End-to-End PDE-Based Quantum Algorithms for Multi-Asset Option Pricing under Local and Stochastic Volatility

By Nikita Guseynov, Nana Liu, Chi Seng Pun, Tushar Vaidya

Rating

1697
Battle Count: 88

Relevance

6/10
The paper addresses a core quantitative finance problem (multi-asset option pricing under realistic volatility models) with potential long-term impact on derivative pricing and risk management. However, the quantum advantage is theoretical/asymptotic and requires fault-tolerant quantum computers that are not yet available. The work is more relevant to quantitative research and infrastructure development than to immediate trading applications. The implied-volatility smile recovery is directly relevant to market-making and derivatives desk operations.

Implementation Complexity

9/10
The implementation requires deep expertise in quantum computing (Schrödingerisation, QSVT, block-encodings, amplitude estimation), numerical PDE methods (finite differences, ODE systems), and quantitative finance (Black-Scholes, Heston models, implied volatility). The quantum circuits involve multiple registers (main, auxiliary, ancilla), Fourier transforms, Hamiltonian simulation, and postselection. Current implementation is limited to classical simulation of small quantum systems (18 qubits). Full fault-tolerant implementation would require thousands of physical qubits per logical qubit.

Reproducibility

4/5
The paper provides a GitLab repository with code for numerical simulations, including Black-Scholes and Heston implementations, semi-analytical validation routines, and implied-volatility/SSVI post-processing workflows. All numerical parameters are explicitly listed in tables. However, the quantum circuits are described at the logical level and full fault-tolerant implementations are not provided. The theoretical proofs are detailed in extensive appendices.

About this paper

Methodology: End-to-End Quantum PDE Framework via Schrödingerisation. Problem types: Optimization, Risk Management, Portfolio Optimization.

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