RiskLabs: Predicting Financial Risk Using Large Language Model based on Multimodal and Multi-Sources Data

Yupeng Cao, Zhi Chen, Prashant Kumar, Qingyun Pei, Yangyang Yu, Haohang Li, Fabrizio Dimino, Lorenzo Ausiello, K. P. Subbalakshmi and Papa Momar Ndiaye

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Abstract: The integration of Artificial Intelligence (AI) techniques, particularly large language models (LLMs), in finance has garnered increasing academic attention. Despite progress, existing studies predominantly focus on tasks like financial text summarization, question-answering, and stock movement prediction (binary classification), the application of LLMs to financial risk prediction remains underexplored. Addressing this gap, in this paper, we introduce RiskLabs, a novel framework that leverages LLMs to analyze and predict financial risks. RiskLabs uniquely integrates multimodal financial data, including textual and vocal information from Earnings Conference Calls (ECCs), market-related time series data, and contextual news data to improve financial risk prediction. Empirical results demonstrate RiskLabs' effectiveness in forecasting both market volatility and variance. Through comparative experiments, we examine the contributions of different data sources to financial risk assessment and highlight the crucial role of LLMs in this process. We also discuss the challenges associated with using LLMs for financial risk prediction and explore the potential of combining them with multimodal data for this purpose.

Date: 2024-04, Revised 2025-05
New Economics Papers: this item is included in nep-ain, nep-big, nep-cmp and nep-rmg
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