Fujitsu today announced a partnership with BBVA, Spain’s second largest bank, to test the concept of an optimization solution inspired by Digital Annealer quantum technology (PoC).
The bank would like to know whether the Digital Annealer can perform better in optimizing investment portfolios than traditional calculation methods based on the processing of a decade of past data – with minimal risk and maximum return.
BBVA, which seeks to play a leading role in innovation in the financial sector, is carrying out a number of studies to assess the benefits of quantum technologies over traditional instruments in different areas of financial application. To this end, BBVA has developed a strategy to build professional partnerships, strengthen internal capacity to support technology adoption, test the various tools available, and develop joint PoC programs with research centers, traditional companies, and startups. In addition to portfolio optimization, BBVA researchers are also exploring how the technology can be used to simulate financial scenarios, currency arbitrage and credit assessment processes, for example.
Regular portfolio optimization is a challenge for financial institutions. While forecasts for individual securities are relatively easy to make, balancing the entire investment portfolio is an incredibly complex operation due to the large number of possible combinations. More than one quintillion permutations are needed to examine optimal combinations of just 20 stocks. Because of the complexity, portfolio optimization has traditionally been a manual task, often based on guesswork rather than empirical data — quite simply because complex calculations far exceed the capabilities of normal computers. However, Fujitsu Digital Annealer is specifically designed to be able to process such complex combinatorial problems in minutes.
BBVA’s research and patent team examined how Digital Annealer could be used to optimize the investment portfolio. To do this, various stocks were valued based on various data, such as past market prices, and the level of investment associated with them was determined. The bank also wants to use Fujitsu Digital Annealer to determine when it is best to buy or sell securities to reach the maximum portfolio value.
The project is still at an early stage, but initial results show that Digital Annealer offers several advantages over other tools in solving complex problems quickly, accurately and efficiently. According to a joint PoC project by BBVA and Fujitsu, with Digital Annealer, clearly better results can be achieved with large-scale calculations that process more than 100 securities or factors.
“There are areas in every industry where optimization would be of great benefit, but because of the complexity of the problems, they try to thrive by guesswork and trial and error. Although true quantum computing is still in the laboratory testing stage, it is a bridging solution. “Digital Annealer is already able to evaluate various combinations with extreme speed. In the financial sector, for example, by identifying the optimal portfolio and determining the ideal time to buy and sell shares, it significantly increases the return on investment,” said Carlos Cordero, Chief Technology Officer, Fujitsu Spain deputy.
“The ecosystem of quantum technologies is evolving very rapidly. We believe that cooperation with various public and private sector partners is key to achieving meaningful development for the banking sector and society as a whole by reaping the benefits of technology. Although the technology is still in its early stages of development and is already having a tangible positive impact on the sector. Our research helps identify areas where quantum computing can increase competitive advantage by achieving the right level of maturity in assets. We believe that quantum computing “Meeting these important societal challenges of the decade is in line with the goals of the BBVA strategy, such as making better decisions and making more sustainable use of the expanding data base,” said Carlos Kuchkovky, BBVA global leader for patents and patents.
Fujitsu has already used Digital Annealer in several industries to solve various problems, such as determining the optimal sequence of operations by welding robots on the car assembly line, route planning for transport vehicles, ideal distribution of distribution warehouses and commissioning routes, maximizing the return on investment of utilities and accelerating the discovery of new active substances and the development of new pharmaceutical products in the pharmaceutical sector.