# Financial Language Models as Applied Artificial Intelligence Systems for News-Based Trading under Market Frictions

arXiv: https://arxiv.org/abs/2609.23703 · HTML: https://mlsanity.com/paper/2609.23703/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 26 of its 80 references that are in the map.
- First posted on arXiv 20 Sep 2026.

## Builds on (most cited first, 26 of 26)

- [Attention Is All You Need](https://mlsanity.com/paper/1706.03762/) (2017)
- [BERT: Pre-training of Deep Bidirectional Transformers for Language Understanding](https://mlsanity.com/paper/1810.04805/) (2018)
- [The Llama 3 Herd of Models](https://mlsanity.com/paper/2407.21783/) (2024)
- [RoBERTa: A Robustly Optimized BERT Pretraining Approach](https://mlsanity.com/paper/1907.11692/) (2019)
- [A Unified Approach to Interpreting Model Predictions](https://mlsanity.com/paper/1705.07874/) (2017)
- [XGBoost: A Scalable Tree Boosting System](https://mlsanity.com/paper/1603.02754/) (2016)
- ["Why Should I Trust You?": Explaining the Predictions of Any Classifier](https://mlsanity.com/paper/1602.04938/) (2016)
- [OPT: Open Pre-trained Transformer Language Models](https://mlsanity.com/paper/2205.01068/) (2022)
- [Longformer: The Long-Document Transformer](https://mlsanity.com/paper/2004.05150/) (2020)
- [Extracting Training Data from Large Language Models](https://mlsanity.com/paper/2012.07805/) (2020)
- [DeBERTa: Decoding-enhanced BERT with Disentangled Attention](https://mlsanity.com/paper/2006.03654/) (2020)
- [Big Bird: Transformers for Longer Sequences](https://mlsanity.com/paper/2007.14062/) (2020)
- [Understanding intermediate layers using linear classifier probes](https://mlsanity.com/paper/1610.01644/) (2016)
- [Deep learning for time series classification: a review](https://mlsanity.com/paper/1809.04356/) (2018)
- [FinBERT: Financial Sentiment Analysis with Pre-trained Language Models](https://mlsanity.com/paper/1908.10063/) (2019)
- [NLP Evaluation in trouble: On the Need to Measure LLM Data Contamination for each Benchmark](https://mlsanity.com/paper/2310.18018/) (2023)
- [Good Debt or Bad Debt: Detecting Semantic Orientations in Economic Texts](https://mlsanity.com/paper/1307.5336/) (2013)
- [Financial Time Series Forecasting with Deep Learning : A Systematic Literature Review: 2005-2019](https://mlsanity.com/paper/1911.13288/) (2019)
- [Proving Test Set Contamination in Black Box Language Models](https://mlsanity.com/paper/2310.17623/) (2023)
- [PIXIU: A Large Language Model, Instruction Data and Evaluation Benchmark for Finance](https://mlsanity.com/paper/2306.05443/) (2023)
- [Challenges in Deploying Machine Learning: a Survey of Case Studies](https://mlsanity.com/paper/2011.09926/) (2020)
- [WHEN FLUE MEETS FLANG: Benchmarks and Large Pre-trained Language Model for Financial Domain](https://mlsanity.com/paper/2211.00083/) (2022)
- [Task Contamination: Language Models May Not Be Few-Shot Anymore](https://mlsanity.com/paper/2312.16337/) (2023)
- [Deep Learning for Financial Applications : A Survey](https://mlsanity.com/paper/2002.05786/) (2020)
- [Towards CRISP-ML(Q): A Machine Learning Process Model with Quality Assurance Methodology](https://mlsanity.com/paper/2003.05155/) (2020)
- [Stock Movement Prediction Based on Bi-typed Hybrid-relational Market Knowledge Graph via Dual Attention Networks](https://mlsanity.com/paper/2201.04965/) (2022)

## Abstract (arXiv)

Financial language models can transform unstructured firm-specific news into structured decision signals, but financial AI research lacks an integrated deployment framework for evaluating whether those signals remain useful in financial decision systems. Computer science research has developed strong methods for time-series forecasting, text classification, multimodal stock prediction, graph-based market modeling, and machine-learning operations, yet these streams do not provide a domain-specific protocol that jointly tests financial language-model outputs under event-time observability, probability calibration, execution timing, transaction costs, liquidity constraints, capacity limits, operational diagnostics, and statistical inference. We introduce MFAST, a Market-Friction-Aware Sentiment-to-Trading framework that converts timestamped financial text into auditable, reproducible, and market-feasible trading decisions. The application is news-based trading, where firm-specific text must be linked to securities before portfolio decisions can be evaluated. The framework links Refinitiv News Analytics to Center for Research in Security Prices (CRSP) equity data, restricts the primary out-of-sample evaluation to post-release news outside disclosed foundation-model data-freshness periods, and adds a public replication arm using open financial text and public price data. Results show that decoder-only language models outperform encoder baselines and dictionary sentiment in classification, calibration, return prediction, and net portfolio performance, while operational diagnostics reveal trade-offs among accuracy, latency, memory, throughput, and inference cost. The paper shows that credible evaluation of financial language models requires an end-to-end engineering approach combining language understanding, temporal discipline, market-friction-aware deployment, and reproducible validation.