Pricing financial options for an asset is a tricky job, especially if the option is an “exotic” option that contains multiple assets and can be auto-invoked. The current method used by most financial companies is computationally intensive Monte Carlo Simulation. Quantum Earth have worked with Circanic Capital to generate a better option pricing algorithm that is based on a tensor network. The nice thing about tensor network algorithms is that they can initially be implemented on classical computing hardware including GPUs, which some call a quantum-inspired approach. Terra Quantum points out that their experience with this project has shown a 75% speedup over more traditional methods while still using the same classic computing hardware.
But when more powerful quantum computers become available, these algorithms can be ported to real quantum computers for added speed. It’s estimated that there are around $1 trillion worth of exotic options in circulation so algorithmic improvements to how they are priced could be invaluable to financial firms. The financial sector may be one of the first areas where quantum computing can be used for commercial gain as even small improvements can yield significant benefits due to the large volume of financial transactions that occur every day.
Terra Quantum has posted a news release on their website with additional information about this project for you to view Here.
July 7, 2023