UOB is collaborating with Singapore's Centre for Quantum Technologies (CQT) to assess how quantum-computing methods could improve the valuation of complex financial derivatives.
The initial work will focus on path-dependent instruments, whose values are determined by multiple market variables and historical price movements. Such contracts are among the most computationally demanding products to value using conventional methods.
Derivatives, including options, futures and swaps, are used to manage financial and market risks. Banks commonly use Monte Carlo simulations to estimate their value, running thousands of potential future market scenarios to calculate a fair price. This process can be time-intensive and resource-intensive.
As such, UOB and CQT will examine whether quantum methods could process large numbers of scenarios more efficiently under certain conditions, with the aim of improving valuation speed, precision and the ability to manage derivative risks at scale over time.
CQT researchers at the National University of Singapore (NUS) will work on the project with support from the National Quantum Computing Hub.
“We know in theory that quantum computing could help with the difficult task of pricing financial derivatives. The collaboration with UOB is an opportunity to advance that theory into practice, testing our methods against real-world scenarios. We will develop beyond-Monte Carlo quantum techniques that could significantly improve our ability to evaluate complex risk scenarios,” says Patrick Rebentrost, a principal investigator at CQT and associate professor in NUS’s Department of Computer Science.
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Lawrence Goh, UOB’s head of group technology and operations, adds: “By investing early and building a clear deployment roadmap, we are laying the foundation for the next generation of banking capabilities – where research and innovation are translated into practical solutions that strengthen risk management and resilience, catalyse scale, and provide long-term value to our customers.”
The initiative follows Singapore's National Quantum Strategy, announced in 2024. CQT and the National Quantum Computing Hub are programmes supported under the strategy, with the hub providing access to quantum computers and supporting public-private partnerships in quantum computing.
