How Quantum Technology Can Aid Personal Investment and Support Financial Wellbeing
Jakarta, 31 July 2023 - Nowadays, financial wellbeing is becoming increasingly important as people become more aware of financial literacy.
The desire for individuals to feel secure, be able to fulfil their obligations and achieve financial freedom has given birth to new forms of financial technology. Examples are insurtech in insurance and fintech in finance.
This is also reflected in the broader field of economics, which traditionally focuses on the production, distribution, and consumption of goods and services.
One type of technology that is growing rapidly today is quantum technology.
In the realm of finance, quantum technology is closely related to financial technology today and in the future. The ability of quantum technology to solve complex problems more efficiently and practically is indispensable in finding solutions in the unpredictable world of finance.
What is quantum technology?
Quantum technology is a rapidly emerging field of the 20th century, characterised by Albert Einstein's discovery of the laws of relativity.
Basically, everything has generalised and "logical" properties. For example, a ball thrown upwards will fall downwards. If person A walks at 20 km/h for 4 hours, then he has travelled 80 km. In short, everything in this world can be measured.
However, at the quantum level that deals with very small particles, such as atoms, things are very different. The superposition condition allows particles to be in many places at once. This theory may seem strange, but it has been proven by many thinkers.
Imagine if we have a Rp 500 coin and want to throw it. In the quantum world, before the coin falls with the result of Lieutenant General TB Simatupang's face or the number 500, the coin can actually be in a state that is a combination of both simultaneously.
Another important aspect of quantum mechanics is entanglement. When various particles are brought together, their properties can be connected.
Today, scientists are developing ways to control and manipulate quantum mechanics to create technologies with extraordinary properties. One of them is to create a quantum computer.
Quantum computers have significant advantages in terms of data processing speed and can be more efficient. This allows quantum computers to perform many calculations simultaneously, making them faster and more efficient than traditional computers.
Quantum technology also shows promise in quantum communications and cryptography, the science of using complex mathematical techniques and algorithms to secure data. Quantum mechanics can protect confidential and sensitive information, making it almost impossible for eavesdroppers to get in.
So, what does this have to do with finance?
In many situations, traditional methods are often difficult and time-consuming when faced with complex computational processes that need to be completed quickly. Computing is the process of manipulating data or information for the purpose of solving problems, performing calculations, or even performing specific tasks - from operating Microsoft Excel and Google Sheets to creating virtual worlds and animations.
The use of quantum technology, for example, is linked to the financial well-being of investors and market participants. By using quantum technology, investors and market participants can quickly obtain important results and information and enable them to make more timely investment decisions.
This is related to how quantum technology allows for faster and more accurate calculations in setting option prices, as well as enabling better risk assessment and trading strategies. Option pricing refers to the value or cost of a financial contract called an "option", a type of derivative instrument traded in financial markets. The option gives the option holder the right to buy or sell a stock or other commodity at a certain predetermined price. Options may have a maturity date, which indicates the time limit within which the right can be exercised.
Raymond Lee, an expert on quantum finance and artificial intelligence from the United International College, China said in his book "Quantum Finance" (2020) that the application of quantum technology in the financial world can be seen from the wave-particle duality of the financial market itself.
In quantum physics, waves and particles are two basic concepts that form the basis of quantum mechanical theory. Waves are entities that can spread and expand. Meanwhile, particles are localised entities with a certain position or momentum.
In the financial market, stock prices can be seen as particles that can be bought and sold. For example, when investors buy shares of a company, they can acquire as much ownership rights as they buy. At that point the share price has a localised and identifiable value.
However, stock prices can also be seen as waves that can rise and fall, fluctuate and change over time due to political events, market sentiment, and so on.
The wave-particle duality of financial markets has many implications for the world of finance and allows for the development of a new field of finance, quantum finance. This field of study has the potential to revolutionise the way humans think about finance and create new trading strategies that are more profitable than traditional trading strategies.
Some developed countries have begun to apply quantum technology to improve the quality of human resources, the quality of research, and the progress of their industries. For example, Japan, which just released their first quantum computer online as of 27 March 2023.
Quantum finance in Indonesia
In Indonesia, the growth of quantum technology has not been very popular. Besides being behind in terms of access, there are several obstacles that need more attention.
Firstly, the application of quantum technology in finance requires a cross-disciplinary understanding. Combining quantum principles with the financial industry makes both fields more complex to understand and manage. This requires a deep understanding of quantum physics concepts as well as an understanding of financial markets, financial instruments and other financial knowledge.
Secondly, devices affected by quantum principles often require complex calculations and optimisation. However, the current hardware limitations of quantum computers can hinder the work of the computers themselves. These limitations affect the application of quantum technology in areas such as portfolio optimisation, risk management and trading algorithms.
Third, quantum computers require expertise in quantum physics, quantum algorithms and programming languages related to quantum computing. However, the availability of individuals with quantum expertise is limited, making it difficult for financial institutions and individuals to acquire and utilise such quantum principle-influenced strategies.
Fourth, many financial institutions use legacy systems that may not be compatible with quantum-based technologies. Integrating devices based on quantum principles into existing infrastructure and software can be problematic and time consuming and costly.
However, developing this technology has many advantages. Just as quantum entanglement describes the correlations between quantum particles, entanglement of economic factors such as income, expenses, investments, and savings affects the overall economic outcome.
By enabling individuals to analyze multiple options simultaneously and consider the different possible outcomes, quantum technology can improve the process of making personal financial decisions more accurately and help improve our financial well-being.
