The prediction of financial crashes in a complex financial network is known to be an NP-hard problem, which means that no known algorithm can efficiently find optimal solutions. We experimentally explore a novel approach to this problem by using a D-Wave quantum annealer, benchmarking its performance for attaining a financial equilibrium. To be specific, the equilibrium condition of a nonlinear financial model is embedded into a higher-order unconstrained binary optimization (HUBO) problem, which is then transformed into a spin-1/2 Hamiltonian with at most, two-qubit interactions. The problem is thus equivalent to finding the ground state of an interacting spin Hamiltonian, which can be approximated with a quantum annealer. The size of the simulation is mainly constrained by the necessity of a large number of physical qubits representing a logical qubit with the correct connectivity. Our experiment paves the way for the codification of this quantitative macroeconomics problem in quantum annealers.
The prediction of financial crashes in a complex financial network is known to be an NP-hard problem, which means that no known algorithm can efficiently find optimal solutions. We experimentally explore a novel approach to this problem by using a D-Wave quantum annealer, benchmarking its performance for attaining a financial equilibrium. To be specific, the equilibrium condition of a nonlinear financial model is embedded into a higher-order unconstrained binary optimization (HUBO) problem, which is then transformed into a spin-1/2 Hamiltonian with at most, two-qubit interactions. The problem is thus equivalent to finding the ground state of an interacting spin Hamiltonian, which can be approximated with a quantum annealer. The size of the simulation is mainly constrained by the necessity of a large number of physical qubits representing a logical qubit with the correct connectivity. Our experiment paves the way for the codification of this quantitative macroeconomics problem in quantum annealers.
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 Rapid Communication, 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 two-body interactions, i.e., a quadratic unconstrained binary optimization problem. The equilibrium market values of institutions after a sudden shock to the network can then be calculated via adiabatic quantum computation and, more generically, by quantum annealers. Our procedure could be implemented on near-term quantum processors, thus providing a potentially more efficient way to assess financial equilibrium and predict financial crashes.
Abstract Quantum annealing is a type of analog computation that aims to use quantum mechanical fluctuations in search of optimal solutions of QUBO (quadratic unconstrained binary optimization) or, equivalently, Ising problems. Since NP-hard problems can in general be mapped to Ising and QUBO formulations, the quantum annealing paradigm has the potential to help solve various NP-hard problems. Current quantum annealers, such as those manufactured by D-Wave Systems, Inc. have various practical limitations including the size (number of qubits) of the problem that can be solved, the qubit connectivity, and error due to the environment or system calibration, which can reduce the quality of the solutions. Typically, for an arbitrary problem instance, the corresponding QUBO (or Ising) structure will not natively embed onto the available qubit architecture on the quantum chip. Thus, in these cases, a minor embedding of the problem structure onto the device is necessary. However, minor embeddings on these devices do not always make use of the full sparse chip hardware graph, and a large portion of the available qubits stay unused during quantum annealing. In this work, we embed a disjoint random QUBO on the unused parts of the chip alongside the QUBO to be solved, which acts as an indicator of the solution quality of the device over time. Using experiments on three different D-Wave quantum annealers, we demonstrate that (i) long term trends in solution quality exist on the D-Wave device, and (ii) the unused qubits can be used to measure the current level of noise of the quantum system.
Abstract Quantum computers have strict requirements for the problems that they can efficiently solve. One of the principal limiting factor for the performances of noisy intermediate-scale quantum (NISQ) devices is the number of qubits required by the running algorithm. Several combinatorial optimization problems can be solved with NISQ devices once that a corresponding quadratic unconstrained binary optimization (QUBO) form is derived. Numerous techniques have been proposed to achieve such reformulations and, depending on the method chosen, the number of binary variables required, and therefore of qubits, can vary considerably. The aim of this work is to drastically reduce the variables needed for these QUBO reformulations in order to unlock the possibility to efficiently obtain optimal solutions for a class of optimization problems with NISQ devices. This goal is achieved by introducing novel tools that allow an efficient use of slack variables, even for problems with non-linear constraints, without the need to approximate the starting problem. We divide our new techniques in two independent parts, called the iterative quadratic polynomial and the master-satellite methods. Hence, we show how to apply our techniques in case of an NP-hard optimization problem inspired by a real-world financial scenario called Max-Profit Balance Settlement . We follow by submitting several instances of this problem to two D-wave quantum annealers, comparing the performances of our novel approach with the standard methods used in these scenarios. Moreover, this study allows to appreciate several performance differences between the D-wave Advantage and next-generation Advantage2 quantum annealers. We show that the adoption of our techniques in this context allows to obtain QUBO formulations with significantly fewer slack variables, i.e. around 90% less, and D-wave annealers provide considerably higher correct solution rates, which moreover do not decrease with the input size as fast as when adopting standard techniques.
The D-Wave quantum annealers make it possible to obtain high quality solutions of NP-hard problems by mapping a problem in a QUBO (quadratic unconstrained binary optimization) or Ising form to the physical qubit connectivity structure on the D-Wave chip. However, the latter is restricted in that only a fraction of all pairwise couplers between physical qubits exists. Modeling the connectivity structure of a given problem instance thus necessitates the computation of a minor embedding of the variables in the problem specification onto the logical qubits, which consist of several physical qubits "chained" together to act as a logical one. After annealing, it is however not guaranteed that all chained qubits get the same value (-1 or +1 for an Ising model, and 0 or 1 for a QUBO), and several approaches exist to assign a final value to each logical qubit (a process called "unembedding"). In this work, we present tailored unembedding techniques for four important NP-hard problems: the Maximum Clique, Maximum Cut, Minimum Vertex Cover, and Graph Partitioning problems. Our techniques are simple and yet make use of structural properties of the problem being solved. Using Erdös-Rényi random graphs as inputs, we compare our unembedding techniques to three popular ones (majority vote, random weighting, and minimize energy). We demonstrate that our proposed algorithms outperform the currently available ones in that they yield solutions of better quality, while being computationally equally efficient.
Quantum annealing has emerged as a promising computational paradigm for solving large-scale combinatorial optimization problems that are intractable for classical algorithms. Financial portfolio optimization, which involves balancing expected returns against risk under multiple practical constraints, represents one of the most challenging optimization tasks in quantitative finance. Traditional approaches based on mean-variance theory, heuristic meta-optimization, and classical quadratic programming often struggle to scale efficiently as the dimensionality of assets and constraints increases. This study explores the application of quantum annealing techniques to financial portfolio optimization by formulating the problem as a quadratic unconstrained binary optimization model suitable for quantum hardware. The paper provides a systematic mapping of portfolio objectives and constraints into the Ising Hamiltonian framework and analyzes how quantum tunneling and probabilistic state transitions can enhance convergence toward near-global optima. Comparative insights between classical solvers and quantum annealing-based approaches are discussed in terms of solution quality, computational efficiency, and scalability. Furthermore, the study highlights current hardware limitations, embedding challenges, and noise effects that influence optimization performance. The findings indicate that quantum annealing offers substantial potential for accelerating portfolio optimization in high-dimensional financial systems, particularly in scenarios involving complex constraints and dynamic market conditions, thereby establishing a foundation for future quantum-driven financial decision-support systems.
Abstract Quantum annealing has the potential to find low energy solutions of NP-hard problems that can be expressed as quadratic unconstrained binary optimization problems. However, the hardware of the quantum annealer manufactured by D-Wave Systems, which we consider in this work, is sparsely connected and moderately sized (on the order of thousands of qubits), thus necessitating a minor-embedding of a logical problem onto the physical qubit hardware. The combination of relatively small hardware sizes and the necessity of a minor-embedding can mean that solving large optimization problems is not possible on current quantum annealers. In this research, we show that a hybrid approach combining parallel quantum annealing with graph decomposition allows one to solve larger optimization problem accurately. We apply the approach to the Maximum Clique problem on graphs with up to 120 nodes and 6395 edges.