Reinforcement Learning in Financial Decision Making: A Systematic Review of Performance, Challenges, and Implementation Strategies

ArXiv ID: 2512.10913 “View on arXiv”

Authors: Mohammad Rezoanul Hoque, Md Meftahul Ferdaus, M. Kabir Hassan

Abstract

Reinforcement learning (RL) is an innovative approach to financial decision making, offering specialized solutions to complex investment problems where traditional methods fail. This review analyzes 167 articles from 2017–2025, focusing on market making, portfolio optimization, and algorithmic trading. It identifies key performance issues and challenges in RL for finance. Generally, RL offers advantages over traditional methods, particularly in market making. This study proposes a unified framework to address common concerns such as explainability, robustness, and deployment feasibility. Empirical evidence with synthetic data suggests that implementation quality and domain knowledge often outweigh algorithmic complexity. The study highlights the need for interpretable RL architectures for regulatory compliance, enhanced robustness in nonstationary environments, and standardized benchmarking protocols. Organizations should focus less on algorithm sophistication and more on market microstructure, regulatory constraints, and risk management in decision-making.

Keywords: Reinforcement Learning (RL) Review, Market Making, Portfolio Optimization, Algorithmic Trading, Risk Management, General

Complexity vs Empirical Score

• Math Complexity: 6.0/10
• Empirical Rigor: 3.0/10
• Quadrant: Lab Rats
• Why: The paper reviews complex RL algorithms and theoretical finance concepts, indicating substantial mathematical density, but its empirical rigor is limited as it analyzes 167 articles using synthetic data rather than presenting new backtests or real-world datasets.

  flowchart TD
    A["Research Goal: Review RL in Finance<br/>(2017-2025, n=167)"] --> B{"Systematic Literature Review"}
    B --> C["Topics Analyzed<br/>Market Making | Portfolio Optimization | Algorithmic Trading"]
    C --> D["Computational Synthesis<br/>Performance Metrics vs. Challenges"]
    D --> E["Key Findings & Outcomes"]
    E --> F["Framework & Recommendations<br/>Focus: Microstructure & Risk over Complexity"]