Impact of Artificial Intelligence on Financial Markets

Abstract

Artificial Intelligence (AI) has rapidly transformed financial markets, enhancing efficiency, precision, and scalability in trading, risk management, fraud detection, and personalization. Through advanced machine learning models, AI has enabled high-frequency trading, predictive risk assessment, and robust compliance processes, which streamline operations and improve market responsiveness. However, the complexity and opacity of AI systems introduce ethical concerns and regulatory challenges, especially regarding model interpretability and potential biases. This paper examines the role of AI across financial functions, highlights both advantages and limitations compared to traditional methods, and discusses future directions for integrating hybrid models and adaptive trading strategies. While AI offers considerable benefits, addressing its ethical and regulatory implications will be essential to harnessing its full potential within financial markets.