The impact of quantum computing

A new type of computer is coming — one that can solve problems much faster and much better than today’s models. Quantum computing, powered by quantum mechanics, represents a foundational shift in computing.

Eric Ghysels, the Edward Bernstein Distinguished Professor of Economics and Professor of Finance, researches the impact quantum computing could have on finance at UNC Kenan-Flagler Business School.

“Quantum computing is one of the emerging technologies for dealing with all sorts of practical problems facing financial institutions,” he said. “It is a paradigm shift compared to classical computing, and it has the promise to affect many issues of decision-making in the financial sector.”

Ghysels answers questions about quantum computing and how it can impact businesses and the financial sector.

When did you begin to realize quantum’s potential impact on finance and study the implications?

Six years ago I read that NC State had established the very first Q Hub, as it was called, which is quantum hardware sponsored or supported by IBM, meaning that we could actually work with real hardware. That drew my curiosity, and in 2019 I went to the first Q Network meetings organized by IBM in New York. Ironically, the pandemic helped in that we all took classes online while sitting home.

What are the biggest potential changes — both challenges and opportunities?

Encryption is based on algorithms and factorization problems that cannot be solved easily within a reasonable amount of time, and we’re talking about 70,000 years —just inconceivable to break a code. Quantum computers will easily break those codes that underlie encryption. That means that all the traffic that we consider to be safe on the internet and all the transactions that we think are safe through encryption are jeopardized.

Most financial institutions know that and are getting quantum ready. That’s the most obvious thing, but that’s not only for financial institutions. That’s true for all the other things that go through internet connections.

There are other things, of course: the speed at which we trade, the speed at which we can derive formulas for portfolio allocation, pricing of derivative securities … all are going to be affected by the computational speedups.

Carolina has a webinar series on quantum computing and business. How did that come about?

This started around 2019. Initially, it was organized by the Rethinc Labs, of which I am the research director of at the Kenan Institute of Private Enterprise. This was parallel to a series that was joined between NC State and Duke. They were organizing quantum-related webinars, except they did not cover financial sector applications. We now have a joint Duke, NC State and UNC webinar.

What are you most curious to learn more about?

I’ll give you two projects I’m working on. One is solving what we call asset-pricing problems. How do you price a particular asset that has a particular payoff profile? That’s a very foundational question in finance. You buy a security or real estate property — how do you price it? I’ve been working on research on the potential exponential speedup of computing solutions to asset-pricing problems.

The other project involves combinatorial optimization, which requires matching of bids and asks people who want to buy versus people who want to sell. You want to figure out how you combine these different sides of the market. Quantum computers are good at solving combinatorial optimization problems and are better than classical computers.

Read more about the technology behind quantum computers.

By Brennan Doherty, University Communications