Methods that find patterns in data to predict outcomes without being explicitly programmed with rules. In risk, they raise issues of explainability and model risk.
Where you will meet it
Machine learning comes up in 3 learning outcome notes across the FRM syllabus.
A few of them:
Machine-Learning Methods FRM Part I · Quantitative analysis
“Machine learning starts from the data.”
Advances in Artificial Intelligence: Implications for Capital Markets Activities FRM Part II · Current issues in financial markets
“AI and machine learning are already embedded in capital markets in narrow, well-defined tasks.”
The Financial Stability Implications of Artificial Intelligence FRM Part II · Current issues in financial markets
“On the official side, supervisory technology, or suptech, applies machine learning and language processing to collect and analyse data, flag anomalies, scan disclosures and monitor markets.”
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