Forecasting financial crashes with quantum computing

Understand

A key problem in financial mathematics is the forecasting of financial crashes: if we perturb asset prices, will financial institutions fail on a massive scale? This was recently shown to be a computationally intractable (NP-hard) problem.

• Financial crashes are inherently difficult to predict, even for a regulator which has complete information about the financial system.
• In this paper we show how this problem can be handled by quantum annealers.
• More specifically, we map the equilibrium condition of a toy-model financial network to the ground-state problem of a spin-1/2 quantum Hamiltonian with 2-body interactions, i.e., a quadratic unconstrained binary optimization (QUBO) problem.