IBM & JP Morgan Research & Envision “Option Pricing Using Quantum Computers”
(Paypers.com) IBM Research scientist Dr. Stefan Woerner and JPMorgan recently published a paper entitled Option Pricing Using Quantum Computers.
Due to the variety and complexity of existing option contracts, their performance and prices are most of the time analysed using Monte Carlo simulations. Although Monte Carlo simulations are generic, they require large numbers of samples to achieve a reasonable accuracy – sometimes on the order of millions of samples, which can take hours or even days – leading to extensive computational costs and preventing fast decision making.
Quantum computing, because of its unique exponential compute properties that operate in a completely different way from today’s classical computers, may help significantly increase the efficiency of these calculations by achieving a quadratic speed-up over classical Monte Carlo simulations.
Dr. Woerner and scientists at JPMorgan Chase developed a generic approach to map option contracts to quantum circuits. The algorithms use today’s small, noisy quantum computers to conceptually demonstrate a speed-up for pricing and analysis of the performance of a simple option. This speed-up may allow financial institutions to significantly reduce computation times and cost and increase the number of what-if scenarios and sensitivities that can be analyzed in a given time once large enough quantum hardware becomes available.