Quantum computing “ideal for portfolio optimisation”

By Michael McCaw | 28 August 2018

Although the technology is in its infancy, financial services are now experimenting with use cases for quantum computers. While the systems are expensive, few and far between, and much of the technology is still at experimental phase, organisations in financial markets are finding ways of getting ahead of the competition.

“A lot of organisations in financial services now are experimenting with ways to use quantum computing, which is encouraging,” says Ian Bradbury, CTO of financial services at Fujitsu. “And it’s not an ivory tower-based approach, they’re experimenting directly – which is of course a better way of doing things as well.”

The technology is widely anticipated to have implications on everything from high frequency trading to fraud detection, the advancement of crypto markets, payments and cyber security. Over the course of the past two years, technology giants IBM and Google have offered experimental systems – with more than 80,000 developers having tested in the former’s rudimentary quantum environment since launch.

But Bradbury, whose team has developed the Fujitsu Digital Annealer – which is based on quantum logic and helps solve large-scale combinatorial optimisation problems – has identified portfolio optimisation as a key beneficiary from quantum developments. And it’s at fairly advanced stages.

Bradbury cites an example of an organisation with a portfolio of high quality liquid assets available for emergency situations. The portfolio is overprovisioned from a risk perspective and is not proactively managed. Previously, it might have taken the firm three to four weeks to assess a move to reoptimize, but with quantum computing, the portfolio can be assessed in less than a second.

Another example, says Bradbury is where a major organisation has a large cash portfolio with a lot of cash moving around a system and there’s a large ATM network but the firm must also hold a significant amount in bonds for risk management purposes.   

“Knowing where they have the cash in the network at any one time can be optimised,” he says. “So we’re looking at the Fujitsu Digital Annealer, to help them identify where that money should be at any one time to deliver these optimum benefits.

“It’s a bit like portfolio optimisation but it’s also about how we move the money around, the challenges with the time table of moving them around, can you move it around and asking questions like how long is it going to take to move a cash in transit? That’s the type of detail we’re able to get into. It’s real cash optimisation.”

According to a report by BCC Research released in early August the global quantum computing market will be worth $161m by 2022, and $1.3bn by 2027.  

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