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FRM Part II · FRM Exam Part II · Advances in Artificial Intelligence: Implications for Capital Markets Activities

A bank deploys a generative-AI assistant that summarizes research and drafts trade ideas for its sales traders. Which control is MOST appropriate to address the risk that the assistant produces plausible but fabricated market information that traders act upon?

The appropriate control is human verification of the assistant's outputs against authoritative sources, restricting it to decision support rather than autonomous action, and keeping logs. This addresses hallucinated content directly and preserves accountability for trading decisions.

  1. AIncreasing the assistant's output length so more detail is provided
  2. BRequiring human verification of source data and limiting use to non-autonomous decision support with loggingCorrect
  3. CRemoving all audit logs to speed up responses
  4. DTraining the assistant only on the previous day's prices

Explanation

Hallucination risk is mitigated by human-in-the-loop verification against authoritative sources, defined use limits and logging for traceability. Longer output or less logging does not reduce fabrication, and narrowing training data to one day degrades the model.

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