Artificial intelligence advances

Artificial intelligence is widely seen as more science fiction than science, a grab bag of 1960s theories that never panned out. But while computers still can’t grasp the difference between concepts such as ‘breadbox’ and ‘Chicago’, artificial intelligence techniques today actually underpin many of the cutting-edge analytics that allow financial institutions to manage increasingly complex risks

“The central challenge of financial valuation is categorising risk then putting a price on it,” said Emanuel Derman, the former head of Goldman Sachs’ quantitative strategies group, and Risk columnist, in a presentation at the Risk 2002 Congress in Paris in April (Risk June 2002, page 81). Unfortunately, advanced intelligent computer techniques do not have anything to offer in this regard, he said, echoing a common criticism of artificial intelligence (AI): that its proponents promised more

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