Diversification & Hedging
Diversification and hedging are two widely used strategies to manage the risk of a financial portfolio. Diversification seeks to reduce the volatility of a portfolio by taking positions in uncorrelated assets.
Challenge: Identifying the largest subset of uncorrelated assets or a given basket of them becomes an exponentially hard optimization problem.
Potential Benefits of quantum-inspired:
Finding well diversified/hedged sets of investments among thousands of instruments for extremly risk averse investors.