CaixaBank, the leading financial group in Spain, and D-Wave Systems Inc., a global leader in quantum computing systems, software and services and the only vendor producing both annealing and gate model quantum computers , today announced business results for two major financial quantum hybrid computing applications for investment portfolio optimization and investment hedge calculation. As a result of their collaboration, the hybrid quantum applications have been able to significantly reduce the computing time for solving complex financial problems, improve investment portfolio optimization, increase the internal rate of return (IRR) of a bond portfolio and minimize the capital required for hedging transactions.
Quantum in the area of hedging investment portfolios and optimizing bond portfolios
CaixaBank’s life insurance and pension company, VidaCaixa, leveraged D-Wave’s Leap ™ quantum cloud service and hybrid quantum solution techniques that combine the strengths of classical computing and quantum computing to create a quantum computing application for the to develop the selection and allocation of investment portfolios and for portfolio hedging. With this project, CaixaBank Group is the first known financial services company in the world to use quantum computing to secure investments in the insurance sector. The group is examining whether the application can be transferred to regular operation not only in VidaCaixa, but also in other areas of the company in the coming months.
The CaixaBank Group team leveraged D-Wave’s hybrid quantum solver services to program a faster algorithm that significantly reduced the computation time required for an optimal solution to improve investment portfolio hedging. What would normally take the bank several hours of computing time has been reduced to just a few minutes with the help of quantum computing technology – a reduction in computing time of up to 90% compared to the conventional solution. This reduction in computation time allows the complexity of the modeling to be increased, resulting in a more dynamic model that better adapts to real-time markets, making the most of the invested capital while maintaining risk, and improving the hedging decision-making process.
When selecting and allocating investment portfolios, the algorithm quickly generates portfolios that can be optimized in a shorter time frame, taking into account a larger number of boundary conditions. The result was a successful application that optimizes the IRR by 10% in a selected bond portfolio.
“We’ve always been an innovation-first company, and we realized very early on that investing in quantum computing could help us more efficiently offer cutting-edge products and services to provide the best experience for our customers. That was the case with this proof of concept, which confirms that the bank is the first in Spain and one of the first in the world to incorporate quantum computing into its daily work,” says Gonzalo Gortazar, CEO of CaixaBank. While attending a launch ceremony in Jülich, Germany, where D-Wave announced the first Leap quantum cloud-based system outside of North America at the Forschungszentrum Jülich Supercomputing Centre, Gortazar confirmed CaixaBank’s determination to to further explore the potential of quantum computing in the financial services industry: “We are excited to see this industry growing and maturing, and we look forward to increasing our investments and activities in quantum computing, which is sure to be transformative for our industry . We are very keen to work with D-Wave on this process.”
“Our focus has always been on developing and delivering quantum computing for practical applications and business value,” said Alan Baratz, CEO of D-Wave. “The financial industry is currently undergoing massive transformation, which is why the industry will benefit greatly from investments in quantum computing. CaixaBank has a clear vision for implementing market-ready quantum computing applications to increase efficiency, customer value and scalability. We look forward to continuing to work with the company as it expands its offering and identifies further use cases for quantum computing.”
CaixaBank’s way into the quantum world
In 2019, CaixaBank created an expert team of computer scientists, mathematicians and risk analysts dedicated to multidisciplinary innovation in the quantum field, to explore the potential of quantum technology to optimize the Bank’s various capacities in different areas, such as: B. in the areas of risk assessment and tail risk simulators, fraud detection using artificial intelligence and machine learning, quantum-proof cryptography, portfolio selection and allocation, and data mining optimization.
One of the first projects was to introduce a quantum algorithm capable of assessing the financial risk of two portfolios created specifically for the project based on real data, one consisting of mortgages and the other of treasury bills.
In 2020, CaixaBank developed the first machine learning algorithm for risk classification in Spanish banking, working on the basis of quantum computers. In this case, CaixaBank combined quantum and conventional computing at different stages of the calculation process to classify credit risk profiles. To do this, CaixaBank used a public data set corresponding to 1,000 artificial users who have a similar profile to existing customers, but whose data was specifically configured for the test.
In this project, CaixaBank used the Leap Quantum Cloud Service to access D-Wave’s hybrid quantum solver service, which includes the Advantage™ quantum computer. The cloud access and real-time service enable companies like the bank and countless other companies from different industries to solve large and complex problems. To date, D-Wave customers have developed hundreds of early applications with their systems, including protein folding, financial modeling, scheduling, logistics, manufacturing optimization, machine learning, route optimization and more. Given these results, CaixaBank is working to make hybrid quantum applications productive.
