Quantum computing is mostly spoken about in fields like computer security, biological modelling, weather modelling etc. These kind of systems have large amounts of variables and need to do billions of computations to arrive at the final answer. Now some researchers may have found uses of quantum computing in derivatives pricing.
Derivatives pricing is required to value investment portfolios and to understand how the value will change based on underlying price changes. Generally these tests are done at the end of the business day as they take a few hours to process.
The group which includes researchers from Goldman Sachs, IBM and University of Maryland have found the resource requirements for derivatives pricing using quantum computing. Their new model will solve the computations that ran for hours within 1 second using a quantum computer.
The researchers do note that there is a long way to go before this becomes a reality. Quantum computers are still in their infancy. Google announced in 2019 that they can now compute a problem on a quantum computer in 200 seconds, which would take 10,000 years on a super computer. This was the first time a quantum computer was advanced enough to handle a problem complex enough that a super computer cannot solve. The computers mentioned in the research may take a few years more to become a reality.
More info at:
- A threshold for quantum advantage in derivatives pricing – https://arxiv.org/pdf/2012.03819.pdf
- Demonstrating quantum supremacy – https://www.youtube.com/watch?v=-ZNEzzDcllU
