Comparing Classical-Quantum Portfolio Optimization with Enhanced Constraints

• URL: http://arxiv.org/abs/2203.04912v1
• Date: Wed, 9 Mar 2022 17:46:32 GMT
• Title: Comparing Classical-Quantum Portfolio Optimization with Enhanced Constraints
• Authors: Salvatore Certo, Anh Dung Pham, Daniel Beaulieu
• Abstract summary: We show how to add fundamental analysis to the portfolio optimization problem, adding in asset-specific and global constraints based on chosen balance sheet metrics. We analyze the current state-of-the-art algorithms for solving such a problem using D-Wave's Quantum Processor and compare the quality of the solutions obtained to commercially-available optimization software.
• Score: 0.0
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: One of the problems frequently mentioned as a candidate for quantum advantage is that of selecting a portfolio of financial assets to maximize returns while minimizing risk. In this paper we formulate several real-world constraints for use in a Quantum Annealer (QA), extending the scenarios in which the algorithm can be implemented. Specifically, we show how to add fundamental analysis to the portfolio optimization problem, adding in asset-specific and global constraints based on chosen balance sheet metrics. We also expand on previous work in improving the constraint to enforce investment bands in sectors and limiting the number of assets to invest in, creating a robust and flexible solution amenable to QA. Importantly, we analyze the current state-of-the-art algorithms for solving such a problem using D-Wave's Quantum Processor and compare the quality of the solutions obtained to commercially-available optimization software. We explore a variety of traditional and new constraints that make the problem computationally harder to solve and show that even with these additional constraints, classical algorithms outperform current hybrid solutions in the static portfolio optimization model.

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