Solving the Optimal Trading Trajectory Problem Using a Quantum Annealer

Gili Rosenberg, Poya Haghnegahdar, Phil Goddard, Peter Carr, Kesheng Wu, Marcos López De Prado

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We solve a multi-period portfolio optimization problem using D-Wave Systems' quantum annealer. We derive a for- mulation of the problem, discuss several possible integer en- coding schemes, and present numerical examples that show high success rates. The formulation incorporates transaction costs (including permanent and temporary market impact), and, significantly, the solution does not require the inversion of a covariance matrix. The discrete multi-period port- folio optimization problem we solve is significantly harder than the continuous variable problem. We present insight into how results may be improved using suitable software enhancements, and why current quantum annealing technol- ogy limits the size of problem that can be successfully solved today. The formulation presented is specifically designed to be scalable, with the expectation that as quantum annealing technology improves, larger problems will be solvable using the same techniques.

Original languageEnglish (US)
Title of host publicationProceedings of WHPCF 2015
Subtitle of host publication8th Workshop on High Performance Computational Finance - Held in conjunction with SC 2015: The International Conference for High Performance Computing, Networking, Storage and Analysis
PublisherAssociation for Computing Machinery, Inc
ISBN (Electronic)9781450340151
DOIs
StatePublished - Nov 15 2015
Event8th Workshop on High Performance Computational Finance, WHPCF 2015 - Austin, United States
Duration: Nov 15 2015Nov 20 2015

Publication series

NameProceedings of WHPCF 2015: 8th Workshop on High Performance Computational Finance - Held in conjunction with SC 2015: The International Conference for High Performance Computing, Networking, Storage and Analysis

Other

Other8th Workshop on High Performance Computational Finance, WHPCF 2015
CountryUnited States
CityAustin
Period11/15/1511/20/15

Keywords

  • Optimal trading trajectory
  • Portfolio optimization
  • Quantum annealing

ASJC Scopus subject areas

  • Computational Theory and Mathematics
  • Computer Science Applications
  • Software

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  • Cite this

    Rosenberg, G., Haghnegahdar, P., Goddard, P., Carr, P., Wu, K., & De Prado, M. L. (2015). Solving the Optimal Trading Trajectory Problem Using a Quantum Annealer. In Proceedings of WHPCF 2015: 8th Workshop on High Performance Computational Finance - Held in conjunction with SC 2015: The International Conference for High Performance Computing, Networking, Storage and Analysis [a7] (Proceedings of WHPCF 2015: 8th Workshop on High Performance Computational Finance - Held in conjunction with SC 2015: The International Conference for High Performance Computing, Networking, Storage and Analysis). Association for Computing Machinery, Inc. https://doi.org/10.1145/2830556.2830563