[2208.11380] Financial Index Tracking via Quantum Computing with Cardinality Constraints
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Quantum Physics

arXiv:2208.11380 (quant-ph)
[Submitted on 24 Aug 2022]

Title:Financial Index Tracking via Quantum Computing with Cardinality Constraints

Authors:Samuel Palmer, Konstantinos Karagiannis, Adam Florence, Asier Rodriguez, Roman Orus, Harish Naik, Samuel Mugel
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Abstract:In this work, we demonstrate how to apply non-linear cardinality constraints, important for real-world asset management, to quantum portfolio optimization. This enables us to tackle non-convex portfolio optimization problems using quantum annealing that would otherwise be challenging for classical algorithms. Being able to use cardinality constraints for portfolio optimization opens the doors to new applications for creating innovative portfolios and exchange-traded-funds (ETFs). We apply the methodology to the practical problem of enhanced index tracking and are able to construct smaller portfolios that significantly outperform the risk profile of the target index whilst retaining high degrees of tracking.
Comments: 8 pages, 8 figures, 4 tables
Subjects: Quantum Physics (quant-ph); Computational Engineering, Finance, and Science (cs.CE); Portfolio Management (q-fin.PM)
Cite as: arXiv:2208.11380 [quant-ph]
  (or arXiv:2208.11380v1 [quant-ph] for this version)
  https://doi.org/10.48550/arXiv.2208.11380

Submission history

From: Roman Orus [view email]
[v1] Wed, 24 Aug 2022 08:59:19 UTC (1,450 KB)
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