Topic 8

Question 1

Big Data

Answer 1

used broadly to describe the storage and analysis of large and/or complicated data sets using a variety of techniques including AI

Question 2

Artificial Intelligence (AI)

Answer 2

the theory and development of computer systems able to perform tasks that traditionally have required human intelligence

Question 3

Natural Language Processing (NLP)

Answer 3

allows computers to ‘read’ and produce written text or, when combined with voice recognition, to read and produce spoken language.

Question 4

Machine Learning (ML)

Answer 4

a method of designing a sequence of actions to solve a problem, known as algorithms, which optimize automatically through experience and with limited or no human intervention

Question 5

Supervised learning

Answer 5

algorithm is fed a set of ‘training’ data that contains labels on some portion of the observations.

Question 6

Unsupervised learning

Answer 6

situations where the data provided to the algorithm does not contain labels. The algorithm is asked to detect patterns in the data by identifying clusters of observations that depend on similar underlying characteristics

Question 7

Deep learning

Answer 7

a form of machine learning that uses algorithms that work in ‘layers’ inspired by the structure and function of the brain. Deep learning algorithms, whose structure are called artificial neural networks, can be used for supervised, unsupervised, or reinforcement learning

Question 8

Sentiment indicators

Answer 8

Unsupervised textual analysis method, measures of happy/unhappy or other emotion (sentiment) about a company or unit.

Question 9

Trading signals

Answer 9

leading indicators that provide sufficiently high-quality information to trade based on

Question 10

Fraud detection

Answer 10

Detecting fraud

Question 11

RegTech

Answer 11

applications by financial institutions for regulatory compliance; or applications by financial regulators to monitor non-compliance

Question 12

InsurTech

Answer 12

FinTech, for insurance

Question 13

Chatbots

Answer 13

Provide human-like tech support, cutting costs (edit. and super annoying)

Question 14

Know your customer (KYC)

Answer 14

Machine learning is increasingly used in remote KYC of financial services firms to perform identity and background pre-checks. It is predominantly used in two ways: (1) evaluating whether images in identifying documents match one another, and (2) calculating risk scores on which firms determine which individuals or applications need to receive additional scrutiny.

Question 15

Reinforcement learning

Answer 15

the algorithm is fed an unlabeled set of data, chooses an action for each data point, and receives feedback (perhaps from a human) that helps the algorithm learn

Question 16

Auditability

Answer 16

lack of interpretability or auditability is a concern and has potential to contribute to macro-level risks if not appropriately supervised.

Question 17

Fintech

Answer 17

Financial Technology technologically enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets and institutions and the provision of financial services.

Question 18

SupTech

Answer 18

FinTech by supervisory authorities.

Question 19

Robo-Advisors

Answer 19

applications that combine digital interfaces and algorithms, and can also include machine learning, in order to provide services ranging from automated financial recommendations to contract brokering to portfolio management to their clients, without or
with very limited human intervention. Such advisors may be standalone firms and platforms, or can be in-house applications of incumbent financial institutions.

Question 20

Tonality analysis

Answer 20

a method to gauge the negativity of a piece of text by counting terms with a negative connotation. (aka sentiment analysis)

Question 21

List Three Areas of Passive Strategies

Answer 21

1. Asset Allocation and Implementation
2. Portfolio Monitoring
3. Portfolio Rebalancing

Question 22

List the key characteristics of robo-advisors.

Answer 22

• Service Model (D2C or B2B)
• Minimum Investment Amount
• Asset Management Fee
• Available Investment Products (eg.ETFs, Mut. Funds)
• Tax Planning (yes/no)
• Goal Based (yes/no)

Question 23

List the three main areas of private wealth managment

Answer 23

1. Investment advice, including tax advice
2. Retirement and legacy advice, including estate planning
3. Asset Management, including gathering and allocation
   Bonus: other services, including client education