Papers › Quantum unary approach to option pricing

Quantum unary approach to option pricing

3 Dec 2019arXiv:1912.01618links table onlyarchive 2025-07-28

Sergi Ramos-Calderer, Adrián Pérez-Salinas, Diego García-Martín, Carlos Bravo-Prieto, Jorge Cortada, Jordi Planagumà, José I. Latorre

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We present a quantum algorithm for European option pricing in finance, where the key idea is to work in the unary representation of the asset value. The algorithm needs novel circuitry and is divided in three parts: first, the amplitude distribution corresponding to the asset value at maturity is generated using a low depth circuit; second, the computation of the expected return is computed with simple controlled gates; and third, standard Amplitude Estimation is used to gain quantum advantage. On the positive side, unary representation remarkably simplifies the structure and depth of the quantum circuit. Amplitude distributions uses quantum superposition to bypass the role of classical Monte Carlo simulation. The unary representation also provides a post-selection consistency check that allows for a substantial mitigation in the error of the computation. On the negative side, unary representation requires linearly many qubits to represent a target probability distribution, as compared to the logarithmic scaling of binary algorithms. We compare the performance of both unary vs. binary option pricing algorithms using error maps, and find that unary representation may bring a relevant advantage in practice for near-term devices.

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