BBVA evaluates the use of quantum computers to improve the return on investment portfolios

Last year the BBVA analyzed the applications of the quantum computer in the financial sector. Therefore through a proof of concept, BBVA and the Spanish startup Multiverse evaluated and compared various quantum technology platforms in order to solve a classic financial problem that has to do with optimizing real data in the investment portfolio market. The results of this analysis, published in a scientific paper, made it possible to find new formulas that could speed up this type of calculation, maximize profitability and minimize risk.

BBVA began its quantum journey two years ago when it turned out that this technology would have an impact on business in a few years. The bank created a multidisciplinary team of mathematicians and finance professionals in 2018 looking for areas where quantum computers can represent a differentiated leap.

The bank worked on six lines of research to examine the benefits of using quantum computing in the financial sector with CSIC, Accenture, Fujitsu, Zapata and Multiverse.

BBVA evaluates the use of quantum computers to improve the return on investment portfolios
BBVA evaluates the use of quantum computers to improve the return on investment portfolios

To this end, the company has implemented a strategy that includes creating alliances, consolidating internal capacity around this technology, evaluating the various tools available and conducting concept tests in collaboration with research centers. Companies and startups.

Results still in the exploration phase

The results of this work are still in the exploration phase. They suggest that this technology has a number of advantages over the tools currently used to solve certain complex problems –How to optimize investment portfolios–faster, more accurate and more efficient. While this technology is still in the early stages of development, its ability to have an impact on the sector is already a reality.

This research has enabled them to identify the areas where they can have a greater competitive advantage once the tools have reached the required level of maturity. They believe that this will be a success for certain tasks within the next two or five years.

Likewise, the results published during this scientific work have made it possible to describe new methods of performing these calculations that have not previously been considered and that would allow the potential return on investment to be maximized.

“The aim of this work, which is still in the exploration phase, was to find out which weights of an investment portfolio with certain assets would be more profitable, and financially we found a way to optimize these previously unrecognized calculations. The methods based on quantum computing and quantum inspiration are new and can improve the tools currently available in practice, ”said Escolástico Sánchez, Head of Research and Patents at BBVA.

The study has shown promising results in portfolios with more than 50 financial assets for which traditional, bit-based computing has no reach. “In small portfolios, the returns are very similar to those obtained using traditional computer techniques.”explains Sánchez. This analysis was done using real market prices of 52 different financial assets. The results of the scientific work have just been published.

In particular, the tests were carried out on various hardware platforms on which a number of quantum and quantum-inspired algorithms were implemented. The goal: to find the best portfolio to invest after analyzing 10,382 candidates and doing so dynamically, that is, in such a way that the portfolio weights vary depending on the buy and sell of the market.

This groundbreaking experiment can help revitalize the business of BBVA’s fund manager, who has been struggling to attract net subscriptions since last year.

BBVA Asset Management is the third largest asset manager in Spain after CaixaBank and Santander. It manages 37,540 million euros with dates as of April 30th and has 115 funds. At the end of 2019, 41,284 million were managed.

Last February, shortly before the lockdown, BBVA AM presented its strategy for the next four years. In addition to further strengthening the quality portfolios (asset allocation), one of the objectives is to promote the range of alternative investment products with venture capital funds, private debt and infrastructure.

Dr. For his part, Román Orús, co-founder and scientific director of Multiverse Computing, stated: “For the first time, we have implemented an optimization with real market data using a variation algorithm for IBM-Q, a hybrid quantum-classical algorithm for D-Wave, and for the first time internationally in a financial context using quantum algorithms. inspired by ‘Tensor Networks’.

Spanish multiverse startup

Multiverse is a young Spanish technology startup that specializes in the development of quantum algorithms for the international financial sector. The company has a well-respected team of experts in the fields of quantum physics, artificial intelligence, machine learning, math and business. Since its inception, it has been supported by accelerators and technology centers in the Basque Country such as the Donostia International Physics Center and BIC Gipuzkoa, as well as the Creative Destruction Lab in Cana.

Test for six months

However, BBVA has been conducting tests for six months in collaboration with the Basque startup Multiverse Computing in order to achieve maximum profitability in an investment portfolio with minimal risk. Mathematicians, physicists and experts in artificial intelligence took part in the experiment.

Building the foundation

BBVA’s next steps, in addition to further progress in current research areas, will be to find new, more disruptive use cases and deepen cooperation with the bank’s business units. On the one hand, the researchers see a particular interest in exploring the possibilities that this technology offers for improving algorithms for machine learning, and on the other hand, the potential to improve energy efficiency and contribute to a more sustainable society.

Although the developments in the field of quantum computers are at an exploratory stage and machines are still imperfect today, the sector and research have grown strongly in recent years. BBVA works in this area as part of its objective of studying disruptive technologies and trends that can have a significant impact on the financial sectorwith the creation of multidisciplinary teams specializing in advanced technological and scientific disciplines.

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