Artificial Intelligence and Systemic Risk

26 Pages Posted: 28 Jun 2019 Last revised: 17 Aug 2021

See all articles by Jon Danielsson

Jon Danielsson

London School of Economics - Systemic Risk Centre

Robert Macrae

affiliation not provided to SSRN

Andreas Uthemann

Bank of Canada; London School of Economics - Systemic Risk Centre

Date Written: May 28, 2021

Abstract

Artificial intelligence (AI) is rapidly changing how the financial system is operated, taking over core functions for both cost savings and operational efficiency reasons. AI will assist both risk managers and the financial authorities. However, it can destabilize the financial system, creating new tail risks and amplifying existing ones due to procyclicality, unknown-unknowns, the need for trust, and optimization against the system.

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 (May 28, 2021). Journal of Banking and Finance, Forthcoming, 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

Bank of Canada ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

London School of Economics - Systemic Risk Centre ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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