IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2203.15716.html
   My bibliography  Save this paper

Application of Quantum Computers in Foreign Exchange Reserves Management

Author

Listed:
  • Martin Vesel'y

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.

Suggested Citation

  • Martin Vesel'y, 2022. "Application of Quantum Computers in Foreign Exchange Reserves Management," Papers 2203.15716, arXiv.org.
    • Handle: RePEc:arx:papers:2203.15716
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2203.15716
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adam Bouland & Wim van Dam & Hamed Joorati & Iordanis Kerenidis & Anupam Prakash, 2020. "Prospects and challenges of quantum finance," Papers 2011.06492, arXiv.org.
    2. Isaiah Hull & Or Sattath & Eleni Diamanti & Göran Wendin, 2024. "Quantum Technology for Economists," Contributions to Economics, Springer, number 978-3-031-50780-9.
    3. Samuel Palmer & Serkan Sahin & Rodrigo Hernandez & Samuel Mugel & Roman Orus, 2021. "Quantum Portfolio Optimization with Investment Bands and Target Volatility," Papers 2106.06735, arXiv.org, revised Aug 2021.
    4. Manjin Zhong & Morgan P. Hedges & Rose L. Ahlefeldt & John G. Bartholomew & Sarah E. Beavan & Sven M. Wittig & Jevon J. Longdell & Matthew J. Sellars, 2015. "Optically addressable nuclear spins in a solid with a six-hour coherence time," Nature, Nature, vol. 517(7533), pages 177-180, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abha Naik & Esra Yeniaras & Gerhard Hellstern & Grishma Prasad & Sanjay Kumar Lalta Prasad Vishwakarma, 2023. "From Portfolio Optimization to Quantum Blockchain and Security: A Systematic Review of Quantum Computing in Finance," Papers 2307.01155, arXiv.org.
    2. Martin Vesely, 2023. "Finding the Optimal Currency Composition of Foreign Exchange Reserves with a Quantum Computer," Working Papers 2023/1, Czech National Bank.
    3. Martin Vesely, 2023. "Finding the Optimal Currency Composition of Foreign Exchange Reserves with a Quantum Computer," Papers 2303.01909, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Vesely, 2022. "Application of Quantum Computers in Foreign Exchange Reserves Management," Working Papers 2022/2, Czech National Bank.
    2. Fred Glover & Gary Kochenberger & Rick Hennig & Yu Du, 2022. "Quantum bridge analytics I: a tutorial on formulating and using QUBO models," Annals of Operations Research, Springer, vol. 314(1), pages 141-183, July.
    3. Jesús Fernández-Villaverde & Isaiah J. Hull, 2023. "Dynamic Programming on a Quantum Annealer: Solving the RBC Model," NBER Working Papers 31326, National Bureau of Economic Research, Inc.
    4. Dong An & Noah Linden & Jin-Peng Liu & Ashley Montanaro & Changpeng Shao & Jiasu Wang, 2020. "Quantum-accelerated multilevel Monte Carlo methods for stochastic differential equations in mathematical finance," Papers 2012.06283, arXiv.org, revised Jun 2021.
    5. Luca Ciacci & Ivano Vassura & Fabrizio Passarini, 2018. "Shedding Light on the Anthropogenic Europium Cycle in the EU–28. Marking Product Turnover and Energy Progress in the Lighting Sector," Resources, MDPI, vol. 7(3), pages 1-17, September.
    6. Hull, Isaiah & Sattath, Or, 2021. "Revisiting the Properties of Money," Working Paper Series 406, Sveriges Riksbank (Central Bank of Sweden).
    7. Jeong Yu Han & Patrick Rebentrost, 2022. "Quantum advantage for multi-option portfolio pricing and valuation adjustments," Papers 2203.04924, arXiv.org.
    8. Christopher McMahon & Donald McGillivray & Ajit Desai & Francisco Rivadeneyra & Jean-Paul Lam & Thomas Lo & Danica Marsden & Vladimir Skavysh, 2022. "Improving the Efficiency of Payments Systems Using Quantum Computing," Staff Working Papers 22-53, Bank of Canada.
    9. Skavysh, Vladimir & Priazhkina, Sofia & Guala, Diego & Bromley, Thomas R., 2023. "Quantum monte carlo for economics: Stress testing and macroeconomic deep learning," Journal of Economic Dynamics and Control, Elsevier, vol. 153(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2203.15716. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.