Practical Applications of Quantum Computing in Finance: Mathematical Foundations and Deployment Challenges

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Authors: Wan-Gon Lee, Anthony George Constantinides
Cited by: 2
References: 29

Abstract

This article presents a systematic survey of six prominent quantum computing applications in finance, unified under the paradigm of optimization as the foundational use case from which derivative applications are constructed. We formalize the transition from the classical Markowitz portfolio optimization framework to a quantum implementation via the Quantum Approximate Optimization Algorithm (QAOA), including explicit mathematical derivations, theoretical performance bounds, and convergence guarantees. Beyond algorithmic formalism, we critically assess prevailing hardware limitations, focusing on noise thresholds and coherence constraints that currently preclude a demonstrable quantum advantage over classical counterparts. Furthermore, we address the underexplored institutional prerequisites for financial deployment, including regulatory compliance, model validation protocols, and structural barriers to adoption. We conclude that despite ongoing hardware maturation, proactive engagement with quantum algorithm development is imperative for financial institutions to preempt technological obsolescence upon the achievement of hardware parity.

Fields of Study & Subjects

Quantum Computing Algorithms and Architecture Big Data and Digital Economy Cloud Computing and Resource Management

Publication details

Journal / source
Encyclopedia
Publisher
MDPI AG
Volume
6
Issue
5
Pages
95–95
Publication date
22 April 2026
Language
EN