Related papers: Arbitrage risk induced by transaction costs
The study seeks to develop an effective strategy based on the novel framework of statistical arbitrage based on graph clustering algorithms. Amalgamation of quantitative and machine learning methods, including the Kelly criterion, and an…
We discuss how quantum computation can be applied to financial problems, providing an overview of current approaches and potential prospects. We review quantum optimization algorithms, and expose how quantum annealers can be used to…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
Recently developed quantum algorithms suggest that quantum computers can solve certain problems and perform certain tasks more efficiently than conventional computers. Among other reasons, this is due to the possibility of creating…
A critical problem in the financial world deals with the management of risk, from regulatory risk to portfolio risk. Many such problems involve the analysis of securities modelled by complex dynamics that cannot be captured analytically,…
In recent years, a CRA (Credit Risk Analysis) quantum algorithm with a quadratic speedup over classical analogous methods has been introduced. We propose a new variant of this quantum algorithm with the intent of overcoming some of the most…
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
In this paper we reformulate the problem of pricing options in a quantum setting. Our proposed algorithm involves preparing an initial state, representing the option price, and then evolving it using existing imaginary time simulation…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
We consider the realization of a quantum computer in a chain of nuclear spins coupled by an Ising interaction. Quantum algorithms can be performed with the help of appropriate radio-frequency pulses. In addition to the standard…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
A quantum-inspired optimization approach is proposed to study the portfolio optimization aimed at selecting an optimal mix of assets based on the risk-return trade-off to achieve the desired goal in investment. By integrating conventional…
In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival…
In this paper, we discuss the dynamical issues of quantum computation. We demonstrate that fast wave function oscillations can affect the performance of Shor's quantum algorithm by destroying required quantum interference. We also show that…
The main result of this paper is a collateralized counterparty valuation adjusted pricing equation, which allows to price a deal while taking into account credit and debit valuation adjustments (CVA, DVA) along with margining and funding…
We review here the recent success in quantum annealing, i.e., optimization of the cost or energy functions of complex systems utilizing quantum fluctuations. The concept is introduced in successive steps through the studies of mapping of…
We develop a full-fledged analysis of an algorithmic decision process that, in a multialternative choice problem, produces computable choice probabilities and expected decision times.
The resource theory of coherence studies the operational value of superpositions in quantum technologies. A key question in this theory concerns the efficiency of manipulation and interconversion of this resource. Here we solve this…
Recently, several researchers proposed portfolio optimization as a potential use case for quantum optimization. However, the literature is lacking an extensive benchmark quantifying the potential of quantum computers for portfolio…
We introduce two quantum algorithms to compute the Value at Risk (VaR) and Conditional Value at Risk (CVaR) of financial derivatives using quantum computers: the first by applying existing ideas from quantum risk analysis to derivative…