Hallucination

The Crossroads of Reason: When AI Hallucinates with Purpose On this day of reflection and sacrifice, we ask not what AI can do, but what it should become. Good Friday is not just a historical commemoration—it’s a paradox made holy: a moment when failure is reinterpreted as fulfillment, when death is the prelude to transformation. In today’s Cognaptus Insights, we draw inspiration from this theme to reimagine the way we evaluate, guide, and build large language models (LLMs). ...

When your AI believes too much, you pay the price. AI-driven quantitative trading is supposed to be smart—smarter than the market, even. But just like scientific AI systems that hallucinate new protein structures that don’t exist, trading models can conjure signals out of thin air. These errors aren’t just false positives—they’re corrosive hallucinations: misleading outputs that look plausible, alter real decisions, and resist detection until it’s too late. The Science of Hallucination Comes to Finance In a recent philosophical exploration of AI in science, Charles Rathkopf introduced the concept of corrosive hallucinations—a specific kind of model error that is both epistemically disruptive and resistant to anticipation1. These are not benign missteps. They’re illusions that change the course of reasoning, especially dangerous when embedded in high-stakes workflows. ...