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  4. A Quantum Algorithm for Pricing Asian Options on Valuation Trees
 
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2022
Journal Article
Title

A Quantum Algorithm for Pricing Asian Options on Valuation Trees

Abstract
We develop a novel quantum algorithm for approximating the price of a discrete floating-strike Asian option based on an underlying valuation tree. 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. The algorithm may be used with quantum amplitude estimation, enabling a quadratic speed-up over classical Monte Carlo methods.
Author(s)
Wolf, Mark-Oliver
Fraunhofer-Institut für Techno- und Wirtschaftsmathematik ITWM  
Horsky, Roman  
Fraunhofer-Institut für Techno- und Wirtschaftsmathematik ITWM  
Koppe, Jonas
Fraunhofer-Institut für Techno- und Wirtschaftsmathematik ITWM  
Journal
Risks  
Open Access
DOI
10.3390/risks10120221
Language
English
Fraunhofer-Institut für Techno- und Wirtschaftsmathematik ITWM  
Keyword(s)
  • tree methods

  • quantum computing

  • option pricing

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