Quantum Product in Finance

What’s typical finance problem?

Financial ProblemBroad Approach SolutionComments
Which assets should be included in a optimum portfolio? How should the composition of the portfolio change according to what happens in the market? Optimization models Deep learning, Heaton et al.
How to detect opportunities in the dfifferent assets in the market, and take profit by trading with themMachine learning methods, including neural networks and deep learning
How to estimate the risk and return of a portfolio, or even a companyMote Carlo-based methods

Steps of a Quantum Algo

In general, a quantum algorithm is a sequence of five steps:

  1. Encode the input data into the state of a set of qubits.
  2. Bring the qubits into superposition over many states (i.e., use quantum superposition).
  3. Apply an algorithm (or oracle) simultaneously to all the states (i.e., use quantum entanglement amongst the qubits); at the end of this step, one of these states holds the correct answer.
  4. Amplify the probability of measuring the correct state (i.e., use quantum interference).
  5. Measure one or more qubits.

Specific Use Cases

Option Pricing

The problem of what option is worth can be solved, in simple instances, by closed form formula. However, in general, the exotics/complex product requires numerical simulation methods (such as Monte Carlo).

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