Quantum Bayesian Networks

February 5, 2010

Likely: Wall Street Firms Will be Early Adopters of Quantum Computers

Filed under: Uncategorized — rrtucci @ 11:35 pm

Imagine an institution that

  • is waging war against its rivals
  • has deep pockets and does not shy away from buying any gadget that might give it even a slight advantage over its rivals
  • will gain a significant advantage over its rivals if it can speed up its response time
  • must predict the future in order to respond

Well, a very effective way of predicting the future is to use Bayesian statistical techniques. An important calculational tool of Bayesian statistics is Markov Chain Monte Carlo (MCMC). Quantum computers can do MCMC quadratically faster than classical computers. (See my post on the quantum computerization of MCMC).

Hence, any institution that fits the above bill will love QCs, because QCs will help it achieve its goals better.

One type of institution that fits the bill is the Department of Defense, when doing time-constrained target discrimination, as in, for instance, ballistic missile defense (Star Wars). (I’ve talked about this before in my post about military applications of QCs.)

But another type of institution that fits this bill just as well are Wall Street firms.

For evidence that financial engineers in Wall Street firms use Bayesian/MCMC techniques, see

  • A search of the wilmott.com domain for the keyword “MCMC”.
  • A search of the wilmott.com domain for the keyword “Bayesian”.
  • A search of the wilmott.com domain for the keyword “Monte Carlo”.
  • My previous post on Emanuel Derman’s book about quants.

Hence, it is not too far-fetched to predict that Wall Street firms will be early adopters of QCs.

Since many of the quants in Wall Street are physics or mathematics Ph.D.s well acquainted with the power and beauty of quantum mechanics, and since QCs will greatly increase a quant’s effectiveness, one hopes that quants will be keen on QCs. Just think of it: “Quants, the Next Generation”, or “Make Way For the QuQus (Quantum Quants)”. Okay, maybe it’s better not to think of it too much. I wonder if quants can help to persuade investors to invest in quantum computing.

At the present time, there is only one private company, D-Wave, doing full-time QC research, so more private QC research and development is sorely needed. It will take much more than one measly company to reach the critical mass of QC companies that will be needed to launch a self-sustaining QC industry.

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3 Comments »

  1. …measly? 🙂

    I agree that sampling/monte carlo applications match well with high value financial applications, and that more private development efforts across the board would be great. Any ideas how to get more entrepreneurial effort going in this space?

    Comment by Geordie — February 9, 2010 @ 2:06 am

  2. Geordie, I wish I knew. Despite strongly believing in the future of QCs, I’ve never been able to get any entrepreneurs interested in them, so I’m ultimately just the writer of a dumb blog that very few people read.

    Comment by rrtucci — February 9, 2010 @ 5:06 pm

  3. This thread, entitled “quantum computing and finance”, at the “Wilmott Forums”, might be of interest to some readers.

    Comment by rrtucci — February 20, 2010 @ 7:15 am


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