BMO and Scotiabank speed up derivatives pricing using quantum algo

Canadian quantum startup Xanadu announced the results of a joint proof-of-concept technology collaboration between the BMO Financial Group and Scotiabank. The organizations set out to discover computational speedups and improved accuracy in the trading products space using a quantum algorithm developed by Xanadu known as quantum Monte Carlo.

“Quantum Monte Carlo is perhaps the strongest evidence yet of the huge impact quantum will have on finance,” said Tom Bromley, researcher and project lead at Xanadu, in a statement. “This project allowed us to forecast the disruptive potential for derivatives pricing over the coming years, paving the way for near real-time pricing and significantly lower power overhead.”

Financial institutions, like BMO and Scotiabank, devote an enormous amount of resources and time to pricing portfolios of trading products as the organization must consider different possible market scenarios. Currently, institutions use Monte Carlo estimation to model and price derivatives, often running in huge data centers of parallel CPUs and GPUs.

As part of the proof-of-concept project with BMO and Scotiabank, Xanadu built software to simulate quantum Monte Carlo on a variety of trading products. This allows for benchmarking of the quantum speedup using conventional high-performance computers.

As well as developing software for simulation and benchmarking, the project with BMO and Scotiabank focused on how to implement the quantum Monte Carlo algorithm on real hardware using a process called quantum compiling. Quantum hardware is being developed competitively by a number of companies but requires a few more years of maturing before being capable of running full scale quantum Monte Carlo. Despite this, the BMO, Scotiabank and Xanadu project predicted speedups of hundreds to thousands of times faster — a glimpse into the new era of high technology derivatives trading.

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