Artificial Intelligence and Systemic Risk

23 Pages Posted: 28 Jun 2019 Last revised: 9 Mar 2020

See all articles by Jon Danielsson

Jon Danielsson

London School of Economics - Systemic Risk Centre

Robert Macrae

affiliation not provided to SSRN

Andreas Uthemann

London School of Economics & Political Science (LSE) - Systemic Risk Centre; Bank of Canada

Date Written: March 1, 2020

Abstract

Artificial intelligence (AI) is rapidly changing how the financial system is operated, taking over core functions because of cost savings and operational efficiencies. AI will assist both risk managers and microprudential authorities. It meanwhile has the potential to destabilise the financial system, creating new tail risks and amplifying existing ones due to procyclicality, endogenous complexity, optimisation against the system and the need to trust the AI engine.

Keywords: Artificial intelligence, systemic risk

JEL Classification: G00, G38, G21

Suggested Citation

Danielsson, Jon and Macrae, Robert and Uthemann, Andreas, Artificial Intelligence and Systemic Risk (March 1, 2020). Available at SSRN: https://ssrn.com/abstract=3410948 or http://dx.doi.org/10.2139/ssrn.3410948

Jon Danielsson (Contact Author)

London School of Economics - Systemic Risk Centre ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44.207.955.6056 (Phone)

HOME PAGE: http://www.riskreasearch.org

Robert Macrae

affiliation not provided to SSRN

Andreas Uthemann

London School of Economics & Political Science (LSE) - Systemic Risk Centre ( email )

Houghton St
London
United Kingdom

Bank of Canada ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

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