Benchmarking the performance of portfolio optimization with QAOA

We present a detailed study of portfolio optimization using different versions of the quantum approximate optimization algorithm (QAOA). For a given list of assets, the portfolio optimization problem is formulated as quadratic binary optimization constrained on the number of assets contained in the portfolio. QAOA has been suggested as a possible candidate for solving this problem (and similar combinatorial optimization problems) more efficiently than classical computers in the case of a sufficiently large number of assets. However, the practical implementation of this algorithm requires a careful consideration of several technical issues, not all of which are discussed in the present literature. The present article intends to fill this gap and thereby provide the reader with a useful guide for applying QAOA to the portfolio optimization problem (and similar problems). In particular, we will discuss several possible choices of the variational form and of different classical algorithms for finding the corresponding optimized parameters. Viewing at the application of QAOA on error-prone NISQ hardware, we also analyze the influence of statistical sampling errors (due to a finite number of shots) and gate and readout errors (due to imperfect quantum hardware). Finally, we define a criterion for distinguishing between "easy" and "hard" instances of the portfolio optimization problemComment: 28 pages, 8 figure

Quantum Portfolios

Quantum computation holds promise for the solution of many intractable problems. However, since many quantum algorithms are stochastic in nature they can only find the solution of hard problems probabilistically. Thus the efficiency of the algorithms has to be characterized both by the expected time to completion {\it and} the associated variance. In order to minimize both the running time and its uncertainty, we show that portfolios of quantum algorithms analogous to those of finance can outperform single algorithms when applied to the NP-complete problems such as 3-SAT.Comment: revision includes additional data and corrects minor typo

Portfolio Optimization with Digitized-Counterdiabatic Quantum Algorithms

We consider digitized-counterdiabatic quantum computing as an advanced paradigm to approach quantum advantage for industrial applications in the NISQ era. We apply this concept to investigate a discrete mean-variance portfolio optimization problem, showing its usefulness in a key finance application. Our analysis shows a drastic improvement in the success probabilities of the resulting digital quantum algorithm when approximate counterdiabatic techniques are introduced. Along these lines, we discuss the enhanced performance of our methods over variational quantum algorithms like QAOA and DC-QAOA.Comment: 8 pages, 4 figure

Solving the Optimal Trading Trajectory Problem Using a Quantum Annealer

We solve a multi-period portfolio optimization problem using D-Wave Systems' quantum annealer. We derive a formulation of the problem, discuss several possible integer encoding schemes, and present numerical examples that show high success rates. The formulation incorporates transaction costs (including permanent and temporary market impact), and, significantly, the solution does not require the inversion of a covariance matrix. The discrete multi-period portfolio optimization problem we solve is significantly harder than the continuous variable problem. We present insight into how results may be improved using suitable software enhancements, and why current quantum annealing technology limits the size of problem that can be successfully solved today. The formulation presented is specifically designed to be scalable, with the expectation that as quantum annealing technology improves, larger problems will be solvable using the same techniques.Comment: 7 pages; expanded and update