Exploring Syntax and Semantics with ChatGPT and Large Language Models

Money Bizwiz Team
3 Min Read

Artificial Intelligence in Investment Management: A New Frontier for Finance

When it comes to artificial intelligence (AI) and machine learning (ML) technology, the banking and finance sectors have been leading the way. These innovations have revolutionized the industry, offering alternative models and enhancing existing analytics across various functional areas such as credit risk management, market risk management, compliance, and portfolio management.

The Handbook of Artificial Intelligence and Big Data Applications in Investments, authored by Larry Cao, CFA, from the CFA Institute Research Foundation, delves deeper into the realm of AI in investment management.

The Power of Machine Learning

ML has automated the model development process, making it faster and more efficient. ML-driven models have shown comparable – if not better – performance than traditional models. The latest advancements in AI/ML, such as ChatGPT and large language models (LLMs), represent a significant evolution in technology with wide-ranging implications for the financial sector.

These LLMs have immense power and versatile applications. ChatGPT, for instance, can understand human language and provide coherent responses across a wide range of topics. Its potential use cases are limitless, from risk assessment and loan recommendations to regulatory compliance and legal document reviews.

Understanding LLMs

Despite their capabilities, there are limitations and risks associated with LLMs. Companies like Apple, Amazon, and JPMorgan Chase have banned the use of ChatGPT due to concerns about misuse. Before addressing these issues, it is essential to understand how these technologies operate.

LLMs like ChatGPT primarily rely on statistical analysis of vast amounts of human text to generate responses. They lack a formal semantic logic but produce coherent output based on training data. Embedding and attention mechanisms play a crucial role in these models, enabling them to process and generate text effectively.

The Future of ChatGPT

While LLMs like ChatGPT offer remarkable capabilities, replicating the systematic structure of human language algorithmically remains a challenge. In the next part of this series, we will explore the potential limitations and risks associated with ChatGPT and discuss strategies for mitigating them.

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Disclaimer: The views expressed in this post are the author’s opinions and should not be considered investment advice. They do not necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images /Yuichiro Chino

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