While we generally associate the term “quantum” with science, the applications of quantum computing go beyond. Some of the fields where we use quantum computing include finance, machine learning, cryptography, computational biology and logistics.
In this article, we’ll be learning how quantum computing relates to and is applied in finance.
How is Quantum Computing Useful in Finance?
To put it in the simplest understandable terms, quantum computing refers to solving really complex problems at a higher level. These problems require hard-core and time consuming mathematics that leave alone a human brain, even a regular computer cannot solve in a day.
So, in order to solve such problems, you need a quantum computer – one that can make complicated calculations within seconds.
Now, in the world of finance, where you’re handling a lot of money, certain calculations have to be very accurate. In other words, there are several financial problems that are very complex in nature and do require very specific solutions in a short span of time.
Areas of Finance Where We Use Quantum Computing
Quantum computing has helped financial institutions and advisors gain plenty of insights that has helped them provide better solutions. The following applications might help you understand how it has proved to be useful:
In the field of finance, an option is an instrument you can trade in. You buy it at a certain price and later sell it for a higher one. Quantum computing is mostly used for option pricing, where you really need to know the probability of exercising the option. When you use this method, you practically accelerate the traditional Monte Carlo technique and gain more accurate results in a shorter span of time.
Minimizing Cost of Financial Trading
The stock market isn’t an easy place even for a professional. The money you make here totally depends on your market predictions. This involves making investments on time and then withdrawing it back on time too. To solve this problem, using the quantum annealer by D Wave proves to give better results than the classical method.
Solving Financial Regression Algorithms
Regression is a method of analysis that is used in many fields in finance such as measuring financial risk or forecasting revenues and expenses. Using quantum computers to solve them can speed up the process multi-fold.
What Potential Does Quantum Computing Hold in This Field?
To sum it up, quantum computing provides accurate solutions that can minimize financial risks and optimize portfolios. However, its potential lies way beyond and can be used in several other fields.
Given the speed and accuracy with which it can solve complex algorithms, it may be used in another field of finance – cryptocurrency. Given how complex the algorithms are here, miners might be able to solve them at a much greater speed using this technology. However, that may sound more as a threat to crypto investors than a blessing.
Given that many financial calculations are based on speculations, do you think an increase in the use of quantum computing may create drastic changes in the financial market?