Quantum Computing is soon coming to Finance!

What might appear like a golden chandelier, as seen in the picture, is a?quantum computer.?Their era is here, and many top technology companies, universities and governments are investing heavily in the research and application of quantum computing.

If you are a mathematics and physics lover and crave to implement an understanding of nature to real-world applications, you shouldn’t miss this emerging technology.

What makes quantum computing extraordinary is that it's based on quantum mechanics, which is the deepest explanation of reality available. Quantum Computing exploits quantum-mechanical phenomena to process information.

DID YOU KNOW? The atoms in your body and in deep space operate on the principles of quantum mechanics!
        

How does it work??

The regular computing devices and super-computers are called classical computers. They use binary digits (bits) to store and process information: a classical computer with n bits (say n=4) can exist in one of (2 to the power 4) possible states ranging from 0000 to 1111 at any point in its computation. A quantum computer also has bits, but instead of 0 and 1, its quantum bits, or?qubits, can represent a 0, 1, or combination of both, which is a property known as?superposition. While bits in a classical computer can be in one of (2 to the power n) possible states at a time, qubits in a quantum computer can be in all the (2 to the power n) possible states at the same time which can be used for computation. What this implies is that quantum computers use fewer resources than classical computers to represent a lot of information. Other important quantum resources are interference by which quantum computers can converge to the “right” solution by cancelling out the wrong choices and amplifying the right one and entanglement by which quantum computers can access states that are inaccessible to classical computers.

We use algorithms daily – to make delicious dishes, using google maps, following Netflix recommendations. These are classical algorithms. A key goal of quantum computing is leveraging the quantum resources (superposition, interference, and entanglement) to design quantum algorithms that are more powerful than any classical algorithm and enable us to efficiently solve certain types of problems that are computationally hard even for the largest super-computer to solve in a reasonable amount of time! The substantial speedup that we achieve relative to classical algorithms is what we call, well, quantum speedup.??

In the financial services industry, there are many computationally challenging problems arising in applications across asset management, investment banking, and retail and corporate banking.?        

Specific areas in financial services where quantum computing is being studied are –?

1. Simulation

• The simulation focuses on creating scenarios of potential outcomes, such as the impact of volatility on risk, evaluating asset values for pricing, or monitoring economic system impacts in the market
• Ex: Simulating the impact of market volatility on the price of financial instruments

2. Optimization

• Many financial services firms may want to take actions that result in the best possible outcome for a given goal
• In the language of mathematical optimization, finding the best decision or action with respect to maximizing or minimizing given goals or objectives is cast as maximizing or minimizing an objective function in a decision variable, subject to constraints, often given again by functions of a decision variable
• Ex: Identifying the best portfolio of stocks from the available set to maximize return but minimize risk

3. Quantum Machine Learning (QML)

• Machine Learning is a key ingredient to tackle many financial problems. Several computing tasks can be run faster on a quantum computer
• Ex: Quantum-Principal Component Analysis (PCA) algorithm can be run exponentially faster on a quantum processor

JP Morgan Chase & Barclays have partnered with IBM as early as 2017 to perform business experiments with quantum computation. Accenture is a global leader incubating quantum computing talent to “prepare for the quantum impact” (read this report online here).?Accenture helped BBVA, a multinational financial services company, jumpstart their quantum business experiments by successfully mapping three client-relevant use cases in areas like currency arbitrage, credit scoring and portfolio optimization. This has fortified BBVA's position as an early adopter of this emerging technology to create real-world commercial applications soon.

Quantum computing stands to be one of the most disruptive technologies of all time, and competitive advantage will depend on who can leverage quantum to solve key business problems and generate important insights. Now is the chance to learn quantum computing before the world goes ‘gung-ho’ about it soon! ?

The author is Data|Cloud|AI Architect & Innovator. He is "Accenture's Quantum Computing Conversant" and received a “Certificate of Quantum Excellence" from IBM. And oh, by the way, those chandelier-like devices need to be in sub-space temperatures for artificial qubits in quantum chips to perform computations hence the large setup.?

I think this is a good place to stop the post. We have barely scratched the surface on a topic that has ginormous breadth and depth. Do write to me if you would like to cover any of the above topics in detail, or any other related topics in my future blog post(s).