# Enhancing Financial RAG with Agentic AI and Multi-HyDE: A Novel Approach to Knowledge Retrieval and Hallucination Reduction

arXiv: https://arxiv.org/abs/2509.16369 · HTML: https://mlsanity.com/paper/2509.16369/

## Key facts

- Cited by 4 papers in the map (data through 14 Oct 2026).
- Placed in Financial trading and forecasting agents, one of 16 directions in LLM agents and tool use.
- Builds on 24 of its 40 references that are in the map.
- First posted on arXiv 19 Sep 2025.

## Placed in

- LLM agents and tool use / [Financial trading and forecasting agents](https://mlsanity.com/agents/financial-trading-and-forecasting-agents/)

## Builds on (most cited first, 24 of 24)

- [LoRA: Low-Rank Adaptation of Large Language Models](https://mlsanity.com/paper/2106.09685/) (2021)
- [LLaMA: Open and Efficient Foundation Language Models](https://mlsanity.com/paper/2302.13971/) (2023)
- [Retrieval-Augmented Generation for Knowledge-Intensive NLP Tasks](https://mlsanity.com/paper/2005.11401/) (2020)
- [Sentence-BERT: Sentence Embeddings using Siamese BERT-Networks](https://mlsanity.com/paper/1908.10084/) (2019)
- [ReAct: Synergizing Reasoning and Acting in Language Models](https://mlsanity.com/paper/2210.03629/) (2022)
- [Toolformer: Language Models Can Teach Themselves to Use Tools](https://mlsanity.com/paper/2302.04761/) (2023)
- [Dense Passage Retrieval for Open-Domain Question Answering](https://mlsanity.com/paper/2004.04906/) (2020)
- [SimCSE: Simple Contrastive Learning of Sentence Embeddings](https://mlsanity.com/paper/2104.08821/) (2021)
- [REALM: Retrieval-Augmented Language Model Pre-Training](https://mlsanity.com/paper/2002.08909/) (2020)
- [ToolLLM: Facilitating Large Language Models to Master 16000+ Real-world APIs](https://mlsanity.com/paper/2307.16789/) (2023)
- [Self-RAG: Learning to Retrieve, Generate, and Critique through Self-Reflection](https://mlsanity.com/paper/2310.11511/) (2023)
- [Least-to-Most Prompting Enables Complex Reasoning in Large Language Models](https://mlsanity.com/paper/2205.10625/) (2022)
- [ColBERT: Efficient and Effective Passage Search via Contextualized Late Interaction over BERT](https://mlsanity.com/paper/2004.12832/) (2020)
- [BloombergGPT: A Large Language Model for Finance](https://mlsanity.com/paper/2303.17564/) (2023)
- [Reasoning with Language Model is Planning with World Model](https://mlsanity.com/paper/2305.14992/) (2023)
- [Approximate Nearest Neighbor Negative Contrastive Learning for Dense Text Retrieval](https://mlsanity.com/paper/2007.00808/) (2020)
- [Precise Zero-Shot Dense Retrieval without Relevance Labels](https://mlsanity.com/paper/2212.10496/) (2022)
- [FinanceBench: A New Benchmark for Financial Question Answering](https://mlsanity.com/paper/2311.11944/) (2023)
- [ConvFinQA: Exploring the Chain of Numerical Reasoning in Conversational Finance Question Answering](https://mlsanity.com/paper/2210.03849/) (2022)
- [Question Decomposition Improves the Faithfulness of Model-Generated Reasoning](https://mlsanity.com/paper/2307.11768/) (2023)
- [StateFlow: Enhancing LLM Task-Solving through State-Driven Workflows](https://mlsanity.com/paper/2403.11322/) (2024)
- [DMQR-RAG: Diverse Multi-Query Rewriting for RAG](https://mlsanity.com/paper/2411.13154/) (2024)
- [FinSage: A Multi-aspect RAG System for Financial Filings Question Answering](https://mlsanity.com/paper/2504.14493/) (2025)
- [RE-GAINS & EnChAnT: Intelligent Tool Manipulation Systems For Enhanced Query Responses](https://mlsanity.com/paper/2401.15724/) (2024)

## Built on by (most cited first, 4 of 4)

- [VERAFI: Verified Agentic Financial Intelligence through Neurosymbolic Policy Generation](https://mlsanity.com/paper/2512.14744/) (2025)
- [Decomposing Retrieval Failures in RAG for Long-Document Financial Question Answering](https://mlsanity.com/paper/2602.17981/) (2026)
- [W-RAG: Source-Aware Retrieval for Enterprise Document Generation from Heterogeneous Knowledge Bases](https://mlsanity.com/paper/2608.22081/) (2026)
- [VikingRAG: Accurate and Token-efficient Retrieval-augmented Generation over Structured Documents](https://mlsanity.com/paper/2609.11390/) (2026)

## Abstract (arXiv)

Accurate and reliable knowledge retrieval is vital for financial question-answering, where continually updated data sources and complex, high-stakes contexts demand precision. Traditional retrieval systems rely on a single database and retriever, but financial applications require more sophisticated approaches to handle intricate regulatory filings, market analyses, and extensive multi-year reports. We introduce a framework for financial Retrieval Augmented Generation (RAG) that leverages agentic AI and the Multi-HyDE system, an approach that generates multiple, nonequivalent queries to boost the effectiveness and coverage of retrieval from large, structured financial corpora. Our pipeline is optimized for token efficiency and multi-step financial reasoning, and we demonstrate that their combination improves accuracy by 11.2% and reduces hallucinations by 15%. Our method is evaluated on standard financial QA benchmarks, showing that integrating domain-specific retrieval mechanisms such as Multi-HyDE with robust toolsets, including keyword and table-based retrieval, significantly enhances both the accuracy and reliability of answers. This research not only delivers a modular, adaptable retrieval framework for finance but also highlights the importance of structured agent workflows and multi-perspective retrieval for trustworthy deployment of AI in high-stakes financial applications.