Dynamic portfolio optimization with real datasets using quantum processors and quantum-inspired tensor networks
Samuel Mugel, Carlos Kuchkovsky, Escolástico Sánchez-Martínez, Samuel Fernández-Lorenzo, Jorge Luis-Hita, Enrique Lizaso, Román Orús
Abstract
In this paper we tackle the problem of dynamic portfolio optimization, i.e., determining the optimal trading trajectory for an investment portfolio of assets over a period of time, taking into account transaction costs and other possible constraints. This problem is central to quantitative finance. After a detailed introduction to the problem, we implement a number of quantum and quantum-inspired algorithms on different hardware platforms to solve its discrete formulation using real data from daily prices over 8 years of 52 assets, and do a detailed comparison of the obtained Sharpe ratios, profits, and computing times. In particular, we implement classical solvers (Gekko, exhaustive), D-wave hybrid quantum annealing, two different approaches based on variational quantum eigensolvers on IBM-Q (one of them brand-new and tailored to the problem), and for the first time in this context also a quantum-inspired optimizer based on tensor networks. In order to fit the data into each specific hardware platform, we also consider doing a preprocessing based on clustering of assets. From our comparison, we conclude that D-wave hybrid and tensor networks are able to handle the largest systems, where we do calculations up to 1272 fully-connected qubits for demonstrative purposes. Finally, we also discuss how to mathematically implement other possible real-life constraints, as well as several ideas to further improve the performance of the studied methods.