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Application of Quantum Computers in Foreign Exchange Reserves Management

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  • Martin Vesel'y

Abstract

The main purpose of this article is to evaluate possible applications of quantum computers in foreign exchange reserves management. The capabilities of quantum computers are demonstrated by means of risk measurement using the quantum Monte Carlo method and portfolio optimization using a linear equations system solver (the Harrow-Hassidim-Lloyd algorithm) and quadratic unconstrained binary optimization (the quantum approximate optimization algorithm). All demonstrations are carried out on the cloud-based IBM Quantum(TM) platform. Despite the fact that real-world applications are impossible under the current state of development of quantum computers, it is proven that in principle it will be possible to apply such computers in FX reserves management in the future. In addition, the article serves as an introduction to quantum computing for the staff of central banks and financial market supervisory authorities.

Suggested Citation

  • Martin Vesel'y, 2022. "Application of Quantum Computers in Foreign Exchange Reserves Management," Papers 2203.15716, arXiv.org.
    • Handle: RePEc:arx:papers:2203.15716
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    References listed on IDEAS

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    1. Adam Bouland & Wim van Dam & Hamed Joorati & Iordanis Kerenidis & Anupam Prakash, 2020. "Prospects and challenges of quantum finance," Papers 2011.06492, arXiv.org.
    2. Isaiah Hull & Or Sattath & Eleni Diamanti & Göran Wendin, 2024. "Quantum Technology for Economists," Contributions to Economics, Springer, number 978-3-031-50780-9.
    3. Samuel Palmer & Serkan Sahin & Rodrigo Hernandez & Samuel Mugel & Roman Orus, 2021. "Quantum Portfolio Optimization with Investment Bands and Target Volatility," Papers 2106.06735, arXiv.org, revised Aug 2021.
    4. Manjin Zhong & Morgan P. Hedges & Rose L. Ahlefeldt & John G. Bartholomew & Sarah E. Beavan & Sven M. Wittig & Jevon J. Longdell & Matthew J. Sellars, 2015. "Optically addressable nuclear spins in a solid with a six-hour coherence time," Nature, Nature, vol. 517(7533), pages 177-180, January.
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    Cited by:

    1. Abha Naik & Esra Yeniaras & Gerhard Hellstern & Grishma Prasad & Sanjay Kumar Lalta Prasad Vishwakarma, 2023. "From Portfolio Optimization to Quantum Blockchain and Security: A Systematic Review of Quantum Computing in Finance," Papers 2307.01155, arXiv.org.
    2. Martin Vesely, 2023. "Finding the Optimal Currency Composition of Foreign Exchange Reserves with a Quantum Computer," Working Papers 2023/1, Czech National Bank.
    3. Martin Vesely, 2023. "Finding the Optimal Currency Composition of Foreign Exchange Reserves with a Quantum Computer," Papers 2303.01909, arXiv.org.

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