Solving Currency Arbitrage Problems using D-Wave Advantage2 Quantum Annealer

2025-09-26

AI Summary

This work addresses Currency Arbitrage (CA), an NP-hard combinatorial optimization problem, by proposing the first exact Quadratic Unconstrained Binary Optimization (QUBO) formulation and implementing it on the D-Wave Advantage2 quantum annealing hardware. The approach transforms cycle-based arbitrage detection in foreign exchange rate networks into a binary optimization problem, circumventing computational bottlenecks inherent in classical graph algorithms and integer programming. Experiments on medium-scale instances (≤20 currencies) demonstrate that the quantum annealing solution achieves superior solution quality and runtime efficiency compared to classical simulated annealing and the Gurobi optimizer—particularly under realistic, noisy exchange rate data, where it exhibits enhanced robustness. This study extends the applicability of quantum annealing to financial optimization and delivers the first hardware-deployable quantum computing framework for CA.

Technology Category

• Search and Optimization: Combinatorial Optimization
• Machine Learning: Quantum Machine Learning
• Constraint Satisfaction and Optimization: Satisfiability

Application Category

• Economics, Online Markets and Human Computation: Data quality aspects of human-annotated datasets
• Graph Algorithms and Modeling for the Web: Graph neural networks and deep learning approaches for Web-related graphs
• Web Mining and Content Analysis: Web data quality in the era of algorithmically-generated content

Abstract

Quantum annealing has emerged as a powerful tool for solving combinatorial optimization problems efficiently, making use of the principles of quantum mechanics. Companies are increasingly investing in the market of quantum computers, providing the users with the possibility to solve these optimization problems by resorting to quantum computers. This paper explores how Quantum Annealing can be applied to the Currency Arbitrage (CA) optimization problem and its comparative performance against classical methods. A key contribution of the work is an original formulation of the CA problem as a QUBO (Quadratic Unconstrained Boolean Optimization) problem. We test the speed of D-wave quantum annealer, using the recently released latest version (Advantage 2).

Problem

• Solving currency arbitrage via quantum annealing optimization
• Formulating arbitrage as a Quadratic Unconstrained Boolean Optimization
• Comparing quantum annealing performance against classical methods

Innovation

• Quantum annealing for currency arbitrage optimization
• QUBO formulation of currency arbitrage problem
• D-Wave Advantage2 quantum annealer performance testing