Assessing ChatGPT’s Proficiency in Quantitative Risk Management

Abstract

The purpose and novelty of this article is to investigate the extent to which artificial intelligence chatbot ChatGPT can grasp concepts from quantitative risk management. To this end, we enter a scholarly discussion with ChatGPT in the form of questions and answers, and analyze the responses. The questions are classics from undergraduate and graduate courses on quantitative risk management, and address risk in general, risk measures, time series, extremes and dependence. As a result, the non-technical aspects of risk (such as explanations of various types of financial risk, the driving factors underlying the financial crisis of 2007 to 2009, or a basic introduction to the Basel Framework) are well understood by ChatGPT. More technical aspects (such as mathematical facts), however, are often inaccurate or wrong, partly in rather subtle ways not obvious without expert knowledge, which we point out. The article concludes by providing guidance on the types of applications for which consulting ChatGPT can be useful in order to enhance one’s own knowledge of quantitative risk management (e.g., using ChatGPT as an educational tool to test one’s own understanding of an already grasped concept, or using ChatGPT as a practical tool for identifying risks just not on one’s own radar), and points out those applications for which the current version of ChatGPT should not be invoked (e.g., for learning mathematical concepts, or for learning entirely new concepts for which one has no basis of comparison to assess ChatGPT’s capabilities).