Related papers: Towards Pricing Financial Derivatives with an IBM …
Quantum computers are expected to surpass the computational capabilities of classical computers during this decade and have transformative impact on numerous industry sectors, particularly finance. In fact, finance is estimated to be the…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
Principal Component Analysis (PCA) is the most common nonparametric method for estimating the volatility structure of Gaussian interest rate models. One major difficulty in the estimation of these models is the fact that forward rate curves…
Machine Learning models capable of handling the large datasets collected in the financial world can often become black boxes expensive to run. The quantum computing paradigm suggests new optimization techniques, that combined with classical…
The ongoing progress in quantum technologies has fueled a sustained exploration of their potential applications across various domains. One particularly promising field is quantitative finance, where a central challenge is the pricing of…
Recent work has shown that it can be advantageous to implement a composite channel that partitions the Hamiltonian $H$ for a given simulation problem into subsets $A$ and $B$ such that $H=A+B$, where the terms in $A$ are simulated with a…
Quantum computers are expected to have substantial impact on the finance industry, as they will be able to solve certain problems considerably faster than the best known classical algorithms. In this article we describe such potential…
In their activity, the traders approximate the rate of return by integer multiples of a minimal one. Therefore, it can be regarded as a quantized variable. On the other hand, there is the impossibility of observing the rate of return and…
A multi-factor extension of the Hobson and Rogers (HR) model, incorporating a quadratic variance function (QHR model), is proposed and analysed. The QHR model allows for greater flexibility in defining the moving average filter while…
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…
Classical simulation of real-space quantum dynamics is challenging due to the exponential scaling of computational cost with system dimensions. Quantum computer offers the potential to simulate quantum dynamics with polynomial complexity;…
For a large class of variational quantum circuits, we show how arbitrary-order derivatives can be analytically evaluated in terms of simple parameter-shift rules, i.e., by running the same circuit with different shifts of the parameters. As…
The analytical tractability of affine (short rate) models, such as the Vasicek and the Cox-Ingersoll-Ross models, has made them a popular choice for modelling the dynamics of interest rates. However, in order to account properly for the…
Recent advances in quantum computing have demonstrated its potential to significantly enhance the analysis and forecasting of complex classical data. Among these, quantum reservoir computing has emerged as a particularly powerful approach,…
We present compelling empirical evidence for a new interpretation of the Forward Rate Curve (FRC) term structure. We find that the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a…
In this work, we develop a novel principal component analysis (PCA) for semimartingales by introducing a suitable spectral analysis for the quadratic variation operator. Motivated by high-dimensional complex systems typically found in…
Existence of solutions to the Heath-Jarrow-Morton equation of the bond market with linear volatility and general L\'evy random factor is studied. Conditions for existence and non-existence of solutions in the class of bounded fields are…
Risk assessment and in particular derivatives pricing is one of the core areas in computational finance and accounts for a sizeable fraction of the global computing resources of the financial industry. We outline a quantum-inspired…
Accurate prediction of future loan defaults is a critical capability for financial institutions that provide lines of credit. For institutions that issue and manage extensive loan volumes, even a slight improvement in default prediction…
In a recent formulation of a quantum field theory of forward rates, the volatility of the forward rates was taken to be deterministic. The field theory of the forward rates is generalized to the case of stochastic volatility. Two cases are…