Introduction
Financial AI systems are transforming our perceptions of, and interaction with, financial data. The machine learning- and natural language-based intelligent systems are designed to support anything from the prediction of trends in markets to financial reporting automation. The principal challenge of building such systems lies in ensuring they possess good reasoning abilities to work on data as well as being able to articulate in simple terms financial insights that can be passed on.
Fin-R1 is a major improvement in this direction, providing us with a domain-specific large language model that's designed for financial reasoning. With a new architecture and a rigorous training regimen, it aims to address some of the important problems in the financial sector. The emphasis in the development of Fin-R1 is to enhance AI's capacity to understand and process complex financial information, creating potential for more stable and effective applications in finance.
Who discovered Fin-R1?
Fin-R1 was developed by SUFE-AIFLM Lab, the AI powerhouse of Shanghai University of Finance and Economics. They've built an agile yet strong model, which is meant to turbocharge financial decision-making with advanced AI.
What is Fin-R1?
Fin-R1 is a new large language model designed specifically for financial reasoning. The authors introduce its architecture, a specially constructed high-quality financial reasoning dataset and a two-stage training procedure based on supervised fine-tuning and reinforcement learning.
Unique Key Features of Fin-R1
Fin-R1 has some special things that make it different:
- Good at Financial Thinking: It's made specifically to think through complicated problems about money and finance.
- Small but Strong: It's built in a way that makes it cheaper to use because it doesn't need as much computer power (it has 7 billion parameters). But it still works really well.
- Better at Tricky Money Questions: The way it's trained in two steps, especially the second step using something called RL with GRPO, helps it handle very detailed and complex financial thinking.
- Performs Well in Tests: Fin-R1 does great in tests that focus on understanding financial tables (FinQA) and answering financial questions in conversations (ConvFinQA). It's one of the best in these areas
- Addresses Financial Pain Points: It is designed to address key challenges in the financial industry, including fragmented financial data, uncontrollable reasoning logic, and weak business generalization.
Unique Use Cases of Fin-R1
Fin-R1 has a number of distinct applications in the financial industry:
- Deeper Financial Analysis: Its robust reasoning ability can be utilized for detailed analysis of financial information, such as interpreting financial statements and deriving important conclusions.
- Automated Financial Computations: The model is capable of executing intricate financial computations, possibly simplifying processes and minimizing errors.
- Enhanced Financial Compliance: Its capacity to comprehend and reason about financial rules can help ensure compliance and identify prospective risks.
- Smart Risk Management: Through analysis of financial information and recognition of patterns, Fin-R1 can help with streamlined and precise risk assessment and management.
- ESG Analysis: The model can be utilized to assess firms based on environmental, social, and governance considerations in order to guide sustainable investment choices.
- Robo-advisory: It can use its reasoning and analytic abilities towards devising smarter, personalized robo-advisory solutions.
- Code Generation and Financial Analysis: It has some knowledge of code understanding and potentially creating financial code to carry out unique tasks for certain operations.
- Execution of English Finance Calculations and Communication: Trained with English financial information, it is possible to achieve financial cross-language operation and communication.
Architecture/ Workflow of Fin-R1
Fin-R1's architecture and functionality are established around a two-stage process: (as shown in below figure) Data Generation and Model Training. The first Data Generation stage is devoted to building a high-quality financial reasoning dataset referred to as Fin-R1-Data. It entails distilling data from open-source and proprietary financial datasets into DeepSeek-R1 to produce preliminary reasoning steps. A strict two-stage data filtering process then follows in order to guarantee the accuracy and logical consistency of the resultant dataset. The first filter, Answer Check, checks the correctness of the produced answers with rule-based techniques and Qwen2.5-72B-Instruct as an LLM-as-judge. The second filter, Reasoning Selection, checks the merit of the reasoning paths with Qwen2.5-72B-Instruct according to specified criteria. Fin-R1-Data is made up of varied categories with a large segment devoted to financial non-reasoning business knowledge (50.4%) and financial reasoning business knowledge (27.5%), in addition to financial expertise (21.9%) and the minimal amount of financial code (0.2%).
The next Model Training phase fine-tunes the model in a two-step process: Supervised Fine-Tuning (SFT) and Reinforcement Learning (RL). The process starts with SFT, in which a base model, Qwen2.5-7B-Instruct, is trained on the high-quality Fin-R1-Data to improve its capacity to conduct financial reasoning and produce structured outputs such as 'think' and 'answer' tags. Based on this, the model is subjected to RL with the Group Relative Policy Optimization (GRPO) algorithm. This RL phase uses a double reward function to further optimize the performance of the model. The Format Reward induces the model to strictly follow the given output format with the 'think' and 'answer' tags. At the same time, the Accuracy Reward, which is tested using Qwen2.5-Max, judges the semantic correctness of the final answer in the 'answer' tags. This two-step training paradigm, utilizing a well-designed dataset and focused reinforcement learning, allows Fin-R1 to develop robust financial reasoning skills.
Performance Evaluation of Fin-R1
The Fin-R1 model has been comprehensively tested against a number of important financial metrics, which are outlined in table below of the sources. Of particular note, Fin-R1 showed state-of-the-art performance on certain financial reasoning tasks. On the numerical reasoning FinQA benchmark over financial data, Fin-R1 scored 76.0. This score ranks it number one, beating out other models tested, such as DeepSeek-R1 (71.0), Qwen-2.5-32B-Instruct (72.0), and even the much larger DeepSeek-R1-Distill-Llama-70B (68.0). In the ConvFinQA benchmark, which investigates chain-of-thought numerical reasoning in conversational finance question answering, Fin-R1 also achieved a top score of 85.0, once again beating DeepSeek-R1 (82.0) and other rival models.
Over a wider set of financial metrics, such as Ant_Finance, TFNS, and Finance-Instruct-500K, Fin-R1 recorded an average of 75.2. Such a high average ranked Fin-R1 second in general among models tested, given its compact 7B parameter size. Of particular note was that Fin-R1 beat every other model in the same size category and even beat the larger 70B DeepSeek-R1-Distill-Llama-70B (69.2) by a significant margin of 6 points. The fairly narrow performance gap of only 3.0 points between Fin-R1 and the much bigger DeepSeek-R1 (78.2) further highlights the effectiveness and efficiency of Fin-R1 in financial tasks. Such findings are very important to the financial industry, suggesting that Fin-R1 is a strong yet efficient solution to difficult financial reasoning tasks, perhaps a cost-saving alternative to significantly larger models.
DeepSeek-R1 vs Qwen-2.5-32B-Instruct vs Fin-R1
DeepSeek-R1, Qwen-2.5-32B-Instruct, and Fin-R1 represent different design philosophies in improving the reasoning capabilities of large language models. DeepSeek-R1 utilizes reinforcement learning to improve chain-of-thought reasoning with self-verification, whereas Qwen-2.5-32B-Instruct, a strong 32-billion-parameter transformer bolstered with innovations such as RoPE and SwiGLU, performs well in dealing with long contexts, multilingual tasks, and structured outputs. Conversely, Fin-R1 is finetuned for financial reasoning and uses a two-stage training method supervised fine-tuning on a custom financial reasoning dataset and reinforcement learning with a dual reward scheme—in a highly efficient 7B architecture that achieves state-of-the-art performance on industrial benchmarks.
In situations where domain-specific monetary understanding is the priority like automated financial reasoning, risk management, and regulation Fin-R1 is the best choice because of its task-specific training and effective deployment. On the other hand, setups that require wider, multi-faceted language comprehension or massive long-context processing may prefer Qwen-2.5-32B-Instruct, with DeepSeek-R1 still a top contender for research and use cases that depend on clear, chain-of-thought reasoning.
How to use and access Fin-R1 model
User may get Fin-R1 as a free model on the Hugging Face Model Hub and GitHub. These websites contain complete guides and simple steps to install and utilize it. Individuals can copy the files or download the model themselves. Then they could integrate Fin-R1 into their projects with the help of the Hugging Face Transformers tool, along with examples illustrating how to utilize it and improve it. you can find all relevant links at the end of this article if interested.
Limitations and Future Directions
Fin-R1 is limited since it was primarily trained on only FinQA and ConvFinQA. This makes it more difficult for it to comprehend numerous various money scenarios. It is only able to operate with text, so it is unable to comprehend things such as charts. Furthermore, the tests we've conducted have largely been on simple answer questions. In the future, we want to train it on more data, make it learn images, and utilize it more in actual finance to assist in controlling risk and adhering to regulations.
Conclusion
Fin-R1's strong performance in financial reasoning represents a great leap forward for AI to manage sophisticated financial data. Its accuracy and efficiency show the potential of AI to revolutionize financial analysis, making it more reliable and accessible. This breakthrough opens the door to more intelligent, more informed financial decision-making in multiple applications.
Source
Research document: https://arxiv.org/pdf/2503.16252
Hugging Face: https://huggingface.co/SUFE-AIFLM-Lab/Fin-R1/blob/main/README_en.md
GitHub Repo: https://github.com/SUFE-AIFLM-Lab/Fin-R1/blob/main/README_en.md