The IUP Journal of Computer Sciences
Portfolio Asset Identification Using Graph Algorithms on a Quantum Annealer

Article Details
Pub. Date : Oct, 2019
Product Name : The IUP Journal of Computer Sciences
Product Type : Article
Product Code : IJCS31910
Author Name : Angad Kalra, Faisal Qureshi and Michael Tisi
Availability : YES
Subject/Domain : Management
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No. of Pages : 20

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Abstract

The dual objectives of this paper are to explore how commercially available quantum hardware and algorithms can solve real-world problems in finance, and then compare quantum solutions to their classical counterparts. Specifically, the D-Wave quantum annealing computer (D-Wave 2000Q) is used to address the problem of asset correlation identification for financial portfolio management. Graphical models offer a natural framework to represent asset correlations. Graphs also naturally map the quantum annealing hardware architecture developed by the D-Wave. The paper explores how graph algorithms can be implemented on the D-Wave 2000Q machine to cluster asset correlations in order to identify various financial portfolios. Numerical experiments are conducted using four quantum/classical algorithm pairs on four real-world financial time series datasets spanning 10 years. For the specific algorithms and datasets selected, the quantum solution is competitive with (and sometimes better than) the classical one. However, quantum fails to scale beyond certain levels of data dimensionality. The study focuses on comparison of solution quality not speedup, and the results suggest specific high-potential directions for future research.


Description

While the dream of a universal quantum computer may be many years away, we are beginning to witness the commercial availability of limited scope and noisy quantum offerings—the NISQ machines described by Preskill (2018). One such offering is D-Wave’s quantum annealing-based 2000 qubit machine: the D-Wave 2000Q. The D-Wave approach has garnered both academic skepticism (Boixo et al., 2013; Boixo et al., 2014; and https://www.scottaaronson.com/blog/) and results showing the potential. We do not undertake a general evaluation of the performance of the D-Wave computer.


Keywords

Asset identification, Portfolio management, Quadratic Unconstrained Binary Optimization (QUBO), Ising model, Maximum clique, Maximum independent set, Minimum graph coloring, Structural balance, D-Wave, Quantum annealing

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