Application of Quantum Computers in Foreign Exchange Reserves Management

TL;DR

This paper explores potential future uses of quantum computers in foreign exchange reserves management, demonstrating capabilities through risk measurement and portfolio optimization on cloud-based quantum platforms.

Contribution

It introduces quantum computing applications in FX reserves management and demonstrates their potential through practical examples on IBM Quantum.

Findings

Quantum Monte Carlo used for risk measurement

Quantum algorithms applied to portfolio optimization

Future potential of quantum computing in finance

Abstract

The main purpose of this article is to evaluate possible applications of quantum computers in foreign exchange reserves management. The capabilities of quantum computers are demonstrated by means of risk measurement using the quantum Monte Carlo method and portfolio optimization using a linear equations system solver (the Harrow-Hassidim-Lloyd algorithm) and quadratic unconstrained binary optimization (the quantum approximate optimization algorithm). All demonstrations are carried out on the cloud-based IBM Quantum(TM) platform. Despite the fact that real-world applications are impossible under the current state of development of quantum computers, it is proven that in principle it will be possible to apply such computers in FX reserves management in the future. In addition, the article serves as an introduction to quantum computing for the staff of central banks and financial market supervisory authorities.