Quantum Computing & Finance

Quantum computing is a field of research that allows us to study how algorithms and systems can apply quantum phenomena to derive solutions to complex mathematic problems. It was a field pioneered by Paul Benioff and Richard Feynman in the early 1980's. What makes quantum computers so computationally powerful is its stochasticity, i.e. on its simplest level, they operate with random variables, making them much more robust when trying to efficiently compute large complex systems involving probabilistic variables. The quantum computer relies on storing qubits, the memory elements that hold a linear superposition of the possible combinations of {(0,1)}. This allows it to evaluate and store all feasible solutions (combinations) of 0 and 1 simultaneously.

The characteristics outlined above make quantum computing ideal for solving problems that require parallel processing, the use of more than a single source of computation to execute a program or threads for example. A very useful application of quantum computing in finance is scenario analysis, where the goal is to evaluate a distribution of outcomes under an extremely large number of scenarios. The beauty of quantum computers is that they don't evaluate solutions sequentially like normal computers do, they solve them by assessing the linear combinations of possible solutions (i.e. the 0's and 1's for each qubit) all at the same time. Many current approaches to the problem require far too much time, computing power or are too restrictive in their models.

Quantum computing is no longer a thing of the past. NASA, Google, Lockheed Martin and even Berkeley have obtained their very own quantum computers. The very first company to make these computers is called D-wave systems with their flagship product the D-wave machine (pictured below). These computers are kept in chambers with temperatures below 15 millikelvin. To put that into perspective, it is 180 times colder than interstellar space making it, quite literally, one of the coolest places in the universe. The reason for keeping such low temperatures is so the solution to problems given to it automatically converge to those that require the minimum energy state.

Quantum computers are the future of finance. Many models used in finance today do not map very well onto the real world (requiring a degree of complexity and robustness simple models cannot satisfy). They help us compute solutions to models cognisant of reality's complexity and free us from an over reliance of dumb-downed models and heuristics.

Image References: 

https://static01.nyt.com/images/2013/05/16/technology/16bits-sub-quantum/16bits-sub-quantum-tmagArticle.png