HSBC has announced a partnership with quantum tech firm Terra Quantum (NASDAQ:QMCO) to explore applications of hybrid quantum technology in collateral optimisation. The news comes as part of HSBC's ongoing efforts to enhance its technological capabilities, following its recent move to join a quantum-secured metro network run by BT and Toshiba (OTC:TOSYY) in collaboration with Amazon (NASDAQ:AMZN) Web Services (AWS).
Collateral optimisation is a process that efficiently allocates and manages collateral assets to meet regulatory requirements while minimising costs. It uses mathematical and algorithmic strategies to balance risks, liquidity, and profitability. Current methods primarily rely on linear optimisation solvers, which can sometimes struggle when faced with higher complexities.
Terra Quantum believes that the application of quantum technology could improve this process by effectively handling high-dimensional optimisation problems and potentially providing better scalability. "Optimisation of capital is one of the core functions in a bank. Quantum technologies have the potential to enhance optimisation solutions across many parts of a financial institution," Vishal Shete, managing director UK, Terra Quantum said in a statement.
The partnership will see the application of TetraOpt, a proprietary solver that could tackle higher dimensionality and non-linear constraints more effectively than traditional methodologies, thereby optimising efficiency.
In addition to this project, HSBC is also trialling secure connections between its headquarters in Canary Wharf and a data centre in Berkshire using quantum key distribution (QKD) technology. This technology uses particles of light and the fundamental properties of quantum physics to deliver secret keys between parties, which can be used to encrypt and decrypt sensitive data, offering protection from potential cyber threats by quantum computers.
Markus Pflitsch, CEO and chair at Terra Quantum, expressed optimism about the collaboration: “Working with HSBC allows us to apply our cutting-edge technology to real world use cases at a world class leading financial institution. Hybrid quantum algorithms will revolutionize large scale intractable optimization tasks in the future. We want to demonstrate some of that potential already today”.
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