Option pricing using Quantum Computers

A team from JPMorgan Chase, IBM Research Zurich and ETH Zurich presents a methodology to price options and portfolios of options on a gate-based quantum computer using amplitude estimation, an algorithm which provides a quadratic speedup compared to classical Monte Carlo methods.

The options that they have covered include vanilla options, multi-asset options and path-dependent options such as barrier options. They put an emphasis on the implementation of the quantum circuits required to build the input states and operators needed by amplitude estimation to price the different option types.

Additionally, they showed simulation results to highlight how the circuits that they implemented price the different option contracts.

Finally, they examined the performance of option pricing circuits on quantum hardware using the IBM Q Tokyo quantum device. They employed a simple, yet effective, error mitigation scheme that allowed them to significantly reduce the errors arising from noisy two-qubit gates.

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