MS27: Fin Tech: On the use of Robo Advising and Neural Networks in Finance

Financial Technology, often shortened to “FinTech” broadly refers to the use of technology and innovation in the delivery of financial services. FinTech has been used to automate insurance, trading, banking services and risk management. Within the financial services industry, some of the used technologies include artificial intelligence (AI), big data, robotic process automation (RPA), and blockchain. In this minisymposium, we focus on the use or AI and RPA in investment banking, with interesting applications also to the insurance industry.

Neural networks are AI systems inspired by the biological neural network. Such systems “learn” to perform tasks by considering examples, generally without being programmed with task-specific rules. The recent financial literature has documented many instance where neural networks “beat” classical pricing or risk management models, by far. Still, its non-parametric nature make these systems hard to supervise, raising issues. In three of the talks we discuss its use and explore applications in derivative pricing and rating of fixed income products.

RPA refers to the use artificial intelligence technology in implementing specific tasks. In terms of ”fintech”, one of the most recent contexts where RPA has been used is in robo investment advising, where the role of a human portfolio manager is replace by computer platforms. These platforms require investor to input of information into a system and as output recommend investment portfolios. In the two talks dedicated to robo advising we focus separately in the inputs – discussing investment risk profiling – and outputs analysing the possible risks of automated recommendations.

Wednesday, April 14, 10:20-12:00 (Chair: Raquel M. Gaspar)

1. 10:20 Manuel L. Esquivel, Nadezhda P. Krasii, Large Dimension Gaussian Models for Knowledge Representation; a Wavelet Neural Network Scheme for Supervised and Unsupervised Learning: Application to Price Modeling
2. 10:45 Raquel Medeiros Gaspar, Sara Bárbara Dutra Lopes, Bernardo Sequeira, Neural Network Pricing of American Put Options
3. 11:10 Paulo Martins Silva, Robo Advising: Where are the Risks
4. 11:35 Filipe Charters de Azevedo, Risk Profiling Based on Conjoint Analysis