A risk manager identifies that an AI model used for real-time trading decisions has a 200-millisecond inference latency that occasionally spikes to 2,000 milliseconds under load. In this context, what risk does latency variability create?
Select an answer to reveal the explanation.
Short Explanation and Infographic
Here's the deal — b is correct because in real-time trading, latency spikes cause decisions to be executed based on market data that is no longer current — a 10x latency increase in fast-moving markets creates material market timing risk. A FINRA does not have AI accuracy standards of this type.
Full explanation below image
Full Explanation
B is correct because in real-time trading, latency spikes cause decisions to be executed based on market data that is no longer current — a 10x latency increase in fast-moving markets creates material market timing risk. A FINRA does not have AI accuracy standards of this type. C is not a direct consequence of latency. D is not a documented effect of latency variability.