Financial Firms Seek Edge in Algorithms Inspired by Quantum Computing

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Some firms are running algorithms similar to those used for quantum computers on advanced machines for risk analysis and portfolio optimization.

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Quantum-inspired technology is a broad term that relates to using certain algorithms that run on fast-processing classical computers, usually on quantum computers. According to Carl Dukatz, quantum program lead at Accenture plc, these types of algorithms are well suited to solving optimization problems, which are common in the financial-services sector and include things like risk analysis and derivative values.

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Analysts said interest in quantum-inspired technology has increased as officials hear about developments in real quantum computing.
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Firms including HSBC Holdings Plc, Associate Financial Inc.

And the Spanish multinational bank BBVA is looking to quantum-inspired technology for profit in the near future.

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According to Trolls Steinstrup, technology head of KPMG’s Global Quantum Hub, applications to quantum-inspired optimization problems can yield solutions anywhere from 1% to 10% more accurate than existing approaches and come to solutions two to three times faster. can.

According to Will Zeng, Head of Quantum Research at Goldman Sachs Group Inc.,

It makes sense that the demand for financial services is so high because there are well-specified mathematical problems in the industry, in which incremental improvements in computing can make a huge difference to the bottom line.

“There are certainly big, valuable problems that have a theoretical quantum advantage,” Dr. Zeng said.

Even so, quantum computers are not ready for large-scale commercial operation today. Qubits, the quantum version of the computer bit, are fragile, easily disrupted by changes in temperature, noise or frequency. The number of qubits that operate in today’s quantum machines is relatively small, meaning that experiments are currently limited to a narrow set of information.

When Google last year announced plans to build a commercial-grade quantum computer by 2029, it said it was aiming for a 1-million-qubit machine, while its system at the time had less than 100 qubits.

“The main focus in the near term is really on quantum-inspired kind of activity,” said HSBC Global Head of Innovation, Global Functions Steve Suarez. The London-based bank launched an official quantum program in August 2021.

Currently, the applications the bank is exploring include portfolio optimization and pricing, said Philippe Intalura, HSBC Global Business Lead for Quantum Computing.

“Inspired technologies lend themselves quite well to this,” Dr. Intalura said.

According to KPMG’s Dr. Steinstrup, these processes involve rewriting the traditional algorithm as an algorithm that typically runs on quantum machines, before turning them into quantum-inspired solutions.

Companies often do optimization problems using linear equations. In one mode of quantum-induced, those linear equations are rewritten as quadratic equations in which multiple variables can be multiplied by one another. Dr. Steinstrup said this is one of the few differences between the initial equation and the quantum-inspired process.

After the algorithm is rewritten, it is a question of testing it on some sort of classical machine to determine whether the new algorithm works faster and more effectively than the traditional ones.

Ally Financial started its work in this area at the end of 2021. Chief Information, Data and Digital Officer Satish Muthukrishnan said the company has created some quantum-inspired algorithms and is in the process of testing them. He said the work currently focuses on areas such as pricing, portfolio optimization and other business use cases.

Mr Muthukrishnan said he has yet to find a quantum-inspired solution that works so much better than a conventional equation that he has to hurry to implement it.

“I also want to make sure I go to market with the most impressive quantum-inspired algorithms,” he said.

Testing these solutions is also a priority for Escolastico Sánchez, the quantum discipline leader at BBVA. Dr Sanchez said he is working on proofs of concept for several solutions in this area, including algorithms designed to help with portfolio management.

Running the algorithm on past data sets has yielded promising results, Dr. Sanchez said, although the bank needs to do more work to ensure that the solution will work on current and future data sets before it can be implemented. makes plans.

In terms of actual quantum, Dr. Sanchez said, “Sooner or later, I think this hardware is going to be valuable and robust enough to solve some problems better than classical ones. [computers],

Isabelle Bousquette [email protected] . Feather

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