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Quantum algorithms for financial risk analysis with regime switching

Published on:

1 November 2023

Primary Category:

Quantum Physics

Paper Authors:

Eric Ghysels,

Jack Morgan,

Hamed Mohammadbagherpoor

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Key Details

Proposes quantum algorithms for credit risk and derivative pricing with regime switching

Models feature a Markov chain driving different volatility regimes

Regime switching enables tractability on near-term quantum hardware

Demonstrates quadratic speedups over classical Monte Carlo methods

Implements and tests algorithms on real quantum processors

AI generated summary

Quantum algorithms for financial risk analysis with regime switching

This paper introduces quantum computing algorithms suited for financial risk analysis in realistic market conditions. It focuses on models with regime switching determined by a Markov chain, which provide tractability on near-term quantum hardware. Algorithms are presented for credit risk and derivative pricing, demonstrating quadratic speedups. The practical viability is shown through experiments on real quantum processors.

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