English

Dynamic Portfolio Optimization with Real Datasets Using Quantum Processors and Quantum-Inspired Tensor Networks

Quantum Physics 2022-02-08 v2 Computational Engineering, Finance, and Science Statistical Finance

Abstract

In this paper we tackle the problem of dynamic portfolio optimization, i.e., determining the optimal trading trajectory for an investment portfolio of assets over a period of time, taking into account transaction costs and other possible constraints. This problem is central to quantitative finance. After a detailed introduction to the problem, we implement a number of quantum and quantum-inspired algorithms on different hardware platforms to solve its discrete formulation using real data from daily prices over 8 years of 52 assets, and do a detailed comparison of the obtained Sharpe ratios, profits and computing times. In particular, we implement classical solvers (Gekko, exhaustive), D-Wave Hybrid quantum annealing, two different approaches based on Variational Quantum Eigensolvers on IBM-Q (one of them brand-new and tailored to the problem), and for the first time in this context also a quantum-inspired optimizer based on Tensor Networks. In order to fit the data into each specific hardware platform, we also consider doing a preprocessing based on clustering of assets. From our comparison, we conclude that D-Wave Hybrid and Tensor Networks are able to handle the largest systems, where we do calculations up to 1272 fully-connected qubits for demonstrative purposes. Finally, we also discuss how to mathematically implement other possible real-life constraints, as well as several ideas to further improve the performance of the studied methods.

Keywords

Cite

@article{arxiv.2007.00017,
  title  = {Dynamic Portfolio Optimization with Real Datasets Using Quantum Processors and Quantum-Inspired Tensor Networks},
  author = {Samuel Mugel and Carlos Kuchkovsky and Escolastico Sanchez and Samuel Fernandez-Lorenzo and Jorge Luis-Hita and Enrique Lizaso and Roman Orus},
  journal= {arXiv preprint arXiv:2007.00017},
  year   = {2022}
}

Comments

13 pages, 5 figures, 5 tables, revised version, to appear in Physical Review Research

R2 v1 2026-06-23T16:44:50.204Z