is currently under active development, but aims to provide company filings published in XBRL, APIs that allow for distributed models that post their results back to Freerisk, and Riski – a wiki that aims to draw together resources relating to financial markets regulation. The API functionality is what makes Freerisk more than merely a collection of information and data – it will enable users to tap into the data to build sophisticated models, and then to publish their results for the whole world to see. As companies start to standardize on XBRL, and as the use of XBRL spreads more widely, this could become a potentially very valuable repository of financial models. However, an incentive problem remains. Crowdsourcing of this sort has often been very successful in areas where there is not necessarily any loss to oneself in sharing knowledge with others. However, it remains to be seen whether such a model makes any sense for the financial world, where the value of one’s intellectual production is typically tied to outperforming one’s peers. We remain somewhat skeptical that professional investors and analysts will be eager to share their proprietary models in this manner.