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arXiv · 2007.00017

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

Samuel Mugel·Carlos Kuchkovsky·Escolastico Sanchez·Samuel Fernandez-Lorenzo·Jorge Luis-Hita·Enrique Lizaso·Roman Orus
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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.

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Samuel Mugel, Carlos Kuchkovsky, Escolastico Sanchez, Samuel Fernandez-Lorenzo, Jorge Luis-Hita, Enrique Lizaso, Roman Orus. 2020-06-30. Dynamic Portfolio Optimization with Real Datasets Using Quantum Processors and Quantum-Inspired Tensor Networks. https://doi.org/10.1103/physrevresearch.4.013006

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