Presented By-

Amber Miglani
123006
IMG 12-D
 PROBLEM STATEMENT

On a myriad of issues in the wake of economic and business uncertainty, any organization faces following key challenges:

● Maintaining and enhancing top line growth in an ever changing landscape

● Maximizing profitability and attaining an optimal cost structure

● Optimizing cash by highly effective and efficient business processes Managing risk in a highly complex business environment

· OBJECTIVE

To use AI and machine learning to bring key benefits of financial stability in the form of efficiencies in the provision of financial
services and regulatory and systemic risk surveillance.
 ● AI (artificial intelligence) is the simulation of human intelligence processes by machines, especially computer
systems. These processes include learning (the acquisition of information and rules for using the information), reasoning
(using rules to reach approximate or definite conclusions) and self-correction.

AI is a broad field, of which ‘machine learning’ is a sub-category.

● Machine Learning may be defined as a method of designing a sequence of actions to solve a problem, known as
algorithms, which optimise automatically through experience and with limited or no human intervention. These techniques
can be used to find patterns in large amounts of data (big data analytics) from increasingly diverse and innovative sources.
 Machine learning Algorithms
● Supervised learning the algorithm is fed a set of ‘training’ data
that contains labels on some portion of the observations.

● Unsupervised learning refers to situations where the data provided

to the algorithm does not contain labels. The algorithm is asked to
detect patterns in the data by identifying clusters of observations
that depend on similar underlying characteristics.

● Reinforcement learning falls in between supervised and

unsupervised learning. In this case, the algorithm is fed an
unlabeled set of data, chooses an action for each data point, and
receives feedback (perhaps from a human) that helps the algorithm
learn.

● Deep learning is a form of machine learning that uses algorithms

that work in ‘layers’ inspired by the structure and function of the
brain. Deep learning algorithms, whose structure are called
artificial neural networks, can be used for supervised,
unsupervised, or reinforcement learning.
 DRIVERS
Supply Side
● Computing power owing to faster
processor speeds
● Lower hardware costs
● Better access to computing power via
cloud services
● Rapid growth of datasets for learning
and prediction owing to increased
digitization and the adoption of web-
based services
● Declining cost of data storage
Demand Side
● Opportunities for cost reduction,
● risk management gains,
● greater profitability.
● working to create interactions between
systems and staff applying
● enhance decision-making
● developing new products and services to
offer to clients.
● regulatory compliance
 DIFFERENT USE CASE FOR AI

CASE 1

Credit scoring
applications

Customer-focused
uses: credit
Use for pricing, scoring, insurance
marketing and and client-facing
managing chatbots Client-facing
insurance chatbots
policies
CASE 2

Operations-focused uses

Capital optimisation use case Market impact analysis

● traditional function in running a bank
● Heavily relies on mathematical approaches.
AI and machine learning tools build on the foundations of
computing capabilities, big data, and mathematical
concepts of optimisation to increase the efficiency,
accuracy, and speed of capital optimisation.
● AI and machine learning can complement
conventional market impact models
● Trading robots
● Assess the market impact of a given trade
● Identify groups of bonds that behave similarly
CASE 3

Trading and portfolio

management

AI and machine learning in trading Scope for the use of AI and machine
execution learning in portfolio management

Trading firms are looking to AI and machine
learning to use data to improve their ability to
sell to clients
In portfolio management, AI and machine
learning tools are being used to identify new
signals on price movements and to make more
effective use of the vast amount of available
data
CASE 4

RegTech: applications
by financial
institutions for
regulatory compliance

AI and machine
learning in
regulatory
Uses for compliance and SupTech: uses
macroprudential and potential
supervision
surveillance and uses by central
data quality banks and
assurance prudential
authorities
 MICRO-FINANCIAL ANALYSIS

Financial markets Financial Institutions Consumers and Investors

. ● Consumers and investors

● AI and machine learning may
enable certain market
participants to collect and
analyse information on a greater
scale
● AI and machine learning may
lower market participants’
trading costs
● AI and machine learning may
enhance machine-based
processing of various operations in
financial institutions, thus
increasing revenues and reducing
costs
● AI and machine learning can be
used for risk management through
earlier and more accurate
estimation of risks
could enjoy lower fees and
borrowing costs
● Wider access to financial
services.Ex-robo-advice
● Facilitate more ‘customised’
and ‘personalised’ financial
services
 MACRO-FINANCIAL ANALYSIS

1. Enhancing the efficiency of financial services

for example by executing trades at times when there are available counterparties
with corresponding demand, this may stimulate transactions for real economic
activities

1. Facilitating collaboration and realising new ‘economies of scope:

For example, customer analysis based on transaction data attached to payment and
settlement activities

1. Stimulating investments in AI and machine learning related areas

Many firms, including non-financial businesses, appear eager to apply AI and
machine learning to their business. The growth in investments in AI and machine
learning-related R&D can directly contribute to economy-wide investment and thus
stimulate economy