AI hype - A study on using artificial intelligence in algorithmic trading
(2021) IBUH19 20201Department of Business Administration
- Abstract (Swedish)
- Artificial intelligence (AI) and machine learning (ML) is expected to have a significant effect in the use of algorithmic trading (AT). AT is already dominating the type of trading in financial markets, and ML can increase the capacity of electronic trading. The rationale of this study is to examine the current adoption of AI and ML in AT, and why trading firms in the financial industry should use AI to be successful in the future. There are a number of obstacles and limitations that has reduced the number of trading firms using AI, and the thesis will focus on advantages and disadvantages, while simultaneously having an optimistic opinion about solutions that firms and researchers think are necessary to adopt AI in trading. The author had... (More)
- Artificial intelligence (AI) and machine learning (ML) is expected to have a significant effect in the use of algorithmic trading (AT). AT is already dominating the type of trading in financial markets, and ML can increase the capacity of electronic trading. The rationale of this study is to examine the current adoption of AI and ML in AT, and why trading firms in the financial industry should use AI to be successful in the future. There are a number of obstacles and limitations that has reduced the number of trading firms using AI, and the thesis will focus on advantages and disadvantages, while simultaneously having an optimistic opinion about solutions that firms and researchers think are necessary to adopt AI in trading. The author had a preconception before the start of researching material relevant to the study that firms had started to use ML strategies for trading at a larger scale, but there are in reality only a limited number of successful investment banks and hedge funds using the technology based on data available online. Scientists and firms using algorithmic trading, and those thinking about adopting AI in trading are excited about the technology, which they indicate in the analysis section of this study. Despite that, they acknowledge that quality of data, data availability, and complexity of AI and finance has severely limited AI adoption in trading. However, the majority of those trading in the financial markets think AI and ML is the future because of its ability to trade in microseconds and learn from its mistakes. It is argued by the author that AI and ML should be used in trading, while sharing the opinion of existing research that trading firms needs to change their business strategy, and make other radical changes to use AI and ML in trading as intended. The ability of the technology should be to completely differentiate the scope of firms trading in the financial industry. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9068122
- author
- Jansson, Oscar LU
- supervisor
- organization
- course
- IBUH19 20201
- year
- 2021
- type
- M2 - Bachelor Degree
- subject
- language
- English
- id
- 9068122
- date added to LUP
- 2021-11-19 11:55:39
- date last changed
- 2021-11-19 11:55:39
@misc{9068122,
abstract = {{Artificial intelligence (AI) and machine learning (ML) is expected to have a significant effect in the use of algorithmic trading (AT). AT is already dominating the type of trading in financial markets, and ML can increase the capacity of electronic trading. The rationale of this study is to examine the current adoption of AI and ML in AT, and why trading firms in the financial industry should use AI to be successful in the future. There are a number of obstacles and limitations that has reduced the number of trading firms using AI, and the thesis will focus on advantages and disadvantages, while simultaneously having an optimistic opinion about solutions that firms and researchers think are necessary to adopt AI in trading. The author had a preconception before the start of researching material relevant to the study that firms had started to use ML strategies for trading at a larger scale, but there are in reality only a limited number of successful investment banks and hedge funds using the technology based on data available online. Scientists and firms using algorithmic trading, and those thinking about adopting AI in trading are excited about the technology, which they indicate in the analysis section of this study. Despite that, they acknowledge that quality of data, data availability, and complexity of AI and finance has severely limited AI adoption in trading. However, the majority of those trading in the financial markets think AI and ML is the future because of its ability to trade in microseconds and learn from its mistakes. It is argued by the author that AI and ML should be used in trading, while sharing the opinion of existing research that trading firms needs to change their business strategy, and make other radical changes to use AI and ML in trading as intended. The ability of the technology should be to completely differentiate the scope of firms trading in the financial industry.}},
author = {{Jansson, Oscar}},
language = {{eng}},
note = {{Student Paper}},
title = {{AI hype - A study on using artificial intelligence in algorithmic trading}},
year = {{2021}},
}