A real world test of Portfolio Optimization with Quantum Annealing

• URL: http://arxiv.org/abs/2303.12601v1
• Date: Wed, 22 Mar 2023 14:38:13 GMT
• Title: A real world test of Portfolio Optimization with Quantum Annealing
• Authors: Wolfgang Sakuler, Johannes M. Oberreuter, Riccardo Aiolfi, Luca Asproni, Branislav Roman, J\"urgen Schiefer
• Abstract summary: We describe an experiment on portfolio optimization using the Quadratic Unconstrained Binary Optimization (QUBO) formulation. We find satisfactory results, consistent with the global optimum obtained by the exact classical strategy. Since the tuning of QUBO parameters is crucial for the optimization, we investigate a hybrid method that allows for automatic tuning.
• Score: 0.0
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: In this note, we describe an experiment on portfolio optimization using the Quadratic Unconstrained Binary Optimization (QUBO) formulation. The dataset we use is taken from a real-world problem for which a classical solution is currently deployed and used in production. In this work, carried out in a collaboration between the Raiffeisen Bank International (RBI) and Reply, we derive a QUBO formulation, which we solve using various methods: two D-Wave hybrid solvers, that combine the employment of a quantum annealer together with classical methods, and a purely classical algorithm. Particular focus is given to the implementation of the constraint that requires the resulting portfolio's variance to be below a specified threshold, whose representation in an Ising model is not straightforward. We find satisfactory results, consistent with the global optimum obtained by the exact classical strategy. However, since the tuning of QUBO parameters is crucial for the optimization, we investigate a hybrid method that allows for automatic tuning.

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