Christina Dan Wang

Berend Jelmer Dirk Gort, Xiao-Yang Liu, Xinghang Sun et al.

Designing profitable and reliable trading strategies is challenging in the highly volatile cryptocurrency market. Existing works applied deep reinforcement learning methods and optimistically reported increased profits in backtesting, which may suffer from the false positive issue due to overfitting. In this paper, we propose a practical approach to address backtest overfitting for cryptocurrency trading using deep reinforcement learning. First, we formulate the detection of backtest overfitting as a hypothesis test. Then, we train the DRL agents, estimate the probability of overfitting, and reject the overfitted agents, increasing the chance of good trading performance. Finally, on 10 cryptocurrencies over a testing period from 05/01/2022 to 06/27/2022 (during which the crypto market crashed two times), we show that the less overfitted deep reinforcement learning agents have a higher return than that of more overfitted agents, an equal weight strategy, and the S&P DBM Index (market benchmark), offering confidence in possible deployment to a real market.

Shuai Li, Ziqi Chen, Hongtu Zhu et al.

The conditional randomization test (CRT) was recently proposed to test whether two random variables X and Y are conditionally independent given random variables Z. The CRT assumes that the conditional distribution of X given Z is known under the null hypothesis and then it is compared to the distribution of the observed samples of the original data. The aim of this paper is to develop a novel alternative of CRT by using nearest-neighbor sampling without assuming the exact form of the distribution of X given Z. Specifically, we utilize the computationally efficient 1-nearest-neighbor to approximate the conditional distribution that encodes the null hypothesis. Then, theoretically, we show that the distribution of the generated samples is very close to the true conditional distribution in terms of total variation distance. Furthermore, we take the classifier-based conditional mutual information estimator as our test statistic. The test statistic as an empirical fundamental information theoretic quantity is able to well capture the conditional-dependence feature. We show that our proposed test is computationally very fast, while controlling type I and II errors quite well. Finally, we demonstrate the efficiency of our proposed test in both synthetic and real data analyses.

Hongyang Yang, Boyu Zhang, Neng Wang et al.

As financial institutions and professionals increasingly incorporate Large Language Models (LLMs) into their workflows, substantial barriers, including proprietary data and specialized knowledge, persist between the finance sector and the AI community. These challenges impede the AI community's ability to enhance financial tasks effectively. Acknowledging financial analysis's critical role, we aim to devise financial-specialized LLM-based toolchains and democratize access to them through open-source initiatives, promoting wider AI adoption in financial decision-making. In this paper, we introduce FinRobot, a novel open-source AI agent platform supporting multiple financially specialized AI agents, each powered by LLM. Specifically, the platform consists of four major layers: 1) the Financial AI Agents layer that formulates Financial Chain-of-Thought (CoT) by breaking sophisticated financial problems down into logical sequences; 2) the Financial LLM Algorithms layer dynamically configures appropriate model application strategies for specific tasks; 3) the LLMOps and DataOps layer produces accurate models by applying training/fine-tuning techniques and using task-relevant data; 4) the Multi-source LLM Foundation Models layer that integrates various LLMs and enables the above layers to access them directly. Finally, FinRobot provides hands-on for both professional-grade analysts and laypersons to utilize powerful AI techniques for advanced financial analysis. We open-source FinRobot at \url{https://github.com/AI4Finance-Foundation/FinRobot}.

Xiao-Yang Liu, Hongyang Yang, Qian Chen et al.

As deep reinforcement learning (DRL) has been recognized as an effective approach in quantitative finance, getting hands-on experiences is attractive to beginners. However, to train a practical DRL trading agent that decides where to trade, at what price, and what quantity involves error-prone and arduous development and debugging. In this paper, we introduce a DRL library FinRL that facilitates beginners to expose themselves to quantitative finance and to develop their own stock trading strategies. Along with easily-reproducible tutorials, FinRL library allows users to streamline their own developments and to compare with existing schemes easily. Within FinRL, virtual environments are configured with stock market datasets, trading agents are trained with neural networks, and extensive backtesting is analyzed via trading performance. Moreover, it incorporates important trading constraints such as transaction cost, market liquidity and the investor's degree of risk-aversion. FinRL is featured with completeness, hands-on tutorial and reproducibility that favors beginners: (i) at multiple levels of time granularity, FinRL simulates trading environments across various stock markets, including NASDAQ-100, DJIA, S&P 500, HSI, SSE 50, and CSI 300; (ii) organized in a layered architecture with modular structure, FinRL provides fine-tuned state-of-the-art DRL algorithms (DQN, DDPG, PPO, SAC, A2C, TD3, etc.), commonly-used reward functions and standard evaluation baselines to alleviate the debugging workloads and promote the reproducibility, and (iii) being highly extendable, FinRL reserves a complete set of user-import interfaces. Furthermore, we incorporated three application demonstrations, namely single stock trading, multiple stock trading, and portfolio allocation. The FinRL library will be available on Github at link https://github.com/AI4Finance-LLC/FinRL-Library.

Hongyang Yang, Likun Lin, Yang She et al.

Enterprise Resource Planning (ERP) systems serve as the digital backbone of modern financial institutions, yet they continue to rely on static, rule-based workflows that limit adaptability, scalability, and intelligence. As business operations grow more complex and data-rich, conventional ERP platforms struggle to integrate structured and unstructured data in real time and to accommodate dynamic, cross-functional workflows. In this paper, we present the first AI-native, agent-based framework for ERP systems, introducing a novel architecture of Generative Business Process AI Agents (GBPAs) that bring autonomy, reasoning, and dynamic optimization to enterprise workflows. The proposed system integrates generative AI with business process modeling and multi-agent orchestration, enabling end-to-end automation of complex tasks such as budget planning, financial reporting, and wire transfer processing. Unlike traditional workflow engines, GBPAs interpret user intent, synthesize workflows in real time, and coordinate specialized sub-agents for modular task execution. We validate the framework through case studies in bank wire transfers and employee reimbursements, two representative financial workflows with distinct complexity and data modalities. Results show that GBPAs achieve up to 40% reduction in processing time, 94% drop in error rate, and improved regulatory compliance by enabling parallelism, risk control insertion, and semantic reasoning. These findings highlight the potential of GBPAs to bridge the gap between generative AI capabilities and enterprise-grade automation, laying the groundwork for the next generation of intelligent ERP systems.

Yixuan Liang, Yuncong Liu, Neng Wang et al.

Financial sentiment analysis is crucial for understanding the influence of news on stock prices. Recently, large language models (LLMs) have been widely adopted for this purpose due to their advanced text analysis capabilities. However, these models often only consider the news content itself, ignoring its dissemination, which hampers accurate prediction of short-term stock movements. Additionally, current methods often lack sufficient contextual data and explicit instructions in their prompts, limiting LLMs' ability to interpret news. In this paper, we propose a data-driven approach that enhances LLM-powered sentiment-based stock movement predictions by incorporating news dissemination breadth, contextual data, and explicit instructions. We cluster recent company-related news to assess its reach and influence, enriching prompts with more specific data and precise instructions. This data is used to construct an instruction tuning dataset to fine-tune an LLM for predicting short-term stock price movements. Our experimental results show that our approach improves prediction accuracy by 8\% compared to existing methods.

Shunyao Wang, Ming Cheng, Christina Dan Wang

Stochastic Discount Factor (SDF) models provide a unified framework for asset pricing and risk assessment, yet traditional formulations struggle to incorporate unstructured textual information. We introduce NewsNet-SDF, a novel deep learning framework that seamlessly integrates pretrained language model embeddings with financial time series through adversarial networks. Our multimodal architecture processes financial news using GTE-multilingual models, extracts temporal patterns from macroeconomic data via LSTM networks, and normalizes firm characteristics, fusing these heterogeneous information sources through an innovative adversarial training mechanism. Our dataset encompasses approximately 2.5 million news articles and 10,000 unique securities, addressing the computational challenges of processing and aligning text data with financial time series. Empirical evaluations on U.S. equity data (1980-2022) demonstrate NewsNet-SDF substantially outperforms alternatives with a Sharpe ratio of 2.80. The model shows a 471% improvement over CAPM, over 200% improvement versus traditional SDF implementations, and a 74% reduction in pricing errors compared to the Fama-French five-factor model. In comprehensive comparisons, our deep learning approach consistently outperforms traditional, modern, and other neural asset pricing models across all key metrics. Ablation studies confirm that text embeddings contribute significantly more to model performance than macroeconomic features, with news-derived principal components ranking among the most influential determinants of SDF dynamics. These results validate the effectiveness of our multimodal deep learning approach in integrating unstructured text with traditional financial data for more accurate asset pricing, providing new insights for digital intelligent decision-making in financial technology.