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Quant finance and quantum computing - a match made in heaven?

Mark Jackson, Scientific Lead of Business Development, Cambridge Quantum Computing gives an overview of how quant finance and quantum computers will work together as the technology develops. 

Finance was revolutionised in the 1960s by the introduction of digital computers. Financial transactions could be performed in an instant of a second, and from any location. As computational power grew, so too did the ability to rapidly anticipate profitable transactions - and the field of quantitative finance was born.

We are now experiencing a computational revolution which will make the digital era seem primitive. Quantum computing is not simply a faster type of computer, it is based on completely different computational mechanism. Rather than expressing information as bits, which are simply 1 or 0, quantum computers utilise “quantum bits” or “qubits” which may be simultaneously 1 and 0. This allows some problems to be solved incomparably faster than a digital computer ever could, with major implications to the quantitative finance field. Here I will briefly summarise only two.

Quantum Machine Learning

Machine Learning can become an indispensable tool for financial services, aggregating large amounts of data to identify predictive patterns. While algorithms will continue to evolve, all such “classical” approaches are based on probabilities. Quantum computers, on the other hand, utilise amplitudes which contain a direction as well as magnitude. The importance of a direction is that amplitudes may add together or cancel each other out, depending on their relative direction. This allows for much more sophisticated decision-making, making them ideal for innovative new methods of rapid evaluation.

Encryption

Your ability to send sensitive or confidential information - whether bank account numbers or a market prediction - is due to complex mathematical procedures being used to first encrypt the data before transmission. Many of these encryption procedures can be quickly undone using a sufficiently powerful quantum computer, allowing them to eavesdrop or even edit your transmitted information, destroying any semblance of online privacy. Fortunately, there now exist “post-quantum encryption” methods which patch this vulnerability, and which can be implemented immediately.

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