BBVA evaluates the use of quantum computing to improve performance in investment portfolios
Over the last year, BBVA has analyzed the applications of quantum computing in the financial sector. Therefore, through a proof of concept, BBVA and the Spanish startup Multiverse, have evaluated and compared different quantum technology platforms to solve a classic problem in finance that has to do with the optimization of real market data of investment portfolios. The results of this analysis, published in a scientific work, have allowed to find new formulas that could accelerate this type of calculations maximizing the profitability and minimizing the Bitcoin Loophole risk.
BBVA began its quantum journey two years ago as soon as it realized that this technology was going to have an impact on business in a few years. In 2018, the bank created a multidisciplinary team of mathematicians and finance professionals who are looking for those areas where quantum computing can make a difference.
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The bank worked on six lines of research to explore the advantages of applying quantum computation in the financial sector with CSIC, Accenture, Fujitsu, Zapata and Multiverse.
To this end, the bank has implemented a strategy that involves the creation of alliances, the consolidation of internal capacities around this technology, the evaluation of the various tools available and the performance of proofs of concept in collaboration with research centers, companies and ’startups‘.
Results still in the exploratory phase
The results of this work are still in an exploratory phase, and point out that this technology offers a series of advantages over the tools currently used to solve certain complex problems -such as the optimization of investment portfolios-, in a faster, more precise and efficient manner. Although this technology is still in an early stage of development, its capacity to impact the sector is already a reality.
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This research has allowed them to identify the areas where it will be possible to provide a greater competitive advantage once the tools reach the necessary degree of maturity. They believe that this will be, for certain specific tasks, a success within the next two to five years.
Likewise, the results, published during this scientific work, have made it possible to describe new methods for carrying out these calculations that were not contemplated until now and that would make it possible to maximize the potential return on investment.
„The objective of this work, still in an exploratory phase, has been to look for which weights of an investment portfolio with certain assets have more profitability and, in financial terms, we have achieved a way of optimizing these calculations that had not been considered until now. The methods based on quantum computation and those of quantum inspiration are new and can improve the current tools that are already in practice,“ explained Escolástico Sánchez, head of the Research and Patent discipline at BBVA.
The study has achieved promising results in the case of portfolios composed of more than 50 financial assets, where classic, bit-based computing does not reach. „In small portfolios the returns are very similar to those achieved by applying traditional computing techniques,“ explains Sánchez. This analysis has been carried out with real market prices of 52 different financial assets. The results of the scientific work have just been published.
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Specifically, the tests have been carried out on different hardware platforms in which a series of quantum and quantum-inspired algorithms have been implemented. The objective: to find the best portfolio to invest in after analyzing 10,382 candidates and to do so dynamically, i.e., so that the weights of the portfolio vary according to market purchases and sales.
This pioneering experiment can help revitalize the commercial activity of the BBVA fund manager, which has had difficulty in attracting net subscriptions since last year.
BBVA Asset Management is the third largest asset manager in Spain, after CaixaBank and Santander. It manages 37,540 million Euros, with data as of the 30th of April, and has 115 funds. At the end of 2019 it managed 41,284 million.