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Financial Modeling Using Quantum Computing

You're reading from   Financial Modeling Using Quantum Computing Design and manage quantum machine learning solutions for financial analysis and decision making

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Product type Paperback
Published in May 2023
Publisher Packt
ISBN-13 9781804618424
Length 292 pages
Edition 1st Edition
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Authors (4):
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Iraitz Montalban Iraitz Montalban
Author Profile Icon Iraitz Montalban
Iraitz Montalban
Anshul Saxena Anshul Saxena
Author Profile Icon Anshul Saxena
Anshul Saxena
Javier Mancilla Javier Mancilla
Author Profile Icon Javier Mancilla
Javier Mancilla
Christophe Pere Christophe Pere
Author Profile Icon Christophe Pere
Christophe Pere
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Toc

Table of Contents (16) Chapters Close

Preface 1. Part 1: Basic Applications of Quantum Computing in Finance
2. Chapter 1: Quantum Computing Paradigm FREE CHAPTER 3. Chapter 2: Quantum Machine Learning Algorithms and Their Ecosystem 4. Chapter 3: Quantum Finance Landscape 5. Part 2: Advanced Applications of Quantum Computing in Finance
6. Chapter 4: Derivative Valuation 7. Chapter 5: Portfolio Management 8. Chapter 6: Credit Risk Analytics 9. Chapter 7: Implementation in Quantum Clouds 10. Part 3: Upcoming Quantum Scenario
11. Chapter 8: Simulators and HPC’s Role in the NISQ Era 12. Chapter 9: NISQ Quantum Hardware Roadmap 13. Chapter 10: Business Implementation 14. Index 15. Other Books You May Enjoy

Quantum algorithm portfolio management implementation

Quantum annealers

Quantum annealers are specialized machines capable of finding the minimum energy solution to a given problem, following the adiabatic principle. We talked about some of these machines in Chapter 2, but we will now cover in detail how they can be used to solve a problem such as portfolio optimization.

Quantum annealers require a target problem, set in its matrix form, to place variables as a mask. In our portfolio example, solutions will be encoded as binary decisions if the asset n will be included in our final portfolio. Therefore, our problem matrix should reflect the effect of including an asset or not in a solution.

For this, often in the literature, it is found that problems need to be placed on their QUBO (or Ising) form. QUBO stands for Quadratic Unconstrained Binary Optimization, which means binary variables are considered (0 or 1), only two-way multiplications are represented (X i ×...

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