Daily Papers

This paper investigates the application of Feature-Enriched Generative Adversarial Networks (FE-GAN) in financial risk management, with a focus on improving the estimation of Value at Risk (VaR) and Expected Shortfall (ES). FE-GAN enhances existing GANs architectures by incorporating an additional input sequence derived from preceding data to improve model performance. Two specialized GANs models, the Wasserstein Generative Adversarial Network (WGAN) and the Tail Generative Adversarial Network (Tail-GAN), were evaluated under the FE-GAN framework. The results demonstrate that FE-GAN significantly outperforms traditional architectures in both VaR and ES estimation. Tail-GAN, leveraging its task-specific loss function, consistently outperforms WGAN in ES estimation, while both models exhibit similar performance in VaR estimation. Despite these promising results, the study acknowledges limitations, including reliance on highly correlated temporal data and restricted applicability to other domains. Future research directions include exploring alternative input generation methods, dynamic forecasting models, and advanced neural network architectures to further enhance GANs-based financial risk estimation.

In dynamic programming (DP) and reinforcement learning (RL), an agent learns to act optimally in terms of expected long-term return by sequentially interacting with its environment modeled by a Markov decision process (MDP). More generally in distributional reinforcement learning (DRL), the focus is on the whole distribution of the return, not just its expectation. Although DRL-based methods produced state-of-the-art performance in RL with function approximation, they involve additional quantities (compared to the non-distributional setting) that are still not well understood. As a first contribution, we introduce a new class of distributional operators, together with a practical DP algorithm for policy evaluation, that come with a robust MDP interpretation. Indeed, our approach reformulates through an augmented state space where each state is split into a worst-case substate and a best-case substate, whose values are maximized by safe and risky policies respectively. Finally, we derive distributional operators and DP algorithms solving a new control task: How to distinguish safe from risky optimal actions in order to break ties in the space of optimal policies?

Large Language and Vision-Language Models (LLMs/VLMs) are increasingly used in safety-critical applications, yet their opaque decision-making complicates risk assessment and reliability. Uncertainty quantification (UQ) helps assess prediction confidence and enables abstention when uncertainty is high. Conformal prediction (CP), a leading UQ method, provides statistical guarantees but relies on static thresholds, which fail to adapt to task complexity and evolving data distributions, leading to suboptimal trade-offs in accuracy, coverage, and informativeness. To address this, we propose learnable conformal abstention, integrating reinforcement learning (RL) with CP to optimize abstention thresholds dynamically. By treating CP thresholds as adaptive actions, our approach balances multiple objectives, minimizing prediction set size while maintaining reliable coverage. Extensive evaluations across diverse LLM/VLM benchmarks show our method outperforms Least Ambiguous Classifiers (LAC) and Adaptive Prediction Sets (APS), improving accuracy by up to 3.2%, boosting AUROC for hallucination detection by 22.19%, enhancing uncertainty-guided selective generation (AUARC) by 21.17%, and reducing calibration error by 70%-85%. These improvements hold across multiple models and datasets while consistently meeting the 90% coverage target, establishing our approach as a more effective and flexible solution for reliable decision-making in safety-critical applications. The code is available at: {https://github.com/sinatayebati/vlm-uncertainty}.

In this paper, we study the problem of establishing the accountability and fairness of transparent machine learning models through monotonicity. Although there have been numerous studies on individual monotonicity, pairwise monotonicity is often overlooked in the existing literature. This paper studies transparent neural networks in the presence of three types of monotonicity: individual monotonicity, weak pairwise monotonicity, and strong pairwise monotonicity. As a means of achieving monotonicity while maintaining transparency, we propose the monotonic groves of neural additive models. As a result of empirical examples, we demonstrate that monotonicity is often violated in practice and that monotonic groves of neural additive models are transparent, accountable, and fair.

This paper introduces a novel approach to financial risk analysis that does not rely on traditional price and market data, instead using market news to model assets as distributions over a metric space of risk factors. By representing asset returns as integrals over the scalar field of these risk factors, we derive the covariance structure between asset returns. Utilizing encoder-only language models to embed this news data, we explore the relationships between asset return distributions through the concept of Energy Distance, establishing connections between distributional differences and excess returns co-movements. This data-agnostic approach provides new insights into portfolio diversification, risk management, and the construction of hedging strategies. Our findings have significant implications for both theoretical finance and practical risk management, offering a more robust framework for modelling complex financial systems without depending on conventional market data.

Portfolio management is an essential component of investment strategy that aims to maximize returns while minimizing risk. This paper explores several portfolio management strategies, including asset allocation, diversification, active management, and risk management, and their importance in optimizing portfolio performance. These strategies are examined individually and in combination to demonstrate how they can help investors maximize alpha and minimize beta. Asset allocation is the process of dividing a portfolio among different asset classes to achieve the desired level of risk and return. Diversification involves spreading investments across different securities and sectors to minimize the impact of individual security or sector-specific risks. Active management involves security selection and risk management techniques to generate excess returns while minimizing losses. Risk management strategies, such as stop-loss orders and options strategies, aim to minimize losses in adverse market conditions. The importance of combining these strategies for optimizing portfolio performance is emphasized in this paper. The proper implementation of these strategies can help investors achieve their investment goals over the long-term, while minimizing exposure to risks. A call to action for investors to utilize portfolio management strategies to maximize alpha and minimize beta is also provided.

In quantitative finance, machine learning methods are essential for alpha generation. This study introduces a new approach that combines Hidden Markov Models (HMM) and neural networks, integrated with Black-Litterman portfolio optimization. During the COVID period (2019-2022), this dual-model approach achieved a 83% return with a Sharpe ratio of 0.77. It incorporates two risk models to enhance risk management, showing efficiency during volatile periods. The methodology was implemented on the QuantConnect platform, which was chosen for its robust framework and experimental reproducibility. The system, which predicts future price movements, includes a three-year warm-up to ensure proper algorithm function. It targets highly liquid, large-cap energy stocks to ensure stable and predictable performance while also considering broker payments. The dual-model alpha system utilizes log returns to select the optimal state based on the historical performance. It combines state predictions with neural network outputs, which are based on historical data, to generate trading signals. This study examined the architecture of the trading system, data pre-processing, training, and performance. The full code and backtesting data are available under the QuantConnect terms.

Volatility forecasting is essential for risk management and decision-making in financial markets. Traditional models like Generalized Autoregressive Conditional Heteroskedasticity (GARCH) effectively capture volatility clustering but often fail to model complex, non-linear interdependencies between multiple indices. This paper proposes a novel approach using Graph Neural Networks (GNNs) to represent global financial markets as dynamic graphs. The Temporal Graph Attention Network (Temporal GAT) combines Graph Convolutional Networks (GCNs) and Graph Attention Networks (GATs) to capture the temporal and structural dynamics of volatility spillovers. By utilizing correlation-based and volatility spillover indices, the Temporal GAT constructs directed graphs that enhance the accuracy of volatility predictions. Empirical results from a 15-year study of eight major global indices show that the Temporal GAT outperforms traditional GARCH models and other machine learning methods, particularly in short- to mid-term forecasts. The sensitivity and scenario-based analysis over a range of parameters and hyperparameters further demonstrate the significance of the proposed technique. Hence, this work highlights the potential of GNNs in modeling complex market behaviors, providing valuable insights for financial analysts and investors.

In e-commerce industry, user behavior sequence data has been widely used in many business units such as search and merchandising to improve their products. However, it is rarely used in financial services not only due to its 3V characteristics - i.e. Volume, Velocity and Variety - but also due to its unstructured nature. In this paper, we propose a Financial Service scenario Deep learning based Behavior data representation method for Clustering (FinDeepBehaviorCluster) to detect fraudulent transactions. To utilize the behavior sequence data, we treat click stream data as event sequence, use time attention based Bi-LSTM to learn the sequence embedding in an unsupervised fashion, and combine them with intuitive features generated by risk experts to form a hybrid feature representation. We also propose a GPU powered HDBSCAN (pHDBSCAN) algorithm, which is an engineering optimization for the original HDBSCAN algorithm based on FAISS project, so that clustering can be carried out on hundreds of millions of transactions within a few minutes. The computation efficiency of the algorithm has increased 500 times compared with the original implementation, which makes flash fraud pattern detection feasible. Our experimental results show that the proposed FinDeepBehaviorCluster framework is able to catch missed fraudulent transactions with considerable business values. In addition, rule extraction method is applied to extract patterns from risky clusters using intuitive features, so that narrative descriptions can be attached to the risky clusters for case investigation, and unknown risk patterns can be mined for real-time fraud detection. In summary, FinDeepBehaviorCluster as a complementary risk management strategy to the existing real-time fraud detection engine, can further increase our fraud detection and proactive risk defense capabilities.

As AI systems become increasingly prevalent and impactful, the need for effective AI governance and accountability measures is paramount. This paper examines the AI governance landscape, focusing on Anthropic's Claude, a foundational AI model. We analyze Claude through the lens of the NIST AI Risk Management Framework and the EU AI Act, identifying potential threats and proposing mitigation strategies. The paper highlights the importance of transparency, rigorous benchmarking, and comprehensive data handling processes in ensuring the responsible development and deployment of AI systems. We conclude by discussing the social impact of AI governance and the ethical considerations surrounding AI accountability.

Understanding the characteristics of public attention and sentiment is an essential prerequisite for appropriate crisis management during adverse health events. This is even more crucial during a pandemic such as COVID-19, as primary responsibility of risk management is not centralized to a single institution, but distributed across society. While numerous studies utilize Twitter data in descriptive or predictive context during COVID-19 pandemic, causal modeling of public attention has not been investigated. In this study, we propose a causal inference approach to discover and quantify causal relationships between pandemic characteristics (e.g. number of infections and deaths) and Twitter activity as well as public sentiment. Our results show that the proposed method can successfully capture the epidemiological domain knowledge and identify variables that affect public attention and sentiment. We believe our work contributes to the field of infodemiology by distinguishing events that correlate with public attention from events that cause public attention.

The o1 model series is trained with large-scale reinforcement learning to reason using chain of thought. These advanced reasoning capabilities provide new avenues for improving the safety and robustness of our models. In particular, our models can reason about our safety policies in context when responding to potentially unsafe prompts, through deliberative alignment. This leads to state-of-the-art performance on certain benchmarks for risks such as generating illicit advice, choosing stereotyped responses, and succumbing to known jailbreaks. Training models to incorporate a chain of thought before answering has the potential to unlock substantial benefits, while also increasing potential risks that stem from heightened intelligence. Our results underscore the need for building robust alignment methods, extensively stress-testing their efficacy, and maintaining meticulous risk management protocols. This report outlines the safety work carried out for the OpenAI o1 and OpenAI o1-mini models, including safety evaluations, external red teaming, and Preparedness Framework evaluations.

Can Large Language Models (LLMs) simulate human behavior in complex environments? LLMs have recently been shown to exhibit advanced reasoning skills but much of NLP evaluation still relies on static benchmarks. Answering this requires evaluation environments that probe strategic reasoning in competitive, dynamic scenarios that involve long-term planning. We introduce AucArena, a novel simulation environment for evaluating LLMs within auctions, a setting chosen for being highly unpredictable and involving many skills related to resource and risk management, while also being easy to evaluate. We conduct several controlled simulations using state-of-the-art LLMs as bidding agents. We find that through simple prompting, LLMs do indeed demonstrate many of the skills needed for effectively engaging in auctions (e.g., managing budget, adhering to long-term goals and priorities), skills that we find can be sharpened by explicitly encouraging models to be adaptive and observe strategies in past auctions. These results are significant as they show the potential of using LLM agents to model intricate social dynamics, especially in competitive settings. However, we also observe considerable variability in the capabilities of individual LLMs. Notably, even our most advanced models (GPT-4) are occasionally surpassed by heuristic baselines and human agents, highlighting the potential for further improvements in the design of LLM agents and the important role that our simulation environment can play in further testing and refining agent architectures.

We develop a portfolio allocation framework that leverages deep learning techniques to address challenges arising from high-dimensional, non-stationary, and low-signal-to-noise market information. Our approach includes a dynamic embedding method that reduces the non-stationary, high-dimensional state space into a lower-dimensional representation. We design a reinforcement learning (RL) framework that integrates generative autoencoders and online meta-learning to dynamically embed market information, enabling the RL agent to focus on the most impactful parts of the state space for portfolio allocation decisions. Empirical analysis based on the top 500 U.S. stocks demonstrates that our framework outperforms common portfolio benchmarks and the predict-then-optimize (PTO) approach using machine learning, particularly during periods of market stress. Traditional factor models do not fully explain this superior performance. The framework's ability to time volatility reduces its market exposure during turbulent times. Ablation studies confirm the robustness of this performance across various reinforcement learning algorithms. Additionally, the embedding and meta-learning techniques effectively manage the complexities of high-dimensional, noisy, and non-stationary financial data, enhancing both portfolio performance and risk management.

This paper introduces a novel Hamiltonian-inspired neural network approach to credit scoring, designed to address the challenges of class imbalance and out-of-time (OOT) prediction in financial risk management. Drawing from concepts in Hamiltonian mechanics, we develop a symplectic optimizer and a new loss function to capture the complex dynamics of credit risk evolution. Using the Freddie Mac Single-Family Loan-Level Dataset, we evaluate our model's performance against other machine learning approaches. Our method shows superior discriminative power in OOT scenarios, as measured by the Area Under the Curve (AUC), indicating better ranking ability and robustness to class imbalance. The Hamiltonian-inspired approach shows particular strength in maintaining consistent performance between in-sample and OOT test sets, suggesting improved generalization to future, unseen data. These findings suggest that physics-inspired techniques offer a promising direction for developing more robust and reliable credit scoring models, particularly in uncertain economic situations.

Large Language Models (LLMs) have the potential to enhance Agent-Based Modeling by better representing complex interdependent cybersecurity systems, improving cybersecurity threat modeling and risk management. However, evaluating LLMs in this context is crucial for legal compliance and effective application development. Existing LLM evaluation frameworks often overlook the human factor and cognitive computing capabilities essential for interdependent cybersecurity. To address this gap, I propose OllaBench, a novel evaluation framework that assesses LLMs' accuracy, wastefulness, and consistency in answering scenario-based information security compliance and non-compliance questions. OllaBench is built on a foundation of 24 cognitive behavioral theories and empirical evidence from 38 peer-reviewed papers. OllaBench was used to evaluate 21 LLMs, including both open-weight and commercial models from OpenAI, Anthropic, Google, Microsoft, Meta and so on. The results reveal that while commercial LLMs have the highest overall accuracy scores, there is significant room for improvement. Smaller low-resolution open-weight LLMs are not far behind in performance, and there are significant differences in token efficiency and consistency among the evaluated models. OllaBench provides a user-friendly interface and supports a wide range of LLM platforms, making it a valuable tool for researchers and solution developers in the field of human-centric interdependent cybersecurity and beyond.

Invasive species in water bodies pose a major threat to the environment and biodiversity globally. Due to increased transportation and trade, non-native species have been introduced to new environments, causing damage to ecosystems and leading to economic losses in agriculture, forestry, and fisheries. Therefore, there is a pressing need for risk assessment and management techniques to mitigate the impact of these invasions. This study aims to develop a new physics-inspired model to forecast maritime shipping traffic and thus inform risk assessment of invasive species spread through global transportation networks. Inspired by the gravity model for international trades, our model considers various factors that influence the likelihood and impact of vessel activities, such as shipping flux density, distance between ports, trade flow, and centrality measures of transportation hubs. Additionally, by analyzing the risk network of invasive species, we provide a comprehensive framework for assessing the invasion threat level given a pair of origin and destination. Accordingly, this paper introduces transformers to gravity models to rebuild the short- and long-term dependencies that make the risk analysis feasible. Thus, we introduce a physics-inspired framework that achieves an 89% segmentation accuracy for existing and non-existing trajectories and an 84.8% accuracy for the number of vessels flowing between key port areas, representing more than 10% improvement over the traditional deep-gravity model. Along these lines, this research contributes to a better understanding of invasive species risk assessment. It allows policymakers, conservationists, and stakeholders to prioritize management actions by identifying high-risk invasion pathways. Besides, our model is versatile and can include new data sources, making it suitable for assessing species invasion risks in a changing global landscape.

Survival risk stratification is an important step in clinical decision making for breast cancer management. We propose a novel deep learning approach for this purpose by integrating histopathological imaging, genetic and clinical data. It employs vision transformers, specifically the MaxViT model, for image feature extraction, and self-attention to capture intricate image relationships at the patient level. A dual cross-attention mechanism fuses these features with genetic data, while clinical data is incorporated at the final layer to enhance predictive accuracy. Experiments on the public TCGA-BRCA dataset show that our model, trained using the negative log likelihood loss function, can achieve superior performance with a mean C-index of 0.64, surpassing existing methods. This advancement facilitates tailored treatment strategies, potentially leading to improved patient outcomes.

Quality management and assurance is key for space agencies to guarantee the success of space missions, which are high-risk and extremely costly. In this paper, we present a system to generate quizzes, a common resource to evaluate the effectiveness of training sessions, from documents about quality assurance procedures in the Space domain. Our system leverages state of the art auto-regressive models like T5 and BART to generate questions, and a RoBERTa model to extract answers for such questions, thus verifying their suitability.

With an estimated 160,000 deaths in 2018, lung cancer is the most common cause of cancer death in the United States. Lung cancer CT screening has been shown to reduce mortality by up to 40% and is now included in US screening guidelines. Reducing the high error rates in lung cancer screening is imperative because of the high clinical and financial costs caused by diagnosis mistakes. Despite the use of standards for radiological diagnosis, persistent inter-grader variability and incomplete characterization of comprehensive imaging findings remain as limitations of current methods. These limitations suggest opportunities for more sophisticated systems to improve performance and inter-reader consistency. In this report, we reproduce a state-of-the-art deep learning algorithm for lung cancer risk prediction. Our model predicts malignancy probability and risk bucket classification from lung CT studies. This allows for risk categorization of patients being screened and suggests the most appropriate surveillance and management. Combining our solution high accuracy, consistency and fully automated nature, our approach may enable highly efficient screening procedures and accelerate the adoption of lung cancer screening.

This paper introduces RiskCards, a framework for structured assessment and documentation of risks associated with an application of language models. As with all language, text generated by language models can be harmful, or used to bring about harm. Automating language generation adds both an element of scale and also more subtle or emergent undesirable tendencies to the generated text. Prior work establishes a wide variety of language model harms to many different actors: existing taxonomies identify categories of harms posed by language models; benchmarks establish automated tests of these harms; and documentation standards for models, tasks and datasets encourage transparent reporting. However, there is no risk-centric framework for documenting the complexity of a landscape in which some risks are shared across models and contexts, while others are specific, and where certain conditions may be required for risks to manifest as harms. RiskCards address this methodological gap by providing a generic framework for assessing the use of a given language model in a given scenario. Each RiskCard makes clear the routes for the risk to manifest harm, their placement in harm taxonomies, and example prompt-output pairs. While RiskCards are designed to be open-source, dynamic and participatory, we present a "starter set" of RiskCards taken from a broad literature survey, each of which details a concrete risk presentation. Language model RiskCards initiate a community knowledge base which permits the mapping of risks and harms to a specific model or its application scenario, ultimately contributing to a better, safer and shared understanding of the risk landscape.

Organizations of all sizes, across all industries and domains are leveraging artificial intelligence (AI) technologies to solve some of their biggest challenges around operations, customer experience, and much more. However, due to the probabilistic nature of AI, the risks associated with it are far greater than traditional technologies. Research has shown that these risks can range anywhere from regulatory, compliance, reputational, and user trust, to financial and even societal risks. Depending on the nature and size of the organization, AI technologies can pose a significant risk, if not used in a responsible way. This position paper seeks to present a brief introduction to AI governance, which is a framework designed to oversee the responsible use of AI with the goal of preventing and mitigating risks. Having such a framework will not only manage risks but also gain maximum value out of AI projects and develop consistency for organization-wide adoption of AI.

This paper aims to help structure the risk landscape associated with large-scale Language Models (LMs). In order to foster advances in responsible innovation, an in-depth understanding of the potential risks posed by these models is needed. A wide range of established and anticipated risks are analysed in detail, drawing on multidisciplinary expertise and literature from computer science, linguistics, and social sciences. We outline six specific risk areas: I. Discrimination, Exclusion and Toxicity, II. Information Hazards, III. Misinformation Harms, V. Malicious Uses, V. Human-Computer Interaction Harms, VI. Automation, Access, and Environmental Harms. The first area concerns the perpetuation of stereotypes, unfair discrimination, exclusionary norms, toxic language, and lower performance by social group for LMs. The second focuses on risks from private data leaks or LMs correctly inferring sensitive information. The third addresses risks arising from poor, false or misleading information including in sensitive domains, and knock-on risks such as the erosion of trust in shared information. The fourth considers risks from actors who try to use LMs to cause harm. The fifth focuses on risks specific to LLMs used to underpin conversational agents that interact with human users, including unsafe use, manipulation or deception. The sixth discusses the risk of environmental harm, job automation, and other challenges that may have a disparate effect on different social groups or communities. In total, we review 21 risks in-depth. We discuss the points of origin of different risks and point to potential mitigation approaches. Lastly, we discuss organisational responsibilities in implementing mitigations, and the role of collaboration and participation. We highlight directions for further research, particularly on expanding the toolkit for assessing and evaluating the outlined risks in LMs.

As Large Language Models (LLMs) become more prevalent, concerns about their safety, ethics, and potential biases have risen. Systematically evaluating LLMs' risk decision-making tendencies and attitudes, particularly in the ethical domain, has become crucial. This study innovatively applies the Domain-Specific Risk-Taking (DOSPERT) scale from cognitive science to LLMs and proposes a novel Ethical Decision-Making Risk Attitude Scale (EDRAS) to assess LLMs' ethical risk attitudes in depth. We further propose a novel approach integrating risk scales and role-playing to quantitatively evaluate systematic biases in LLMs. Through systematic evaluation and analysis of multiple mainstream LLMs, we assessed the "risk personalities" of LLMs across multiple domains, with a particular focus on the ethical domain, and revealed and quantified LLMs' systematic biases towards different groups. This research helps understand LLMs' risk decision-making and ensure their safe and reliable application. Our approach provides a tool for identifying and mitigating biases, contributing to fairer and more trustworthy AI systems. The code and data are available.

Rapid advancements in artificial intelligence (AI) have sparked growing concerns among experts, policymakers, and world leaders regarding the potential for increasingly advanced AI systems to pose catastrophic risks. Although numerous risks have been detailed separately, there is a pressing need for a systematic discussion and illustration of the potential dangers to better inform efforts to mitigate them. This paper provides an overview of the main sources of catastrophic AI risks, which we organize into four categories: malicious use, in which individuals or groups intentionally use AIs to cause harm; AI race, in which competitive environments compel actors to deploy unsafe AIs or cede control to AIs; organizational risks, highlighting how human factors and complex systems can increase the chances of catastrophic accidents; and rogue AIs, describing the inherent difficulty in controlling agents far more intelligent than humans. For each category of risk, we describe specific hazards, present illustrative stories, envision ideal scenarios, and propose practical suggestions for mitigating these dangers. Our goal is to foster a comprehensive understanding of these risks and inspire collective and proactive efforts to ensure that AIs are developed and deployed in a safe manner. Ultimately, we hope this will allow us to realize the benefits of this powerful technology while minimizing the potential for catastrophic outcomes.

Through a systematic review of academic literature, we propose a taxonomy of systemic risks associated with artificial intelligence (AI), in particular general-purpose AI. Following the EU AI Act's definition, we consider systemic risks as large-scale threats that can affect entire societies or economies. Starting with an initial pool of 1,781 documents, we analyzed 86 selected papers to identify 13 categories of systemic risks and 50 contributing sources. Our findings reveal a complex landscape of potential threats, ranging from environmental harm and structural discrimination to governance failures and loss of control. Key sources of systemic risk emerge from knowledge gaps, challenges in recognizing harm, and the unpredictable trajectory of AI development. The taxonomy provides a snapshot of current academic literature on systemic risks. This paper contributes to AI safety research by providing a structured groundwork for understanding and addressing the potential large-scale negative societal impacts of general-purpose AI. The taxonomy can inform policymakers in risk prioritization and regulatory development.

We present a comprehensive AI risk taxonomy derived from eight government policies from the European Union, United States, and China and 16 company policies worldwide, making a significant step towards establishing a unified language for generative AI safety evaluation. We identify 314 unique risk categories organized into a four-tiered taxonomy. At the highest level, this taxonomy encompasses System & Operational Risks, Content Safety Risks, Societal Risks, and Legal & Rights Risks. The taxonomy establishes connections between various descriptions and approaches to risk, highlighting the overlaps and discrepancies between public and private sector conceptions of risk. By providing this unified framework, we aim to advance AI safety through information sharing across sectors and the promotion of best practices in risk mitigation for generative AI models and systems.

In this work, we explore the possibility of utilizing transfer learning techniques to address the financial portfolio optimization problem. We introduce a novel concept called "transfer risk", within the optimization framework of transfer learning. A series of numerical experiments are conducted from three categories: cross-continent transfer, cross-sector transfer, and cross-frequency transfer. In particular, 1. a strong correlation between the transfer risk and the overall performance of transfer learning methods is established, underscoring the significance of transfer risk as a viable indicator of "transferability"; 2. transfer risk is shown to provide a computationally efficient way to identify appropriate source tasks in transfer learning, enhancing the efficiency and effectiveness of the transfer learning approach; 3. additionally, the numerical experiments offer valuable new insights for portfolio management across these different settings.

Excellent tail performance is crucial for modern machine learning tasks, such as algorithmic fairness, class imbalance, and risk-sensitive decision making, as it ensures the effective handling of challenging samples within a dataset. Tail performance is also a vital determinant of success for personalized recommender systems to reduce the risk of losing users with low satisfaction. This study introduces a "safe" collaborative filtering method that prioritizes recommendation quality for less-satisfied users rather than focusing on the average performance. Our approach minimizes the conditional value at risk (CVaR), which represents the average risk over the tails of users' loss. To overcome computational challenges for web-scale recommender systems, we develop a robust yet practical algorithm that extends the most scalable method, implicit alternating least squares (iALS). Empirical evaluation on real-world datasets demonstrates the excellent tail performance of our approach while maintaining competitive computational efficiency.

Financial portfolio management is the process of constant redistribution of a fund into different financial products. This paper presents a financial-model-free Reinforcement Learning framework to provide a deep machine learning solution to the portfolio management problem. The framework consists of the Ensemble of Identical Independent Evaluators (EIIE) topology, a Portfolio-Vector Memory (PVM), an Online Stochastic Batch Learning (OSBL) scheme, and a fully exploiting and explicit reward function. This framework is realized in three instants in this work with a Convolutional Neural Network (CNN), a basic Recurrent Neural Network (RNN), and a Long Short-Term Memory (LSTM). They are, along with a number of recently reviewed or published portfolio-selection strategies, examined in three back-test experiments with a trading period of 30 minutes in a cryptocurrency market. Cryptocurrencies are electronic and decentralized alternatives to government-issued money, with Bitcoin as the best-known example of a cryptocurrency. All three instances of the framework monopolize the top three positions in all experiments, outdistancing other compared trading algorithms. Although with a high commission rate of 0.25% in the backtests, the framework is able to achieve at least 4-fold returns in 50 days.

Although AI systems have been applied in various fields and achieved impressive performance, their safety and reliability are still a big concern. This is especially important for safety-critical tasks. One shared characteristic of these critical tasks is their risk sensitivity, where small mistakes can cause big consequences and even endanger life. There are several factors that could be guidelines for the successful deployment of AI systems in sensitive tasks: (i) failure detection and out-of-distribution (OOD) detection; (ii) overfitting identification; (iii) uncertainty quantification for predictions; (iv) robustness to data perturbations. These factors are also challenges of current AI systems, which are major blocks for building safe and reliable AI. Specifically, the current AI algorithms are unable to identify common causes for failure detection. Furthermore, additional techniques are required to quantify the quality of predictions. All these contribute to inaccurate uncertainty quantification, which lowers trust in predictions. Hence obtaining accurate model uncertainty quantification and its further improvement are challenging. To address these issues, many techniques have been proposed, such as regularization methods and learning strategies. As vision and language are the most typical data type and have many open source benchmark datasets, this thesis will focus on vision-language data processing for tasks like classification, image captioning, and vision question answering. In this thesis, we aim to build a safeguard by further developing current techniques to ensure the accurate model uncertainty for safety-critical tasks.

As Large Language Models (LLMs) and generative AI become increasingly widespread, concerns about content safety have grown in parallel. Currently, there is a clear lack of high-quality, human-annotated datasets that address the full spectrum of LLM-related safety risks and are usable for commercial applications. To bridge this gap, we propose a comprehensive and adaptable taxonomy for categorizing safety risks, structured into 12 top-level hazard categories with an extension to 9 fine-grained subcategories. This taxonomy is designed to meet the diverse requirements of downstream users, offering more granular and flexible tools for managing various risk types. Using a hybrid data generation pipeline that combines human annotations with a multi-LLM "jury" system to assess the safety of responses, we obtain Aegis 2.0, a carefully curated collection of 34,248 samples of human-LLM interactions, annotated according to our proposed taxonomy. To validate its effectiveness, we demonstrate that several lightweight models, trained using parameter-efficient techniques on Aegis 2.0, achieve performance competitive with leading safety models fully fine-tuned on much larger, non-commercial datasets. In addition, we introduce a novel training blend that combines safety with topic following data.This approach enhances the adaptability of guard models, enabling them to generalize to new risk categories defined during inference. We plan to open-source Aegis 2.0 data and models to the research community to aid in the safety guardrailing of LLMs.

We seek to understand fundamental tradeoffs between the accuracy of prior information that a learner has on a given problem and its learning performance. We introduce the notion of prioritized risk, which differs from traditional notions of minimax and Bayes risk by allowing us to study such fundamental tradeoffs in settings where reality does not necessarily conform to the learner's prior. We present a general reduction-based approach for extending classical minimax lower-bound techniques in order to lower bound the prioritized risk for statistical estimation problems. We also introduce a novel generalization of Fano's inequality (which may be of independent interest) for lower bounding the prioritized risk in more general settings involving unbounded losses. We illustrate the ability of our framework to provide insights into tradeoffs between prior information and learning performance for problems in estimation, regression, and reinforcement learning.

Laboratory accidents pose significant risks to human life and property, underscoring the importance of robust safety protocols. Despite advancements in safety training, laboratory personnel may still unknowingly engage in unsafe practices. With the increasing reliance on large language models (LLMs) for guidance in various fields, including laboratory settings, there is a growing concern about their reliability in critical safety-related decision-making. Unlike trained human researchers, LLMs lack formal lab safety education, raising questions about their ability to provide safe and accurate guidance. Existing research on LLM trustworthiness primarily focuses on issues such as ethical compliance, truthfulness, and fairness but fails to fully cover safety-critical real-world applications, like lab safety. To address this gap, we propose the Laboratory Safety Benchmark (LabSafety Bench), a comprehensive evaluation framework based on a new taxonomy aligned with Occupational Safety and Health Administration (OSHA) protocols. This benchmark includes 765 multiple-choice questions verified by human experts, assessing LLMs and vision language models (VLMs) performance in lab safety contexts. Our evaluations demonstrate that while GPT-4o outperforms human participants, it is still prone to critical errors, highlighting the risks of relying on LLMs in safety-critical environments. Our findings emphasize the need for specialized benchmarks to accurately assess the trustworthiness of LLMs in real-world safety applications.

Ecological management and decision-making typically focus on uncertainty about the future, but surprisingly little is known about how to account for uncertainty of the present: that is, the realities of having only partial or imperfect measurements. Our primary paradigms for handling decisions under uncertainty -- the precautionary principle and optimal control -- have so far given contradictory results. This paradox is best illustrated in the example of fisheries management, where many ideas that guide thinking about ecological decision making were first developed. We find that simplistic optimal control approaches have repeatedly concluded that a manager should increase catch quotas when faced with greater uncertainty about the fish biomass. Current best practices take a more precautionary approach, decreasing catch quotas by a fixed amount to account for uncertainty. Using comparisons to both simulated and historical catch data, we find that neither approach is sufficient to avoid stock collapses under moderate observational uncertainty. Using partially observed Markov decision process (POMDP) methods, we demonstrate how this paradox arises from flaws in the standard theory, which contributes to over-exploitation of fisheries and increased probability of economic and ecological collapse. In contrast, we find POMDP-based management avoids such over-exploitation while also generating higher economic value. These results have significant implications for how we handle uncertainty in both fisheries and ecological management more generally.

Portfolio optimization has been a broad and intense area of interest for quantitative and statistical finance researchers and financial analysts. It is a challenging task to design a portfolio of stocks to arrive at the optimized values of the return and risk. This paper presents an algorithmic approach for designing optimum risk and eigen portfolios for five thematic sectors of the NSE of India. The prices of the stocks are extracted from the web from Jan 1, 2016, to Dec 31, 2020. Optimum risk and eigen portfolios for each sector are designed based on ten critical stocks from the sector. An LSTM model is designed for predicting future stock prices. Seven months after the portfolios were formed, on Aug 3, 2021, the actual returns of the portfolios are compared with the LSTM-predicted returns. The predicted and the actual returns indicate a very high-level accuracy of the LSTM model.

Large Language Models (LLMs) have become an integral part of our daily lives. However, they impose certain risks, including those that can harm individuals' privacy, perpetuate biases and spread misinformation. These risks highlight the need for robust safety mechanisms, ethical guidelines, and thorough testing to ensure their responsible deployment. Safety of LLMs is a key property that needs to be thoroughly tested prior the model to be deployed and accessible to the general users. This paper reports the external safety testing experience conducted by researchers from Mondragon University and University of Seville on OpenAI's new o3-mini LLM as part of OpenAI's early access for safety testing program. In particular, we apply our tool, ASTRAL, to automatically and systematically generate up to date unsafe test inputs (i.e., prompts) that helps us test and assess different safety categories of LLMs. We automatically generate and execute a total of 10,080 unsafe test input on a early o3-mini beta version. After manually verifying the test cases classified as unsafe by ASTRAL, we identify a total of 87 actual instances of unsafe LLM behavior. We highlight key insights and findings uncovered during the pre-deployment external testing phase of OpenAI's latest LLM.

Counterfactual Risk Minimization (CRM) is a framework for dealing with the logged bandit feedback problem, where the goal is to improve a logging policy using offline data. In this paper, we explore the case where it is possible to deploy learned policies multiple times and acquire new data. We extend the CRM principle and its theory to this scenario, which we call "Sequential Counterfactual Risk Minimization (SCRM)." We introduce a novel counterfactual estimator and identify conditions that can improve the performance of CRM in terms of excess risk and regret rates, by using an analysis similar to restart strategies in accelerated optimization methods. We also provide an empirical evaluation of our method in both discrete and continuous action settings, and demonstrate the benefits of multiple deployments of CRM.

Risk-sensitive reinforcement learning (RL) has become a popular tool to control the risk of uncertain outcomes and ensure reliable performance in various sequential decision-making problems. While policy gradient methods have been developed for risk-sensitive RL, it remains unclear if these methods enjoy the same global convergence guarantees as in the risk-neutral case. In this paper, we consider a class of dynamic time-consistent risk measures, called Expected Conditional Risk Measures (ECRMs), and derive policy gradient updates for ECRM-based objective functions. Under both constrained direct parameterization and unconstrained softmax parameterization, we provide global convergence and iteration complexities of the corresponding risk-averse policy gradient algorithms. We further test risk-averse variants of REINFORCE and actor-critic algorithms to demonstrate the efficacy of our method and the importance of risk control.

Recent advances in Language Model (LM) agents and tool use, exemplified by applications like ChatGPT Plugins, enable a rich set of capabilities but also amplify potential risks - such as leaking private data or causing financial losses. Identifying these risks is labor-intensive, necessitating implementing the tools, manually setting up the environment for each test scenario, and finding risky cases. As tools and agents become more complex, the high cost of testing these agents will make it increasingly difficult to find high-stakes, long-tailed risks. To address these challenges, we introduce ToolEmu: a framework that uses an LM to emulate tool execution and enables the testing of LM agents against a diverse range of tools and scenarios, without manual instantiation. Alongside the emulator, we develop an LM-based automatic safety evaluator that examines agent failures and quantifies associated risks. We test both the tool emulator and evaluator through human evaluation and find that 68.8% of failures identified with ToolEmu would be valid real-world agent failures. Using our curated initial benchmark consisting of 36 high-stakes tools and 144 test cases, we provide a quantitative risk analysis of current LM agents and identify numerous failures with potentially severe outcomes. Notably, even the safest LM agent exhibits such failures 23.9% of the time according to our evaluator, underscoring the need to develop safer LM agents for real-world deployment.

The recent performance leap of Large Language Models (LLMs) opens up new opportunities across numerous industrial applications and domains. However, erroneous generations, such as false predictions, misinformation, and hallucination made by LLMs, have also raised severe concerns for the trustworthiness of LLMs', especially in safety-, security- and reliability-sensitive scenarios, potentially hindering real-world adoptions. While uncertainty estimation has shown its potential for interpreting the prediction risks made by general machine learning (ML) models, little is known about whether and to what extent it can help explore an LLM's capabilities and counteract its undesired behavior. To bridge the gap, in this paper, we initiate an exploratory study on the risk assessment of LLMs from the lens of uncertainty. In particular, we experiment with twelve uncertainty estimation methods and four LLMs on four prominent natural language processing (NLP) tasks to investigate to what extent uncertainty estimation techniques could help characterize the prediction risks of LLMs. Our findings validate the effectiveness of uncertainty estimation for revealing LLMs' uncertain/non-factual predictions. In addition to general NLP tasks, we extensively conduct experiments with four LLMs for code generation on two datasets. We find that uncertainty estimation can potentially uncover buggy programs generated by LLMs. Insights from our study shed light on future design and development for reliable LLMs, facilitating further research toward enhancing the trustworthiness of LLMs.

Current approaches to building general-purpose AI systems tend to produce systems with both beneficial and harmful capabilities. Further progress in AI development could lead to capabilities that pose extreme risks, such as offensive cyber capabilities or strong manipulation skills. We explain why model evaluation is critical for addressing extreme risks. Developers must be able to identify dangerous capabilities (through "dangerous capability evaluations") and the propensity of models to apply their capabilities for harm (through "alignment evaluations"). These evaluations will become critical for keeping policymakers and other stakeholders informed, and for making responsible decisions about model training, deployment, and security.