In the rapidly evolving landscape of finance, staying ahead of the competition often hinges on the ability to process vast amounts of data and make complex calculations swiftly and accurately. Traditional computing systems, while powerful, face limitations when it comes to handling the intricacies of financial modeling, risk assessment, and optimization. This is where hybrid quantum computing emerges as a game-changer, promising faster and more efficient solutions to complex financial problems.
Terra Quantum, a leading quantum computing company, has recently partnered with HBSC to explore the possible benefits of hybrid quantum computing for finance. Their collaboration hopes to demonstrate the applications of hybrid quantum computing for optimization problems.
Using A Hybrid Platform
Quantum computing harnesses the principles of quantum mechanics to perform calculations beyond the reach of classical computers. Unlike classical bits that can be either 0 or 1, quantum bits or qubits can exist in multiple states simultaneously, thanks to a phenomenon known as superposition. Additionally, qubits can be entangled, meaning the state of one qubit is intrinsically linked to another, regardless of the physical distance between them. These properties enable quantum computers to tackle complex problems exponentially faster than their classical counterparts.
However, many companies, like Terra Quantum, utilize a hybrid platform combining classical and quantum computing. In this approach, quantum processors handle the most computationally intensive parts of a problem, while classical processors manage the remaining tasks. This division of labor allows quantum computers to accelerate calculations that would otherwise take classical computers an impractical amount of time.
A Challenge for Finance
Financial institutions face many challenges, including risk assessment, portfolio optimization, fraud detection, and complex derivative pricing. These problems often involve vast datasets and intricate mathematical models, making them time-consuming for classical computers to solve. Furthermore, as financial markets become more interconnected and volatile, the need for real-time decision-making has never been more critical. Traditional computing systems cannot deliver timely and precise solutions to these challenges.
The Terra Quantum and HBSC Partnership
Now with this new partnership between Terra Quantum and HBSC, a further exploration of hybrid quantum computing for finance can take place. “This collaboration shows that quantum computing can address significant business challenges. HSBC, as well as our other partners, recognize that our quantum technology is cutting edge and can be tailored for specific needs, efficiently. For us, this engagement represents an opportunity to support HSBC develop a commercial advantage in a crucial operational area and to expand our solution set to address other high-dimensional problems. We will use this collaboration to learn more about how quantum algorithms can solve complex challenges in financial services,” said Markus Pflitsch, Founder and CEO at Terra Quantum, in an interview with Inside Quantum Technology.
One specific place that Terra Quantum hopes to probe is collateral optimization. According to the company’s recent press release: “Collateral optimization is the process of efficiently allocating and managing collateral assets to meet regulatory requirements while minimizing costs. It utilizes mathematical and algorithmic strategies to balance risks, liquidity, and profitability. Existing methods for collateral optimization primarily rely on linear optimization solvers, which can sometimes falter when confronted with higher complexities.”
The partnership between these two companies not only highlights the interactions between quantum computing and finance but showcases the expansion of the overall quantum ecosystem as it moves into more industries and applications.
Kenna Hughes-Castleberry is a staff writer at Inside Quantum Technology and the Science Communicator at JILA (a partnership between the University of Colorado Boulder and NIST). Her writing beats include deep tech, quantum computing, and AI. Her work has been featured in Scientific American, New Scientist, Discover Magazine, Ars Technica, and more.