Variational Quantum Eigensolver for Real-World Finance: Scalable Solutions for Dynamic Portfolio Optimization Problems

TL;DR

This paper develops a scalable, hardware-aware quantum algorithm for large-scale portfolio optimization, demonstrating practical financial benefits on real quantum hardware with up to 38 assets.

Contribution

It introduces the ISQR routine and VQE Constrained method, enabling quantum optimization of large, realistic financial problems beyond current hardware limitations.

Findings

Achieved portfolio optimization for 38 assets on IBM quantum hardware.

Matched classical methods in financial performance with quantum approaches.

Provided a practical pathway for quantum advantage in finance applications.

Abstract

We present a scalable, hardware-aware methodology for extending the Variational Quantum Eigensolver (VQE) to large, realistic Dynamic Portfolio Optimization (DPO) problems. Building on the scaling strategy from our previous work, where we tailored a VQE workflow to both the DPO formulation and the target QPU, we now put forward two significant advances. The first is the implementation of the Ising Sample-based Quantum Configuration Recovery (ISQR) routine, which improves solution quality in Quadratic Unconstrained Binary Optimization problems. The second is the use of the VQE Constrained method to decompose the optimization task, enabling us to handle DPO instances with more variables than the available qubits on current hardware. These advances, which are broadly applicable to other optimization problems, allow us to address a portfolio with a size relevant to the financial industry, consisting of up to 38 assets and covering the full Spanish stock index (IBEX 35). Our results, obtained on a real Quantum Processing Unit (IBM Fez), show that this tailored workflow achieves financial performance on par with classical methods while delivering a broader set of high-quality investment strategies, demonstrating a viable path towards obtaining practical advantage from quantum optimization in real financial applications.