Abstract
Recent interest in artificial intelligence (AI) has necessarily led to is applications in financial engineering. Possible applications include: (1) "technology" such as risk management, price theory and performance evaluation, and (2) "art" such as prediction profitability and risk in future (usually the standard deviation of profitability). While the "technology" may advance relatively easily by application of theories of probability and statistics, the "art" depends much on investor's philosophy, which makes any "standard model" impossible. This is the very area where AI is beginning to find applications. After presenting a review of financial engineering, the present paper presents two examples of AI application in this field: a simulation of long-term forecasts of interest rates, and a virtual market studies in the Santa Fe Institute. In addition, methods and effectiveness of AI in financial engineering are discussed in comparison with applications in other fields.
