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 Post subject: Quantum Financial Algorithms
PostPosted: Sat Dec 19, 2015 1:12 pm 
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I know very little about "Quantum methods" possible use on Wall Street beyond the numerous articles I've read online the past 2 years ever since a tech documentary on TV about D-Wave computers. I know several big name firms like Goldman Sachs is investing in the technology to determine its future use in the markets beyond the current "theories". Its use could become a reality within a few decades from today...impacting the internet, financial markets and many other professions (e.g. medicine) of those in the future that are children today.

It's also "theorized" that in the beginning it will only be the wealthy Wall Street firms that will be able to afford the technology prior to it becoming available to the retail folks.

With that said, there are some losing retail traders running around on the internet using quantum trading as a scare tactic against discretionary trading. These traders easily forget that trading has been here since the 17th century and we've had a lot of incredible technological advances that Wall Street has taken advantage of. Yes, initially all new technology use begins at the top and then is used by the bottom retail folks.

As researchers stated, if Quantum becomes available just like all prior new technologies...Quantum Financial Algorithms use begins at the top and eventually filters down to the bottom (retail). A recent example is algorithms itself, it begin at the top and is now being used by retail traders that have the knowledge and resources to compete with the big institutions.

Google is now involving it in its chrome browser experiments. Thus, is an example of a company using Quantum computing in other areas outside the market in an effort to make it available to the general public. In fact, Microsoft released its Quantum computing simulator to the general public so that academics, scientists and even do-it-yourself eggheads can simulate quantum computing on their laptops.

http://fortune.com/2015/11/13/microsoft-quantum-computing-simulator/

Simply, everyone will have access to it because it will be available to the consumer (general public) and I'll be shocked if retail traders will just sit there and not take advantage of the new technology just as retail traders are now taking advantage of algorithm trading.There's also a growing number of discretionary traders getting better at riding the coat-tail of algorithms and it doesn't involve scalping.

Note: A particular sub-group of discretionary trading is called scalpers. Most scalpers can't compete with algorithms because they don't have competitive fees except for those that have a seat on the exchange, using an execution platform suitable for scalping and so on.

Its a shame there are ignorant traders out there trying to scare retail traders with this info about quantum computing/trading instead of embracing it as a new tool in the future that retail traders can use because most will have access to it at the same time when Wall Street begins applying it in real life...thanks to companies like Google and Microsoft that has already begun designing it for the general public.

As for us discretionary traders, our goal is not to compete with other retail trading or professional firm using algorithms. In contrast, just ride their coat-tails but we must understand one key point about automation or algorithm trading...

Not all of them are profitable because they primarily compete with each other. Also, there's pending regulations being planned to minimize the impact of High Frequency Trading (HFT) algorithms on the market via a key element called "order cancellation rates" because order cancellation has given algorithm trading a huge advantage. The regulators have openly stated this is "bad behavior" and borders being "illegal" because it lacks transparency due to old order rules being taken advantage by High Frequency Trading (HFT) instead of the rules being updated to create transparency for current market environment.

If those rules get updated along with removing special privileges enjoyed only by High Frequency Trading (HFT) algoriths firms along with quantum trading becoming available for the retail public as is the goal of companies like Google and Microsoft...there's going to be a completely different ball game...a fair game.

Traders adapt with every new technology...it has always been that way and will always be that way since the 17th century.

wrbtrader


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 Post subject: Re: Quantum Financial Algorithms
PostPosted: Sat Dec 19, 2015 1:15 pm 
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Microsoft Simulator Brings Quantum Computing One Step Closer to the Masses

by Barb Darrow @gigabarb November 13, 2015, 9:00 AM EST

Microsoft will share its LIQUi|> (no, that’s not a typo) simulator software with the public, so academics can test quantum computing operations on laptops or in the cloud.

On Friday, Microsoft is releasing simulation software that it says will let academics, scientists, or even do-it-yourself eggheads simulate quantum computing on their laptops.

The promise of quantum computing, which breaks the nuts-and-bolts of computing down to the sub-atomic level, is that it can solve problems that go far beyond the capabilities of even today’s most powerful computers.

The current generation of computers represent all data as ones and zeros. It’s all a very binary, on-or-off proposition. By relying on smaller particles, like photons or electrons, a quantum computer would be able to look at data that can hold several contradictory states at the same time. For instance, instead of those ones and zero, a quantum computer would deal with quantum bits (also known as qubits), which would accommodate multiple states.

It’s a bit complicated for mere mortals to understand, but what all that means is that quantum computers should be able to calculate certain problems—modeling molecules for example—much, much faster than their transistor-based forebears.

One problem with all of this work is it’s still largely theoretical. Scientists think it will work, but the gear required to run these calculations isn’t here yet. That’s because to keep all those wee subatomic particles in a stable state, the equipment has to be very, very cold—100 times colder than the temperature in outer space—according to Dave Wecker, chief architect of the Microsoft’s MSFT -2.82% quantum team, also known as QuArC.

As if that’s not difficult enough, it’s also not clear how best to state the problems that need to be solved by quantum computers, or how to interpret those results since this will be a whole new qubit-inspired world. That’s something the simulator can help researchers get their minds around.

The software, which Microsoft has been using in house for some time, is called Language-Integrated Quantum Operations, or LIQUi|> (and no, that’s not a typo). LIQ stands for language integrated quantum, says Wecker. The vertical bar stands for “ket” which is tech speak for the quantum state. U is the operation performed on the quantum state and the “greater than” bracket is simply a bracket, Wecker says.

As an example of a problem that a quantum computer could solve, Wecker cites the creation of high-temperature superconductors. “We lose electricity on our transmission lines. Superconductors would have no losses, but no one can build a super conductor at anything near room temperature. We could model than on a quantum computer and at least have the hope of solving that problem,” Wecker says.

Ditto the creation of organic batteries, which wouldn’t have to rely on expensive and polluting heavy metals. “We know we can build them but which molecules do we use? There are millions. A cloud of quantum computers could test them all out.”

Drug modeling and testing is another potentially huge use for these computers, which explains why companies like Microsoft, Google GOOG -1.35% , IBM IBM -1.35% , and others are investing in the field. D-Wave Systems, has its own version of a quantum processor, one of which was just sold to Los Alamos National Laboratory.

There are also other quantum computing simulators on the market, including one from Google for example. Wecker says the differentiator here is this is industrial strength and academics or researchers can extend it, adding their own quantum calculations as needed.

The simulator is 30 qubits, which requires 32 gigabytes of memory. That means it can run on a high-end laptop or desktop. Every qubit added, he warns, will double the memory requirement. The code means some simulations can run locally, or if you have bigger requirements, you can turn to the cloud of your choice—such as Microsoft Azure, Amazon AMZN -0.97% Web Services, or Google Cloud Platform—he adds, there are no restrictions on use.

The executable code, along with documentation, will be available on the Github code repository for download. Microsoft will talk more about the simulator next week at Supercomputing 2015 in Austin.

http://fortune.com/2015/11/13/microsoft-quantum-computing-simulator/


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 Post subject: Re: Quantum Financial Algorithms
PostPosted: Sat Dec 19, 2015 1:22 pm 
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Quantum Computers Entice Wall Street Vowing Higher Returns

By Jack Clark and Saijel Kishan December 9, 2015

Goldman Sachs, RBS, CME, Guggenheim exploring the technology

$10 million computers may help in complex asset allocation


You may soon be able to see every conceivable outcome of a wager, say on interest rates, over many time horizons -- thanks to computers that rely on the uncertainty at the root of all matter.

Wall Street is turning its attention to quantum computers, an emerging technology that aims to exploit the properties of subatomic particles to make extremely complex calculations at unprecedented speeds. Goldman Sachs Group Inc., Royal Bank of Scotland Group Plc, CME Group Inc. and Guggenheim Partners are evaluating quantum computing, which requires temperatures colder than in outer space.

The technology is exceptionally complicated, and researchers are debating whether machines now on the market are as powerful as advertised. If successful, these supercomputers could give money managers and banks, whose algorithmic-driven technology already dominate trading, another advantage in a highly competitive market. They can help managers better allocate money to a broad range of assets, find new ways to profit from differences in prices across markets, and value complex derivatives structures, said Marcos Lopez de Prado, a senior managing director at Guggenheim Partners.

“The quantum computer is very good at a few things that happen to be very, very hard for traditional computers,” said Lopez de Prado, also a research fellow at Lawrence Berkeley National Laboratory. “It can solve complex problems in exponentially less time.”

The cost: at least $10 million per computer, he said.

Financial firms are following a handful of companies and governments, including China, France and the U.K., into the world of quantum computing. Lockheed Martin Corp., one of the first adopters, has deployed it to spot bugs in the code that runs F-16 aircraft. Microsoft Corp. and International Business Machines Corp. are developing quantum technologies to speed up software. China’s Alibaba Group Holding Ltd. in July announced plans to form a quantum computing laboratory with the Chinese Academy of Sciences to carry out exploratory work.

Google’s Algorithms

Google Inc. is designing learning algorithms that work on a quantum computer and is collaborating in its research with the National Aeronautics and Space Administration, which has one of the machines. It has demonstrated the ability to crunch through very complex problems in a matter of seconds that would take traditional computers 10,000 years, Hartmut Neven, a director of engineering at Google, said at a press conference on Tuesday.

"We have encountered practical problems we would like to solve that are unfeasible with conventional computers," said John Giannandrea, Google’s vice president of engineering. "We want to understand the future that may lie ahead of us in non-conventional computers."

The quantum computers that can be bought today are made by D-Wave Systems Inc., a 16-year-old Canadian company. D-Wave has raised C$174 million ($130 million) from backers, including Goldman Sachs, which has invested its own money in the company.

At Goldman Sachs, engineers are considering using the technology, as is CME Group, the largest futures exchange, according to people who asked not to be identified because the information is private. Michael DuVally, a spokesman for Goldman, declined to comment. Alex Gorbokon, a spokeswoman for CME, said the exchange is “always looking at new technologies.”

Better Returns

Researchers including Guggenheim’s Lopez de Prado and Peter Carr, a Morgan Stanley managing director, said in a paper in August that they demonstrated the potential of quantum computing to help asset managers solve a difficult problem: wagering on a set of assets over a time horizon that’s divided into multiple steps. The manager must decide how much to invest in each asset at each step, while taking into account transaction and market-impact costs.

Managers today make their calls after traditional computers are fed historical data and forecasts for everything from interest rates and unemployment to stock and currency prices. Conventional technology is able to evaluate millions of possible investment scenarios to guide managers.

“That’s a drop in the ocean,” said Lopez de Prado. “Quantum technology can evaluate all possible scenarios in order to produce an optimized portfolio that can deliver the best risk-adjusted return.”

The performance of today’s binary computers is determined by the number of transistors that fit into a space and how cleverly engineers can connect them. Each transistor can essentially be switched on or off, which maps to zeros and ones -- or the bits -- in code that fuels the computer’s processor.

Qubit Computing

Quantum computers use qubits, which are based on measuring the properties of subatomic particles, as their most basic element. At any point in time, a qubit can be either a zero, a one, or somewhere in between. This means qubits in a quantum computer can explore a far larger number of possibilities than the zero-or-one bits in a typical computer to find the most efficient answer to a math problem, resulting in its greater power and speed.

D-Wave quantum computer
D-Wave quantum computer
Source: D-Wave Systems Inc.

For D-Wave’s computer to work properly and stop its qubits from interacting with other particles, its thumbnail-sized computer chip is encased in a large box, where it is cooled to temperatures of about minus 459 Fahrenheit (minus 273.15 Celsius).

CME is an investor in Canadian software firm 1QB Information Technologies, which helps companies write applications for quantum computers. 1QBit is working with a handful of financial institutions, including the Royal Bank of Scotland, said Andrew Fursman, co-founder of 1QBit.

"We’ve reached out to a number of large financial institutions and have a number of projects on the go," he said.

Simon McNamara, the chief administrative officer at RBS, told The Telegraph that quantum computing will play some role in finance, performing tasks in seconds that currently take days to complete.

Quantum Debate

D-Wave’s machines are spurring debate among researchers who question if they are truly quantum in operation. A paper published in 2014 found no evidence that D-Wave’s technology solved a task faster than a traditional computer using quantum methods. Then a paper published this summer found that the D-Wave machine displayed some quantum characteristics. That prompted Scott Aaronson, an associate professor at the Massachusetts Institute of Technology, to write that while researchers don’t fully understand the characteristics of its machine, "D-Wave and the others are in this for the long haul."

Lopez de Prado said the criticism is immaterial.

"I’m not so worried about how or why the computer solves the problem,” he said. “From a practical perspective what is clear is that this computer is able to do things that traditional computers can not.”

http://www.bloomberg.com/news/articles/2015-12-09/quantum-supercomputers-entice-wall-street-vowing-higher-returns


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 Post subject: Re: Quantum Financial Algorithms
PostPosted: Mon Dec 21, 2015 5:18 pm 
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Thank you Mark for sharing that info. I am familiar with some of what you mentioned and there is some great new info.

My take away is this..............people need to take responsibility for all aspect of their lives......trading included.

Most traders will never make money for a multitude of reasons..........HFT is their latest excuse.

I have seen one of the AI/algos that one of the bigger firms uses.........yes it gives an edge.......and your WRBHG, which I am still working at learning, does very well in my limited experience.

Thanks for all that you do Mark much appreciated. And thanks to others that share here as well. :)

Happy Holidays all.......be safe :)


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 Post subject: Re: Quantum Financial Algorithms
PostPosted: Tue Jan 03, 2017 8:04 am 
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Thanks for putting this information together. Been interested in Quantum Computing recently and looking forward to seeing how this will be applied in the medical field. Thinking how we can further analyze full DNA structures and chain together protective proteins for custom designed vaccines / medicine.

For those that are interested learning more about the D-Wave Quantum Computing you can find more information at the links below:

https://en.wikipedia.org/wiki/D-Wave_Systems
https://en.wikipedia.org/wiki/D-Wave_Two

Great history of the technology along with the evolution of where it is going.

D-Wave System launched their first Quantum Computer in 2011, called the D-Wave One. This year they are looking at launching their newest version currently called D-Wave that has 18X the the processing power. D-Wave One only had 128 Qubits, while the 2017 D-Wave will have 2000+ Qubits.

A qubit is a unit of quantum information—the quantum analogue of the classical bit. A qubit is a two-state quantum-mechanical system, such as the polarization of a single photon: here the two states are vertical polarization and horizontal polarization. In a classical system, a bit would have to be in one state or the other

For more information in Qubits you can check out this link below:

https://en.wikipedia.org/wiki/Qubit

Once this sort of power gets into the hands of the retail investor / home user things are going to start to get very interesting at various levels.

Where do you see them benefiting most with this?


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 Post subject: Re: Quantum Financial Algorithms
PostPosted: Sat Jan 07, 2017 9:09 am 
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Hi aioninfinity,

Thanks for the information.

I think in a few more years we're going to hear more about Quantum computing and Quantum algorithms and I think we'll hear more about it involving the medical/pharmaceutical/security fields prior to hearing more about it involving the financial markets.

Also, I hope Microsoft is able to keep their promise to bring Quantum computing to the masses or to those that can afford it.

Regards,
M.A. Perry


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