Andrew Audette

The Impact of Artificial Intelligence on Finance: Opportunities and Challenges

Started July 1, 2024

Abstract or project description

Artificial Intelligence (AI) is rapidly transforming the financial industry, especially in areas like portfolio management, trading, and risk management. AI’s ability to process and analyze vast amounts of data with exceptional speed and accuracy is changing traditional financial practices forever. In portfolio management, AI analyzes data like company earnings and economic indicators with high speed and accuracy to optimize portfolios. Trading has also been revolutionized as AI can automate decision-making and execute trades without human interference. This results in trading becoming more efficient and accurate as markets continue to become more complex and fast-paced. Additionally, AI has transformed risk management by being used to validate and backtest risk models while also being able to create risk models with stunning accuracy. However, these advancements in finance come with challenges, such as concerns with transparency, as the complexity of AI models makes it difficult to trust the decisions that the algorithm is making. Another challenge is cybersecurity threats that are being enhanced by AI, meaning that investors will need stronger protection against cybersecurity threats in the future. As AI becomes more advanced and intuitive, jobs can become displaced due to AI taking over jobs that have been traditionally worked by humans. As AI continues to become more advanced and widespread in the financial industry, its impact will only increase creating opportunities for increasing efficiency while lowering cost, but also creating challenges that will need to be carefully managed. The financial industry will need to navigate these challenges and opportunities carefully to maximize the potential of AI while minimizing the adverse consequences.