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Forecasting the timeline for quantum advantage and economic viability using option pricing
Carau, Frank Paul, Jr.
Carau, Frank Paul, Jr.
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2024
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The potential for quantum computing to significantly reduce the time necessary to process and analyze data has attracted the attention of major financial institutions. These companies are continually researching ways to accelerate data processing and analysis to react faster to market changes and improve the results of their decisions. Quantum computing holds promise as a “game changer” for several different financial applications such as modeling, risk analysis, portfolio planning and automated trading. However, it is unclear if and/or when a quantum computing advantage will exist over current methods and computers. Estimates for such an advantage range anywhere from 3 to 20+ years in the future. The purpose of this project is to provide guidance on when quantum computing will be economically viable for the finance industry. To focus the research, a specific type of finance application: option pricing, was chosen for analysis. Based on this research, an economically viable quantum computer for option pricing will not be available until 2037 at the earliest, with a more likely timeframe of 2040. Further, the payoff period for investment could take another 3 to 5 years. This paper covers available data for predicted improvements in quantum computing hardware, and improvements in algorithms for option pricing, to forecast when such a computer will be available.
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