Advance Technology and Methods within Finance

I know…. I’m a crazy for talking about The Application of Quantum Computation when we still only have 8 QUBIT computers , still severely challenged by the reverse salient problem of software applications before hardware development, error correction, decoherence, and practical construction issues. But what the hay, the internet creep up on Microsoft quickly and I think anyone serious about advanced computing for finance needs to keep the pulse on this ground breaking development and make sure they stay on top of it. More so this is important to us because we know banks will be the first to invest when these machines start spinning their Quarks in a robust manner.

First, a very quick background: In the early 1980s, renowned physicist Richard Feynman began to investigate the possibility of having a quantum computing machine that could simulate quantum systems as conventional computers simulate classical physical processes. He considered the “representation of binary numbers in relation to the quantum states of two-state quantum systems”. While classical computers of the mid 20th century utilized as their basic unit of information the “bit”, which could represent at any one time either “0″ or “1″, a quantum bit, or “qubit”, would harness the power of quantum mechanics in order to represent “0″, “1″, or a superposition of both. Thus a quantum computer would be able to simulate quantum mechanical processes that classical computers take too long to do or are entirely unable to handle.

Because of its speed and versatility, it seems likely that the search aspect of quantum computers will be one of the more important applications of a quantum computer. By the laws of quantum physics, specifically the Superposition Principle, atoms can be in several different energy states at once. The enormous potential of quantum computing is derived from the fact that this principle could allow for the creation of a computing device able to act on all its possible states simultaneously, carrying out numerous computations in parallel. Quantum computers are able to perform non-classical logic operations and can be used to solve computationally intractable problems that cannot be solved by conventional massively parallel supercomputers.

A classic nonlinear problem is that of the “Traveling Salesman,” which tries to find the shortest route between X number of cities the vendor must visit. As the value of X increases, the problem gets exponentially harder. Finding the best route without testing every possible route against each other, one by one, and assessing results, is the holy grail of information technology. That is the conundrum for quantum computers; the emergence of such a powerful tool comes with relatively few real-world applications. Most people would never see or use a quantum computer. This is not one of those things which will replace all computers. There are already products on the market using quantum mechanics. When they become more powerful the banking space will have endless applications to this new computational paradigm:

• Used to calculate Enterprise Risk Positions intra-day if not real-time
• Used to search massive networks of liquity for Pair trading opportunities
• Massively improve analytics for real-time pricing of exotic products
• Conduct analysis, i.e. Monte Carlo, in 1/1000 of the time frame
• and many more…

So where are we: Teams consisting of scientists and practitioners around the world are succeeded in creating very small quantum computers at the tail end of the 20th century. The first quantum computer consisted of two qubits and was demonstrated by a team of researchers led by Isaac Chuang at the University of California-Berkeley in 1998. Chuang and his colleagues then demonstrated the first three-qubit quantum computer the following year at the IBM-Almaden research facility in Silicon Valley. This one was able to carry out Grover’s database-search algorithm. In 2000 the same people demonstrated order-finding on a five-qubit computer and in 2001 they were able to construct a seven-qubit computer that carried out Shor’s integer-factoring algorithm. The latter of these was built with 1018 molecules, each consisting of the nuclei from five fluorine and two carbon atoms. The molecules interacted with one another as qubits, were “programmed by radio frequency pulses and… detected by nuclear magnetic resonance (NMR) instruments similar to those commonly used in hospitals and chemistry labs” (IBM, 2001). Using Shor’s algorithm, the computer correctly identified 3 and 5 as the factors of the integer 15.

The future of quantum computing is bright and getting near, with applications in many fields and quantum physics modeling on the horizon and further computational work in the distance. There are some notable obstacles as well, including the various forms of error correction and the reverse salient of software development. We have some why to go but the prize is to large to miss the target.

More to come…