How AI-powered Collusion in Stock Trading Could Hurt Price Formation
As world leaders last week raised fears over runaway AI on the scale of a nuclear war or a pandemic, a more immediate and tangible frontier may well be the capital markets. The potential for AI technologies in capital markets to cause unintended effects arises when autonomous AI algorithms learn to act in concert automatically, either through a “price-trigger mechanism” that punishes deviations in trading behavior or through homogenized learning biases among algorithms, according to new research by experts at Wharton and elsewhere.
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