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Register a new userTowards Pricing Financial Derivatives with an IBM Quantum Computer
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Pricing interest-rate financial derivatives is a major problem in finance, in which it is crucial to accurately reproduce the time-evolution of interest rates. Several stochastic dynamics have been proposed in the literature to model either the instantaneous interest rate or the instantaneous forward rate. A successful approach to model the latter is the celebrated Heath-Jarrow-Morton framework, in which its dynamics is entirely specified by volatility factors. On its multifactor version, this model considers several noisy components to capture at best the dynamics of several time-maturing forward rates. However, as no general analytical solution is available, there is a trade-off between the number of noisy factors considered and the computational time to perform a numerical simulation. Here, we employ the quantum principal component analysis to reduce the number of noisy factors required to accurately simulate the time evolution of several time-maturing forward rates. The principal components are experimentally estimated with the $5$-qubit IBMQX2 quantum computer for $2times 2$ and $3times 3$ cross-correlation matrices, which are based on historical data for two and three time-maturing forward rates. This manuscript is a first step towards the design of a general quantum algorithm to fully simulate on quantum computers the Heath-Jarrow-Morton model for pricing interest-rate financial derivatives. It shows indeed that practical applications of quantum computers in finance will be achievable in the near future.
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Prediction of financial crashes in a complex financial network is known to be an NP-hard problem, which means that no known algorithm can guarantee to find optimal solutions efficiently. We experimentally explore a novel approach to this problem by using a D-Wave quantum computer, benchmarking its performance for attaining financial equilibrium. To be specific, the equilibrium condition of a nonlinear financial model is embedded into a higher-order unconstrained binary optimization (HUBO) problem, which is then transformed to a spin-$1/2$ Hamiltonian with at most two-qubit interactions. The problem is thus equivalent to finding the ground state of an interacting spin Hamiltonian, which can be approximated with a quantum annealer. The size of the simulation is mainly constrained by the necessity of a large quantity of physical qubits representing a logical qubit with the correct connectivity. Our experiment paves the way to codify this quantitative macroeconomics problem in quantum computers.
Uncovering the origin of the arrow of time remains a fundamental scientific challenge. Within the framework of statistical physics, this problem was inextricably associated with the second law of thermodynamics, which declares that entropy growth proceeds from the systems entanglement with the environment. It remains to be seen, however, whether the irreversibility of time is a fundamental law of nature or whether, on the contrary, it might be circumvented. Here we show that, while in nature the complex conjugation needed for time reversal is exponentially improbable, one can design a quantum algorithm that includes complex conjugation and thus reverses a given quantum state. Using this algorithm on an IBM quantum computer enables us to experimentally demonstrate a backward time dynamics for an electron scattered on a two-level impurity.
We shall study backward stochastic differential equations and we will present a new approach for the existence of the solution. This type of equation appears very often in the valuation of financial derivatives in complete markets. Therefore, the identification of the solution as the unique element in a certain Banach space where a suitably chosen functional attains its minimum becomes interesting for numerical computations.
We simulate the dynamics of braiding Majorana zero modes on an IBM Quantum computer. We find the native quantum gates introduce too much noise to observe braiding. Instead, we use Qiskit Pulse to develop scaled two-qubit quantum gates that better match the unitary time evolution operator and enable us to observe braiding. This work demonstrates that quantum computers can be used for simulation, and highlights the use of pulse-level control for programming quantum computers and constitutes the first experimental evidence of braiding via dynamical Hamiltonian evolution.
We report the first experimental demonstration of quantum synchronization. This is achieved by performing a digital simulation of a single spin-$1$ limit-cycle oscillator on the quantum computers of the IBM Q System. Applying an external signal to the oscillator, we verify typical features of quantum synchronization and demonstrate an interference-based quantum synchronization blockade. Our results show that state-of-the-art noisy intermediate-scale quantum computers are powerful enough to implement realistic dissipative quantum systems. Finally, we discuss limitations of current quantum hardware and define requirements necessary to investigate more complex problems.
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