Page 76 - CMA Journal (Nov-Dec 2024)

T T T

These models are
particularly useful in
developing financial models
and automating trading
strategies, marking a
significant advancement in
financial risk modeling.
Conclusion

Quantum-inspired computing
is revolutionizing financial risk
modeling by delivering
unprecedented speed and
precision in processing complex financial data. By
• Derivative Pricing leveraging techniques such as quantum annealing,
tensor networks, and hybrid quantum-classical
Pricing complex financial derivatives requires algorithms, QIC dramatically enhances traditional
evaluating various market scenarios to estimate methods—cutting down simulation times in Monte
potential risks and returns. Quantum computing for Carlo analyses, optimizing intricate investment
this process often relies on complex quantum portfolios, and enabling real-time credit risk
arithmetic, significantly impacting resource assessments and derivative pricing.
requirements. Quantum Signal Processing (QSP)
mitigates this challenge by encoding payoffs directly These advancements are not merely theoretical;
practical applications have shown significant
into quantum amplitudes, reducing T-gates by 16
improvements in computational efficiency and risk
times, logical qubits by 4 times, and the logical clock
rate by 5 times. prediction accuracy. With industry giants like IBM and
Google Cloud already integrating quantum-inspired
Beyond risk evaluation, these methods can improve systems into their financial models, the technology is
portfolio optimization, option pricing, and financial proving its potential to redefine market analysis and
modeling. Furthermore, quantum algorithms decision-making processes.
enhance risk assessment by computing Value at Risk
(VaR) and Conditional Value at Risk (CVaR) for financial As financial institutions face ever-growing market
complexities and regulatory demands, the adoption
derivatives, lowering the logical clock rate for
derivative pricing by up to 30 times. of quantum-inspired computing will be crucial for
achieving more robust, agile, and accurate risk
Industry Adoption management, ultimately fostering a more resilient
and competitive financial landscape.
• IBM's Quantum Initiatives: IBM has
over 250 clients utilizing its
quantum systems, including
financial institutions like Wells
Fargo, aiming to enhance artificial
intelligence applications and
improve financial modeling
processes.
• Google Cloud and SandboxAQ
Collaboration: Google Cloud has
integrated SandboxAQ's large
quantitative models into its
platform, enabling enterprises to
handle large-scale numerical

datasets and complex calculations.

74 ICMA’s Chartered Management Accountant, Jan-Feb 2025 BACK TO CONTENTS PAGE