Benchmarking Quantum Algorithmic Resilience for CVaR Portfolio Optimization: The Expressibility-Coherence Trade-off

Abstract:Quantum combinatorial optimization offers theoretical advantages for complex financial modeling, but physical implementation on Noisy Intermediate Scale Quantum (NISQ) devices is severely constrained by hardware topology. This study presents a hardware benchmarking analysis between a Hardware Efficient Variational Quantum Neural Network (HE-VQNN) and the Warm Start Quantum Approximate Optimization Algorithm (WS-QAOA) for a hybrid Mean Variance and Conditional Value at Risk (CVaR) portfolio objective. By implementing a novel classical quantum hybrid proxy matrix to bypass the CVaR auxiliary qubit bottleneck, we map up to 16 assets from the NIFTY 50 index onto an IBM heavy hex processor. We systematically quantify algorithmic resilience to the "SWAP tax" incurred during routing. Empirical results reveal a critical operational trade-off: WS-QAOA provides exact theoretical mapping but suffers catastrophic hardware decoherence due to exponential nonlocal gate overhead. Conversely, HE-VQNN preserves hardware coherence but lacks the mathematical expressibility to capture dense tail risk asset correlations. This study exposes the limitations of dense financial optimization on current architectures forces an nonviable choice between algorithmic inexpressibility and hardware decoherence. This is indicative of a deeper limitation as to what can and cannot be done with NISQ computers lacking in all-to-all connectivity.

10 pages, 11 figures. Master's thesis research conducted at the School of Quantum Technology, Defence Institute of Advanced Technology (DIAT), Pune

Quantum Physics (quant-ph); Computation and Language (cs.CL); Optimization and Control (math.OC); Portfolio Management (q-fin.PM)

arXiv:2606.07727 [quant-ph]

(or arXiv:2606.07727v1 [quant-ph] for this version)

https://doi.org/10.48550/arXiv.2606.07727 Focus to learn more arXiv-issued DOI via DataCite (pending registration)

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