Research from U.S. global banker Goldman Sachs and Silicon Valley quantum computer startup QC Ware indicates that the advanced integration of quantum algorithms could be utilized within five years, the Financial Times reported.
Earlier than anticipated, financial markets could start using quantum computing for some of the most complex calculations, per the report. Research into using quantum machines to price complex derivatives — a costly, computing-intensive task for banks — pointed to near-term breakthroughs.
The calculations rely on Monte Carlo simulations, a probability model used to evaluate risk and simulate prices for a variety of financial instruments. The new research means that financial institutions could quote prices by phone to customers looking to trade complex derivatives, instead of waiting for the calculations via today’s computing software.
“There’s a very large computing bill we pay each year to price those derivatives and run risk on them,” Paul Burchard, head of research, Goldman Research and Development, told FT.
The new research comes at a time when quantum research is being eyed by banks and other companies as a way to get practical results without having to wait for the implementation of “imperfect quantum computers.”
The quantum algorithms designed by Goldman Sachs and QC Ware researchers outperform state-of-the-art classical algorithms for Monte Carlo simulations, according to FT, which is expected to be compatible with quantum hardware “available in 5 to 10 years.”
Research Goldman conducted in 2020 with IBM showed that a quantum computer with about 7,500 quantum bits — or qubits — would be needed to run a full Monte Carlo simulation. Because qubits maintain their quantum state only for a short time, the systems are laden with errors.
Goldman’s most recent research with QC Ware is examining ways to quickly run a simulation before errors can take hold, according to FT. The research — first presented at the Q2B 2020 conference — is now before peer review.
FinTech Ally teamed up with Microsoft earlier this month to advance quantum computing’s role in the financial services sector. The two firms are planning to leverage the latest research on quantum-inspired algorithms to better understand how the technology can be used to facilitate business operations.
Quantum Computing’s value for financial services has been boosted by joint efforts between the private sector and the U.S. Department of Energy (DOE). The DOE in August 2020 earmarked $625 million over the next five years to develop research centers devoted to artificial intelligence (AI) and quantum computing.