AI-Based Forecasting of Interest Rate and Profit Rate Risks in Saudi Debt Markets

Volatility in interest rates and profit rates is one of the critical factors that determine the financial risk in the Saudi Arabian debt markets. This affects government debt instruments, debt securities issued by corporations, and Shariah-compliant financing instruments such as Sukuk. As the Saudi Arabian debt markets grow with the objective of diversifying the country’s economic activities and promoting the development of capital markets, the need to forecast interest rates and profit rates has become critical. This study has attempted to evaluate the role that artificial intelligence plays in the forecasting of interest rate and profit rate risks in the Saudi Arabian debt markets. The study has attempted to utilize the data from the Saudi Arabian debt markets and the relevant macro and financial factors to evaluate the effectiveness of the application of the machine learning approach in the forecasting of interest rate and profit rate risks. The study observed that the application of the artificial intelligence approach has proven to be effective in the forecasting of interest rate and profit rate risks compared to the application of the conventional statistical approach. The study has significant implications for the management of interest rate and profit rate risks in the Saudi Arabian debt markets. The study has attempted to contribute to the body of knowledge on the application of artificial intelligence in the management of financial risks in the Saudi Arabian debt markets. The study has observed that it is relevant to the plans that the Saudi Arabian government has to modernize the debt markets in the country.