Quantum Annealing Algorithm for Expected Shortfall based Dynamic Asset Allocation

Understand

The 2008 mortgage crisis is an example of an extreme event.

• Extreme value theory tries to estimate such tail risks.
• Modern finance practitioners prefer Expected Shortfall based risk metrics (which capture tail risk) over traditional approaches like volatility or even Value-at-Risk.
• This paper provides a quantum annealing algorithm in QUBO form for a dynamic asset allocation problem using expected shortfall constraint.