JPMorgan Chase, Citigroup and Goldman Sachs have upped their research into quantum computing. Recent breakthroughs in the field and the end of Moore’s Law in traditional computing has led many to believe that a new computing era is about to begin. In a world where faster means more opportunities to increase performance, Quantum Technology could revolutionise the industry.
A senior researcher at Goldman Sachs stated the banks increase in its research effort. Putting this down to hardware advances that suggest the technology is on the verge of a breakthrough. More importantly, he mentions the “possibility this becomes a critical technology.” This is the thought process behind many businesses effort to build a quantum computer including the algorithms and software to fully utilise it.
William Hartnett, managing director at Citi, realises the power of this new technology is ground-breaking in risk management and trading and went on to say “banks need to start learning how to harness it now.”
The main focus is aimed the Monte Carlo Simulations. A Monte Carlo Simulation is a prediction and forecasting tool where multiple outcomes are simulated with varying random variables. On a standard supercomputer, the algorithms are well known and documented. However, a quantum computer requires new algorithms.
A traditional supercomputer has a strict logic path it obeys when calculating the outcomes, whereas a quantum computer can compute multiple outcomes at once and select the most desirable outcome.
In terms of the finance industry, banks carry out these complex calculations to assess their overall risk positions and option pricing.
“Together, these calculations account for the bulk of the computing power currently used by JPMorgan Chase”, said Ning Shen, managing director of quantum research.
The hope that instead of overnight calculations for risk assessment, they will be completed instantly. The advantage being that real time quotes grant opportunities in a larger market.
Mr Shen added: “If you can recalibrate your models fast, you can give better execution to clients.” The same technology could also make it possible to optimise the investment portfolios of wealthy clients on a case-by-case basis, he said.
Quantum computing is far from the only technological advancement that could shake up the industry. AI can analyse huge amounts of data quicker than humanly possible making it efficient at spotting anomalies or opportunities.
Modelomni has been quicker in spotting the potential of Artificial Intelligence and developing highly sophisticated models. The fact remains larger Wall Street Companies struggle to adapt to newer technologies and do it fast, while the more dynamic and disruptive Tech start-ups are more agile and flexible and less burdened by hierarchy.
XTX employs no human traders while Ken Griffith’s, Citadel Securities has spent the last 4 years focusing on technology to challenge Wall Street Market Makers. Both viewed as huge success with technology the key factor.
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