• The black box model takes input and produces output, but its operation is unknown.
  • Black box models are increasingly being used for decision making in financial markets.
  • Technological advances, especially machine learning capabilities, do not allow the human mind to analyze or understand exactly how black box models reach their conclusions.
  • The opposite of a black box is a white box. Its results are transparent and can be analyzed by the user.
  • The term “black box model” is easily misused and may simply reflect a need to protect proprietary software or a desire to avoid clear explanations.