Implementing Credit Risk Analysis with Quantum Singular Value Transformation

Abstract: The analysis of credit risk is crucial for the efficient operation of financial institutions. Quantum Amplitude Estimation (QAE) offers the potential for a quadratic speed-up over classical methods used to estimate metrics such as Value at Risk (VaR) and Conditional Value at Risk (CVaR). However, numerous limitations remain in efficiently scaling the implementation of quantum circuits that solve these estimation problems. One of the main challenges is the use of costly and restrictive arithmetic that must be implemented within the quantum circuit. In this paper, we propose using Quantum Singular Value Transformation (QSVT) to significantly reduce the cost of implementing the state preparation operator, which underlies QAE for credit risk analysis. We also present an end-to-end code implementation and the results of a simulation study to validate the proposed approach and demonstrate its benefits.