Portfolio Asset Identification Using Graph Algorithms on a Quantum Annealer

18 Pages Posted: 4 Mar 2019

See all articles by Angad Kalra

Angad Kalra

University of Toronto

Faisal Qureshi

University of Toronto; Capital Methods

Michael Tisi

University of Toronto - The Edward S. Rogers Sr. Department of Electrical and Computer Engineering

Multiple version iconThere are 2 versions of this paper

Date Written: December 2, 2018

Abstract

Our dual objectives are to explore how commercially available quantum hardware and algorithms can solve real world problems in finance, and then to compare quantum solutions to their classical counterparts. Specifically, we use the D-Wave quantum annealing computer (D-Wave 2000Q) to address the problem of asset correlation identification for financial portfolio management. Graphical models over a natural framework to represent asset correlations. Graphs also naturally map to the quantum annealing hardware architecture developed by D-Wave. We explore 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 data sets 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. Our study focuses on comparison of solution quality not speedup. Our results suggest specific high-potential directions for future research.

Suggested Citation

Kalra, Angad and Qureshi, Faisal and Tisi, Michael, Portfolio Asset Identification Using Graph Algorithms on a Quantum Annealer (December 2, 2018). Available at SSRN: https://ssrn.com/abstract=3333537 or http://dx.doi.org/10.2139/ssrn.3333537

Angad Kalra

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

Faisal Qureshi (Contact Author)

University of Toronto ( email )

Sandford Fleming Building
King’s College Road, Room 3302
Toronto, Ontario M5S 3G4
Canada

Capital Methods ( email )

1 Yonge Street
Suite 1905
Toronto, Ontario M5E1W7
Canada
+14168213950 (Phone)

Michael Tisi

University of Toronto - The Edward S. Rogers Sr. Department of Electrical and Computer Engineering ( email )

10 King’s College Road
Toronto, M5S 3G4
Canada

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