Finance 490 Final Exam

Payment systems are one of the most competitive sectors of Financial Technology now that "money" is becoming less of an electronic asset and more of a Physical one. A. True B. False

B. False

The model output isn't binary, but instead expressed in terms of probability A. True B. False

A. True

Blockchain's opportunities are the highest in the countries that haven't reached that level yet. A. True B. False

A.True

Smart contracts allow for the ____________ of data.

bidding

ML can be used to create data A. True B. False

A. True

Omitted variable bias refers to one or more statistically significant variables being excluded from a model and the effect of the missing variable being estimated by those that are included. A. True B. False

A. True

The advances in the 1990's on machine learning shifts from a knowledge-driven approach to a data-driven approach A. True B. False

A. True

Classification

A classification problem is when the output variable is a category, such as "red" or "blue" or "disease" and "no disease"

What is the original meaning of the word computer?

A human being that performs numerical computations on paper

Private Key

A key that is only known to the owner and never shared, often this is not stored electronically This is the key that an be used to decrypt information, send transactions, and empty a wallet

Regression

A regression problem is when the output variable is a real value, such as "dollars" or "weight"

2. In the ML step in which the "split data" module is used, if the field "Fraction of rows in the first output" is set to .75 this means___. A. 75% of the data is used to train the model and 25% is used to test it B. 25% of the data is used to train the model and 75% is used to test it C. 75% of the input data is estimated D. 75% of the data should match the output

A. 75% of the data is used to train the model and 25% is used to test it

In the "Defense of Financial Innovation" article, the author views the 2008 financial crisis not as a warning but as a _________. A. Clarion call for creative thinking of a different kind B. A warning that banks are dying C. A reason to place trust in banks D. A warning on home ownership

A. Clarion call for creative thinking of a different kind

The authors of Blockchain Revolution predict that the future reserve currencies of the world will likely be a mix of: A. Crypto fiat currencies (e.g. digital dollars) and decentralized cryptocurrencies (e.g. Bitcoin) B. Credit cards and electronic transfer services (e.g. Venmo and Paypal) C. Decentralized currencies (e.g. Bitcoin) and fixed income securities D. Crypto fiat currencies (e.g. digital dollars) and wire transfer services

A. Crypto fiat currencies (e.g. digital dollars) and decentralized cryptocurrencies (e.g. Bitcoin)

What algorithm depicts human ways of learning based of real-time feedback and not training itself with data? A. Reinforcement learning B. AI C. Trained Models D. None of the above

A. Reinforcement learning

Financial Services are characterized by _______ service encounters between the firm and its customers. A. Repeated B. Singular C. Annual D. Rare

A. Repeated

The main difference between supervised and unsupervised machine learning is that: A. Supervised learning is focused on the output while unsupervised learning's purpose is to emphasize trends and data structure B. Supervised ML requires manual structuring of the data C. Supervised learning does not return specific, corresponding output variables D. All of the above

A. Supervised learning is focused on the output while unsupervised learning's purpose is to emphasize trends and data structure

A nations dynamism is its ability and proclivity to innovate. A. True B. False

A. True

Better data beat fancier algorithms A. True B. False

A. True

Financial Innovation takes place in and affects a microeconomic environment A. True B. False

A. True

In the early 2000 the notion of "supervised" and "Unsupervised" ML start to appear A. True B. False

A. True

_______ have the ability to consider environmental factors that might affect the attainment of a goal in the assessment and choice of the best options available

AI's

Incentives are based on

Accuracy and value derived

Closed Feedback loops with machine learning are an example of:

Autonomous Agents

______________ ___________ are software that can make decisions and act on them.

Autonomous Agents

What is one aspect of jobs that would be difficult to automate with technology? A. Human intelligence B. Empathy C. Speed of completion D. Communication

B. Empathy

_______ were among the first algorithms used on Wall Street A. Learning algorithms B. Execution algorithms C. Cleaning Algorithms D. Unstructured algorithms

B. Execution algorithms

In ML more variables are always better A. True B. False

B. False

In the Machine Learning (ML) exercise to predict oil prices the variable that is being predicted is Real Trade weighted Index. A. True B. False

B. False

Machine learning solutions are always expressed as binary (yes/no) answers? A. True B. False

B. False

The probability of innovation adoption in the current environment is significantly increased when? A. Operational costs are lowered B. Friction is removed C. Larger investments are made D. It's done by larger banks

B. Friction is removed

A lie on the blockchain is? A. Invisible B. Permanent C. Able to be changed D. All of the above

B. Permanent

ML is NOT the tool to use when _____ A. The dataset is very large B. The data set contains a lot of "noise" C. You are not sure about the output D. You are working with panel data

B. The data set contains a lot of "noise"

Which one of the following statements concerning AI and ML is false? A. AI is the broader concept of machines being able to carry out tasks in a way that we would consider "smart" B. ML is a current application of AI based around the idea that we should be able to give machines access to data and let them learn for themselves C. AI and ML can be used interchangeably D. AI can be classified into one of two fundamental groups, applied or general

C. AI and ML can be used interchangeably

The early computer scientist Alan Turing developed a test for artificial intelligence based on what criteria? A. If the computer is as smart as the average human B. If a computer can achieve emotional sentience C. If a computer can be communicated with, and is deemed indistinguishable from a human D. If a computer can solve problems unsolvable by humans

C. If a computer can be communicated with, and is deemed indistinguishable from a human

If we consider an old-fashioned ledger, a "block" might be thought of as a page, each being unique and holding different transactions. These blocks of information are joined together (chained) through a cryptographic methodology that insures _____________. A. Trust B. Cryptography C. Immutability D. Tokens

C. Immutability

In the Thomas Dietterich interview-ML challenges and impact which was NOT mentioned? A. Improved management of the earths resources B. Map the location and population of endangered species such as the panda C. Increase enrollment at public and private universities D. Help identify fraud and theft in finance

C. Increase enrollment at public and private universities

A _____ is a computer system that classifies information in the same way a human brain does. A. Distributed application B. Quantum computer C. Neural Net D. Statistical AI

C. Neural Net

What does the concept of "No Free Lunch" in Machine Learning refer to? A. There is a universal algorithm that works well in every type of problem B. No ML program is free C. No single algorithm works best for every problem D. Innovative services that appear to be free often collect data as a form of payment

C. No single algorithm works best for every problem

Which one of the following is NOT one of the "Big 3" Machine Learning tasks? A. Regression B. Clustering C. Simplification D. Classification

C. Simplification

Which of the following is true about an error on the blockchain? A. The incorrect block is deleted using a hashing algorithm B. Both parties agree to edit the block and reverse the transaction C.A new transaction is created to reverse the incorrect transaction D. A smart contract is used to change the block with an error

C.A new transaction is created to reverse the incorrect transaction

Stores of value include

Commodities Property Cryptocurrency Information

Recent Financial Innovation has been facilitated by:

Technology, regulation, and globalization

Transactions on the Blockchain

Every transaction is verified by the network The network must agree to "turn the page" (i.e. certify a new block) This eliminates the single point of failure

Quantum Computing

Quantum computers do calculations using bits. We want them to plug into our existing data and computers. But quantum bits, or qubits, have unique and powerful properties that allow a group of them to do much more than an equivalent number of conventional bits. Richard Feynman

Problems built on top of Classification

Random Forest Support Vector Machines

Azure allows missing data in data sets to be corrected by A. Removing rows with missing values B. Removing columns with missing values C. Replacing with custom substitution values D. All of the above

D. All of the above

Implementation of advanced AI might have which effects on the overall economy? A. Automation and replacement of some jobs B. Creation and advancement of some jobs C. A shift in the needs of society D. All of the above

D. All of the above

Recent changes of how financing is facilitated can be attributed to _____ A. Globalization B. Regulation C. Technology D. All of the above

D. All of the above

Which of the following is not a store of value? A. Commodities B. Information C. Cryptocurrency D. All of the above are a store of value

D. All of the above are a store of value

________ helps hold Chief Officers and Executives accountable to avoid scandals related to bribery, insider trading, and falsification of data. A. Multi signature contracts B. Variable contracts C. Smart Contracts D. Both a and c E. Both b and c

D. Both a and c

Which of the following is NOT a benefit of cash. A. Highly liquid B. Anonymity C. Stable value D. Earns value over time

D. Earns value over time

Which of the following is NOT a problem that Blockchain addresses? A. The need for a Middle Man B. The need for trust C. The need for a store of value D. The need for stronger security

D. The need for stronger security

Which of the following are NOT useful applications of ML? A. To look for patterns within large data sets B. To make forecasts using generated codes C. To express outputs in terms of probability D. To find commonalities in data with similar inputs and different outputs

D. To find commonalities in data with similar inputs and different outputs

What are the practical use cases of Blockchain?

Finance Healthcare Government

What is the engine of sustainable economic growth?

Financial Innovation

The ________ at the end of one block is found at the beginning of the next block in the chain

Hash

Statistical AI

In the early 90's Machine Learning leveraged the intersection of Computer Science and Statistics. This resulted in a new way of thinking: the probabilistic approach. In this approach uncertainty in the parameters is incorporated in the models.

Characteristics of Blockchain

It allows for the replacement (maybe augmentation) of trust with technology It's secure, not only is it distributed, Blockchain uses multiple layers of cryptography as apposed to centralized database Transactions can be fast, and borderless It can be relatively inexpensive It is immutable, what goes on the Blockchain stays on the Blockchain

Problems built on top of Regression

Linear Regression Random forest

Investing nowadays retail investors actually provide ______________.

Liquidity

As smart contracts interact with other smart contracts they contribute to ___________ ___________ ___________.

Open Network Enterprises (ONE)

Middle ground between supervised and unsupervised

Partially Labeled Data Techniques are used to identify the unlabeled data using probabilities

New type of financial institution

Payment Systems/Point of Sale (Square, Apple Pay)

Public Key Cryptography

Public Key infrastructure is an asymmetric cryptography It consists of two keys that do NOT perform the same function A Public Key A Private Key

Distributed Autonomous Enterprises (DAE)

Require little management or "hierarchy" The "weathernet" scenario

Public/Private Keys

The "keys" are large numbers that have been paired together, but are not the same (thus the asymmetric) Either of the keys can be used to encrypt a message, with the other one being used to decrypt it

Innovation is accomplished through the use of

Tools

Unsupervised Learning

Unsupervised learning is almost the opposite of supervised, you only have input data (X) and no corresponding output variables. The goal for unsupervised learning is to model the underlying structure or distribution in the data in order to learn more about the data. Unlike supervised learning there is no correct answers that models are trained to. Algorithms are left to their own devises to discover and present the interesting structure in the data. (Clustering, and association)

Understanding and applying variable selection

Variable selection can be assisted through ML or other regression approaches (Feature Selection)...the lack of variable selections can't Results are often biased due to the variables selected or omitted, be vigilant about this Azure is best used with CSV file formats, when creating new files make sure you save them as CSV before loading them into Azure

When is ML not the tool

When new data inputs are not similar to those used to create the model Data in which similar inputs result in different outputs If there is "Noise" in the data, e.g. classification mistakes

Innovation has increased _____________ ________ significantly over the last two millenia

World GDP

Smart contracts are like other contracts, except that they interact in an ____________ fashion

automated

A smart contract enforces a relationship with ________________ _______

cryptographic code

The mechanism that ensures verification is

hashing

Machine Learning

is a method of data analysis that automates analytical model building. It is a branch of artificial intelligence based on the idea that systems can learn from data, identify patterns and make decisions with minimal human intervention.

Supervised Learning

is simply a method in which you know the input and the desired output and "supervise" the creation of the model Where you have input variables (x) and an output variable (Y) and you use an algorithm to learn the mapping function from the input to the output. Y = f(X) The goal is to approximate the mapping function so well that when you have new input data (x) that you can predict the output variables (Y) for that data. (Classification and Regression are two popular algorithms associated with supervised learning)

Association

is where you want to discover rules that describe large portions of your data, such as people that buy X also tend to buy Y

Algorithms used for unsupervised learning include:

k-means for clustering problems Apriori algorithm for association rule learning problems

Change is often viewed in terms of demand and/or opportunity always with __________ as the driver

revenues

Transaction complexity and volume are growing, as is the need for better __________.

transparency

Clustering

where you want to discover the inherent groupings in the data, such as grouping customers by purchasing behavior