Quantum Computing Applications in Financial Services

Updated: 19 March 2021

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Deutsche Börse tests quantum computing for risk models

Finextra — March 2021

Good for everyone when companies start to share information about practical examples. This shows real engagement and progress by the named companies — in this case Deutsche Börse — but also creates a FOMO factor encouraging everyone else in the industry to think about whether they should be doing more.

The results “demonstrated that the application of quantum computing would drastically reduce the required computational effort and thus total calculation time. For the chosen benchmark of 1000 inputs the “warp factor” is about 200,000, reducing the off-the-shelf Monte-Carlo computation time of about 10 years to less than 30 minutes quantum computing time.”

https://www.finextra.com/newsarticle/37649/deutsche-brse-tests-quantum-computing-for-risk-models

The Quantum Dilemma that Banks Must Face

Disruption Banking — February 2021

A article focusing on risk, doxing (new term of the week!) and post-quantum cryptography. The key point being that banks are properly starting to think about this from a risk point of view. And we intuitively know that once conversations start, even if focused in a defence area it is only matter of time before they overflow into other parts of the business and smart people start having clever ideas.

https://disruptionbanking.com/2021/02/24/the-quantum-dilemma-that-banks-must-face/

How Quantum Computing Could Change Financial Services

McKinsey & Company — December 2020

…from a business line perspective, the most promising use cases are likely to be those that require highly complex and/or exceptionally fast models. In valuation, for example, the ability to speedily identify an optimal risk-adjusted portfolio is likely to create significant competitive advantage. For loan and bond portfolios, more precise estimates of credit exposures should lead to better optimization decisions.

More broadly, capital allocation across a range of corporate finance activities can be improved by insights into the size and materiality of risks, while payments and transfers can be protected through better encryption.

Equity and FX trading offer significant possibilities, amid demand for ever-more accurate market risk and scenario calculations, and growing appreciation of the utility of raw computing power in smart routing and trade matching. Some large banks already expend large amounts of computational resources optimizing private interbank trading, suggesting it makes sense to seek an edge in this area.

Finally, sales, marketing, and distribution can benefit from sharper decision making, for example in relation to resource allocation and tailored services.

https://www.mckinsey.com/industries/financial-services/our-insights/how-quantum-computing-could-change-financial-services

Pricing Financial Derivatives with Exponential Quantum Speedup

Via arXiv.org — January 2021

Here, we present a digital quantum algorithm to solve Black-Scholes equation on a quantum computer for a wide range of relevant financial parameters by mapping it to the Schrödinger equation.

The non-Hermitian nature of the resulting Hamiltonian is solved by embedding the dynamics into an enlarged Hilbert space, which makes use of only one additional ancillary qubit.

Moreover, we employ a second ancillary qubit to transform initial condition into periodic boundary conditions, which substantially improves the stability and performance of the protocol.

Pricing Financial Derivatives with Exponential Quantum Speedup

Bankia AM Tests D-Wave Powered Quantum Computer in Fund Management with Multiverse Computing

The Quantum Daily — November 2020

The startup, together with Bankia’s innovation and asset management teams, have developed a quantum algorithm capable of calculating the optimal investment trajectories for a set of funds, determining the best purchase options , sale and transfer over a year for different risk profiles.

In the case of this proof of concept, the best composition of the portfolio was found between 1 followed by 1,300 zeros for each risk profile. The calculations in the quantum computer have taken only a few minutes.

Bankia AM Tests D-Wave Powered Quantum Computer In Fund Management with Multiverse Computing

It’s Time for Financial Institutions to Place Their Quantum Bets

Boston Consulting Group — October 2020

This paper looks at three specific areas as detailed in the chart below: Optimization, Machine learning, Simulation and pricing.

It's Time for Financial Institutions to Place Their Quantum Bets

Visa, JPMorgan Are Already Preparing for Potential Quantum Cyberattacks

The Wall Street Journal — October 2020 (behind paywall)

“A powerful quantum computer could be capable of breaking the internet’s most commonly used cryptography”

Visa, JPMorgan Are Already Preparing for Potential Quantum Cyberattacks

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