Recent Studies from Kaiserslautern Add New Data to Risk Management (A Quantum Algorithm for Pricing Asian Options on Valuation Trees): Insurance – Risk Management

2023 JAN 09 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- A new study on risk management is now available. According to news reporting from Kaiserslautern, Germany, by NewsRx journalists, research stated, “We develop a novel quantum algorithm for approximating the price of a discrete floating-strike Asian option based on an underlying valuation tree.”

Funders for this research include Anquc-3 of The Competence Center Quantum Computing Rhineland-palatinate.

The news reporters obtained a quote from the research from Department of Financial Mathematics: “The paths of the tree are encoded in bit-representation into a qubit register, where quantum state preparation is used to load the corresponding distribution onto the states. We implement the expectation value of the option pricing formula as a composition of the price probabilities, the payout and an indicator function, mapping their respective values to amplitudes of additional qubits. Thus, the underlying no longer has to be discretized into the same bit values for different times, resulting in smaller quantum circuits.”

According to the news editors, the research concluded: “The algorithm may be used with quantum amplitude estimation, enabling a quadratic speed-up over classical Monte Carlo methods.”

For more information on this research see: A Quantum Algorithm for Pricing Asian Options on Valuation Trees. Risks, 2022,10(221):221. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks10120221.

Our news journalists report that more information may be obtained by contacting Mark-Oliver Wolf, Department of Financial Mathematics, Fraunhofer ITWM, Fraunhofer-Platz 1, 67663 Kaiserslautern, Germany. Additional authors for this research include Roman Horsky, Jonas Koppe.

(Our reports deliver fact-based news of research and discoveries from around the world.)