AI: The Double-Edged Sword
The use of artificial intelligence (AI) in capital markets is changing the game while also raising concerns. While algorithms offer speed and efficiency, they also come with risks that can impact market stability. Instances like the 2010 Flash Crash and the 2018 market selloff highlight the potential volatility that algorithmic trading can introduce.
These events serve as a reminder of the dangers that rapid automated trading can pose to the markets. Flash crashes, where stock prices plummet dramatically in a very short period, demonstrate the vulnerabilities of high-speed trading algorithms.
Investors are increasingly aware of the risks associated with algorithmic trading and the potential for market disruptions. As technology continues to advance, firms must adopt strategies to mitigate these risks and protect themselves from the downsides of AI in finance.
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