Inside Quantum Technology

China’s IQIT Implements Typical Collateral Debt Obligation Models Using IBM Qiskit

(AR.Xiv.org) A Chinese team of researchers at Center for Integrated Quantum Information Technologies (IQIT) and University of Science and Technology of China has implemented two typical Collateral Debt Obligation (CDO) models, the single-factor Gaussian copula model and Normal Inverse Gaussian copula model. Quantum computing for finance applications is an emerging field with quickly growing popularity.Thef inance industry involves various numerical and an-alytical tasks,e.g., derivative pricing, credit rating, forex algorithm trading, and portfolio optimization,etc. They all demand heavy quantitative work, and the improved calculation speed and precision would bring significant social value.
Collateral Debt Obligation (CDO) has been one of the most commonly used structured financial products and is intensively studied in quantitative finance.
By applying the conditional independence approach, they have managed to load each model of distribution in quantum circuits. They have applied quantum amplitude estimation as an alternative to Monte Carlo simulation for CDO pricing.
They demonstrated the quantum computation results using IBM Qiskit.
This work addresses a useful task in finance instrument pricing, significantly broadening the application scope for quantum computing in finance.

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