The inevitable AI financial crash

November 7, 2023

“Blaming speculators as a response to financial crises goes back at least to the Greeks. It’s almost always the wrong response.”
– Lawrence Summers

If you have modelling or AI-related news, resources, or events that you’d like to share with 48,000+ of the world’s best modellers, please email cassandra.brightley@gridlines.com.

Finance // Is an AI-triggered financial crash unavoidable?

US Securities and Exchange Commission Chair Gary Gensler predicts that the growing reliance on AI systems could lead to a financial market crash in the next decade.

“I do think we will in the future have a financial crisis. . .[and] in the after-action reports, people will say, ‘Aha!’ There was either one data aggregator or one model. . .we’ve relied on.’ Maybe it’s in the mortgage market. Maybe it’s in some sector of the equity market.”

AI // Microsoft research finds flaws in GPT-4

Microsoft-affiliated research has revealed flaws in GPT-4, raising concerns about the trustworthiness and ‘toxicity’ of large language models. The study found that GPT-4 is more reliable than its predecessor GPT-3.5, but remains susceptible to generating biased, ‘toxic’ text for specific prompts based on the data sources it can pull from. Read more.

Green finance // Lack of biodiversity funding in green bonds

Barclays analysts reveal limited funding for biodiversity protection in green and sustainability bonds. This article examines the reasons behind this discrepancy and how it impacts our environment.

Key points covered in the article:

Lack of clear biodiversity plans.
Carbon-focused impact metrics.
Potential opportunities in the sovereign market. – biodiversity as an eligible category.
The growing significance of nature and transition risks.
Biodiversity KPIs in the sustainability-linked bond market.

Renewables // Here’s how renewables have grown so far in 2023

The rise of renewables continues strongly in 2023 with many sectors hitting major growth milestones. Solar and wind together made up a record 14.3% of global electricity. However, droughts caused hydro to dip by 8.5%, leading to a spike in China’s coal generation. Read more.

Resources for modellers

Unleash Python’s power within Microsoft Excel. Discover how Python integration can improve your Excel skills with the Financial Modelling World Cup’s guide. It covers data frames, advanced data visualisation, and how ChatGPT can create Python code for you.

Why the ‘cell by cell’ approach to Financial Model Auditi is not without its risks. Hidden errors can easily slip through the cracks, and as auditors, it is imperative to stay vigilant. In Gridlines’ recent blog, we compare ‘Cell by Cell’ to ‘Shadow Modelling’ and why we adopt the latter approach.