Deutsche Börse, the German stock exchange company, has reportedly completed the pilot or testing of various quantum computing algorithms which are used to evaluate or create risk models.
The pilots found that quantum tech may bring down the time needed for certain simulations from years to within hours.
Deutsche Börse revealed that it worked cooperatively with JoS Quantum to create a quantum computing algorithm that would be able to address some of the existing limitations of risk models.
These types of models are mainly used for forecasting the potential financial impact of negative external developments like certain macroeconomic events, major changes in competition, or the introduction of new regulatory measures.
Currently, computation is performed using the traditional Monte Carlo simulation on off-the-shelf or readily available computer hardware, which may take several days (depending on the overall complexity of the particular model being used and the simulation parameters provided).
Deutsche Börse confirmed that it has mainly focused on the speedup for up to 1,000 inputs, which could require around 10 years of Monte Carlo simulation.
The results or findings “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.”
This latest experiment then saw the model being executed on IBM’s quantum machine, but hardware limitations allowed for only a relatively smaller version of the model to run. But the specialized hardware needed to perform a complete sensitivity analysis in production should be available in the next few years, the announcement noted.
Deutsche Börse added:
“Quantum hardware providers could and will possibly meet these requirements in the second half of this decade; meaning that a real-life application of quantum computing in risk management could only be a matter of a few years.”
As reported recently, the UK government, via the UK Research and Innovation (UKRI), is planning to invest £153 million, in order to create new products and services that are based on recent advancements in quantum technologies.
Quantum tech is expected to have a major impact on the financial services sector.
This is notably part of a larger investment in the United Kingdom’s National Quantum Technologies Program which is set to provide £1 billion worth of investments over a 10-year period.
Large banking institutions, insurance service providers and regulatory agencies are currently assessing the different opportunities and advising their clients on quantum computers for quantitative finance, asset pricing and effective portfolio management.