Finance and artificial intelligence

: the effect of AI on ethics in the financial sector

Abstract

This dissertation aims to investigate the impact of implementing Artificial Intelligence (AI) in Finance, with emphasis on areas that are likely to be profoundly affected by this technology. Through the study of the implications of AI, an explanation is presented about the changes and advances that are already underway in the implementation of these tools in the financial sector. After carrying out the literature review, the presence of a gap in the literature became noticeable. Based on the Scopus platform, research was carried out on the interdisciplinarity between finance, AI and ethics, verifying that there was almost no work for analysis. To respond to this gap, four relevant areas in finance were investigated: trading; portfolio management; fraud detection and prevention; and risk management; mainly in credit risk management and the occurrences and issues associated with the use and exploitation of AI. Next, we analysed the challenges that AI imposed on the financial industry, such as the costs of implementing systems and liquidity challenges. Such issues highlight the interdisciplinarity between finance, ethics and AI. These challenges raise ethical questions, for example, the potential loss of jobs, the difficulty of transparency and ease of explanation of AI models implemented in organizations, as well as information security and privacy of data used by AI models. The discussion held focused in greater detail on credit risk management. The results reveal that the benefits of AI are numerous, but it also adds many challenges to financial institutions. To ensure that the implementation of these tools is successful, both in the short and medium term, it is crucial to find a balance between technology, regulators and finance. It is essential to apply a multidisciplinary approach that encompasses the different areas involved in the development, implementation, use and supervision of these systems. Only in this way will it be possible to maintain trust, a value that is the basis of finance and financial markets. In particular, the offer of AI tools associated with Finance introduces a potential for disintermediation and change in relationships between the customer, financial institutions and even the role of specialists, through the use and exploitation of AI – which entails additional risks for the sector.

Date of Award	9 Jul 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Luis Borges Gouveia (Supervisor) & Paulo Alves (Co-Supervisor)