Quantum Optimization for Portfolio Management in Financial Services Using the Variational Quantum Eigensolver (VQE) Algorithm

The possibility of adopting quantum computing in the field of financial services can bring a new breakthrough in portfolio management since the optimization of this method requires large numbers for the solution that exceed the capabilities of classical computing algorithms. This study focuses on using a hybrid quantum-classical computational method known as the Variational Quantum Eigensolver (VQE) in optimizing portfolio selection. The VQE aims at finding the best allocation of the portfolio; the best weights that correspond to minimum risk and maximum return as predicted by the modern portfolio theory. The study assesses the suitability and speed of VQE in solving matters involving portfolio management tasks such as handling vast data and nonlinear constraints which are hard to solve through other optimization methods. Thus, under the theoretical framework of quantum computing, the study seeks to address some of the following challenges: computational time and scalability in portfolio optimization. The VQE algorithm work on different portfolio configurations; their performance in comparison with classical techniques; special attention is paid to the rate of convergence and the achievement of the optimal solution. Based on the results of this work we can conclude that there is a considerable literature on quantum finance and that this field can benefit from utilization of quantum algorithms as a tool to improve decision-making in the financial market. That is why the study proves that quantum optimization techniques, to wit VQE, can provide better solutions when it comes to portfolio management within the sphere of finance.

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