IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-05101589.html
   My bibliography  Save this paper

Review of Gen AI Models for Financial Risk Management: Architectural Frameworks and Implementation Strategies

Author

Listed:
  • Satyadhar Joshi

    (Bank of America, Touro University, Bar-Ilan University [Israël], Independent Researcher)

Abstract

The rapid advancement of generative artificial intelligence (Gen AI) has revolutionized various domains, including financial analytics. This paper provides a comprehensive review of the applications, challenges, and future directions of Gen Al in financial analytics. We explore its role in risk management, credit scoring, feature engineering, and macroeconomic simulations, while addressing limitations such as data quality, interpretability, and ethical concerns. By synthesizing insights from recent literature, we highlight the transformative potential of Gen AI and propose frameworks for its effective integration into financial workflows. This paper presents a systematic examination of generative artificial intelligence (Gen AI) applications in financial risk management, focusing on architectural frameworks and implementation methodologies. We analyze the integration of large language models (LLMs) with traditional quantitative finance pipelines, addressing key challenges in feature engineering, risk modeling, and regulatory compliance. The study demonstrates how transformer-based architectures enhance financial analytics through automated data processing, risk factor extraction, and scenario generation. Technical implementations leverage hybrid cloud platforms and specialized Python libraries for model deployment, achieving measurable improvements in accuracy and efficiency. Our findings reveal critical considerations for production systems, including computational optimization, model interpretability, and governance protocols. The proposed architecture combines LLM capabilities with domain-specific modules for credit scoring, value-at-risk calculation, and macroeconomic simulation. Empirical results highlight trade-offs between model complexity and operational constraints, providing actionable insights for financial institutions adopting Gen Al solutions. The paper concludes with recommendations for future research directions in financial Al systems.

Suggested Citation

  • Satyadhar Joshi, 2025. "Review of Gen AI Models for Financial Risk Management: Architectural Frameworks and Implementation Strategies," Post-Print hal-05101589, HAL.
  • Handle: RePEc:hal:journl:hal-05101589
    DOI: 10.69968/ijisem.2025v4i2207-222
    Note: View the original document on HAL open archive server: https://hal.science/hal-05101589v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-05101589v1/document
    Download Restriction: no

    File URL: https://libkey.io/10.69968/ijisem.2025v4i2207-222?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Iñaki Aldasoro & Leonardo Gambacorta & Anton Korinek & Vatsala Shreeti & Merlin Stein, 2024. "Intelligent financial system: how AI is transforming finance," BIS Working Papers 1194, Bank for International Settlements.
    2. Marius Hofert, 2023. "Assessing ChatGPT’s Proficiency in Quantitative Risk Management," Risks, MDPI, vol. 11(9), pages 1-29, September.
    3. Jean Lee & Nicholas Stevens & Soyeon Caren Han & Minseok Song, 2024. "A Survey of Large Language Models in Finance (FinLLMs)," Papers 2402.02315, arXiv.org.
    4. Edward Sharkey & Philip Treleaven, 2024. "BERT vs GPT for financial engineering," Papers 2405.12990, arXiv.org.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hamidou Tembine & Manzoor Ahmed Khan & Issa Bamia, 2024. "Mean-Field-Type Transformers," Mathematics, MDPI, vol. 12(22), pages 1-51, November.
    2. Shanyan Lai, 2025. "Asset Pricing in Pre-trained Transformer," Papers 2505.01575, arXiv.org, revised May 2025.
    3. Dong, Mengming Michael & Stratopoulos, Theophanis C. & Wang, Victor Xiaoqi, 2024. "A scoping review of ChatGPT research in accounting and finance," International Journal of Accounting Information Systems, Elsevier, vol. 55(C).
    4. Dong, Mengming Michael & Stratopoulos, Theophanis C. & Wang, Victor Xiaoqi, 2024. "A scoping review of ChatGPT research in accounting and finance," International Journal of Accounting Information Systems, Elsevier, vol. 55(C).
    5. Jon Danielsson & Andreas Uthemann, 2024. "Artificial intelligence and financial crises," Papers 2407.17048, arXiv.org, revised Jul 2025.
    6. Weixian Waylon Li & Hyeonjun Kim & Mihai Cucuringu & Tiejun Ma, 2025. "Can LLM-based Financial Investing Strategies Outperform the Market in Long Run?," Papers 2505.07078, arXiv.org, revised Aug 2025.
    7. Hande Aladağ, 2023. "Assessing the Accuracy of ChatGPT Use for Risk Management in Construction Projects," Sustainability, MDPI, vol. 15(22), pages 1-27, November.
    8. Kassiani Papasotiriou & Srijan Sood & Shayleen Reynolds & Tucker Balch, 2024. "AI in Investment Analysis: LLMs for Equity Stock Ratings," Papers 2411.00856, arXiv.org.
    9. Junhua Liu, 2024. "A Survey of Financial AI: Architectures, Advances and Open Challenges," Papers 2411.12747, arXiv.org.
    10. Leonardo Gambacorta & Vatsala Shreeti, 2025. "The AI supply chain," BIS Papers, Bank for International Settlements, number 154.
    11. Han Ding & Yinheng Li & Junhao Wang & Hang Chen, 2024. "Large Language Model Agent in Financial Trading: A Survey," Papers 2408.06361, arXiv.org.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-05101589. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.