Quantum Computers Solve Optimization Problems Differently…

Optimization problems find the best solution out of the universe of possible options. That’s something our classical computers can certainly do, but there are limits such as the number of variables or the number and types of constraints we put on a problem so that the problem can be solved in a reasonable amount of time. A classic example would be running a Monte Carlo simulation to determine if an investor’s portfolio will likely be large enough to last through retirement. A Monte Carlo simulation estimates the likelihood of a particular outcome — in this case, financial security in retirement — by taking the variables that are uncertain (for example, future market performance), assigning them to random values, and then repeatedly running that process many times to show a distribution of likely outcomes. This distribution provides confidence in the likelihood of the desired outcome — in this example, that the portfolio is likely large enough for retirement. This method requires many iterations to be reliable and therefore, a lot of time.

Quantum computing has the potential to change that. With a quantum computer, quantum bits (or qubits) have a partial chance of being a 0 AND a partial chance of 1 (unlike their binary counterparts in standard computers, which can only be one OR the other). That means the qubits can essentially be split in the Monte Carlo simulation, settling the distribution curve and resulting in an answer much faster. To bring this to life, FCAT created the video below illustrating why Monte Carlo simulations run faster on a quantum computer.

Quantum computers are still early in their life cycle, but have already shown potential to positively disrupt the technology that we use today. FCAT is exploring the many ways that this new technology has the potential to impact the financial services industry. Quantum computing has the potential to impact everything from AI and machine learning to random number generation. Keep an eye out for updates from FCAT as we share our journey through the space.