Quantum Computing will have a Positive Impact on Portfolio Optimization, Risk Analysis, Asset Pricing, and Trading Strategies

February 26 18:14 2020
Quantum Computing will have a Positive Impact on Portfolio Optimization, Risk Analysis, Asset Pricing, and Trading Strategies

Deltec Bank
Quantum Computing – Deltec Bank

Quantum computing is a nascent field that offers banks more assistance in the areas of risk assessment, asset growth, and customer customization.

This technology uses the laws of quantum mechanics to complete complicated data operations. Traditional computers use bits, the binary ones, and zeros, to create calculations. Quantum computing can be read as both, providing an exponential level of new power because it establishes shortcuts through the computing process.

It may be several years before we understand the entire impact of how this technology can impact banking applications. Recent case studies suggest that it could create massive changes with many positive implications for consumers.

How Banks Use Quantum Computing Today

Banks interested in quantum computing receive direct, cloud-based access to the technology via using technologies like IBM Q systems. Although this approach does not provide immediate banking benefits yet, it is possible to perform corporate experiments on this platform.

According to Deltec Bank, Bahamas – “Exploration of how quantum computing can have positive impacts on portfolio optimization, risk analysis, asset pricing, and trading strategies is just the tip of the iceberg of what this technology could provide.” Although mapping the traditional tasks to this new system is a laborious task, the automation, and in-depth machine learning options provide a lot of potentials.

It is too early to tell what the eventual outcome will be, but many banks believe that quantum computers can provide exponentially more power for solving specific problems that require sophisticated algorithms. That means it will become easier to predict how a portfolio performs under varying circumstances without the need for trial-and-error solutions.

Concerns to Manage with Quantum Computing in Banking

The idea of quantum computing is attractive to the banking industry because faster computations translate into better, speedier decisions. Those outcomes increase the likelihood that profits are obtainable.

In an environment that is rich in datasets, those who can process information with the highest quality and speed will see the most success.

That means an increase in security risks occurs when using quantum computing technologies. The same processing power that makes this option such an attractive investment for the banking industry can also unlock numerous secrets. It could get used for accessing personal healthcare records, financial histories, and even classified intelligence.

The power of a quantum computer is so robust that it could eliminate the effectiveness of our most sophisticated encryption systems before 2030.

Banks also face the same challenges as any other industry when using this technology. Decoherence is an issue that has held this technology back for over 30 years. Vibrations, electromagnetic waves, temperature fluctuations, and outside environment interactions all destroy the exotic properties of the quantum computer.

The benefits are still worth the investment. The equivalent qubit number on a traditional computer or smartphone is only 50 qubits. Imagine what the banking industry could accomplish when its infrastructure uses devices that can provide 100 times that power, and that could open doors that we haven’t even thought about yet.

Quantum computing has the potential to eliminate the obstacles that currently limit the power of legacy systems. It could solve problems in seconds that would take traditional computers years to figure out. That is why this technology will one day transform how we view banking – and every other industry.

Disclaimer:  The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.

About Deltec Bank

Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.

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Company Name: Deltec International Group
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Country: Bahamas
Website: https://www.deltecbank.com/