Photonic Quantum Computing vs. Classical Solvers in Constrained Factor Portfolio Optimization

Title:Photonic Quantum Computing vs. Classical Solvers in Constrained Factor Portfolio Optimization

Abstract:The authors present a rigorous empirical evaluation of three distinct optimization paradigms for institutional factor portfolio construction: an entropy-based photonic quantum annealer (Dirac-3, Quantum Computing Inc.), a commercial mixed-integer programming solver (Gurobi), and a model-free deep reinforcement learning agent (SAC). Evaluating these pipelines on the Jensen-Kelly-Pedersen 13-factor equity library across 164 months test window, we implement a full factorial penalty sweep comprising 48 hyperparameter configurations that govern return, volatility, and skewness trade-offs. Our findings demonstrate that while photonic hardware can locate superior risk-return topologies within a narrow operating range, classical mixed-integer programming remains superior for risk-constrained mandates requiring tight tail-risk control and cross-seed stability. Furthermore, we document structural failure modes in reinforcement learning factor allocators under unanchored higher-moment shaping. We translate these empirical results into actionable, mandate-specific guidelines for quantitative portfolio managers deploying advanced optimization engines.

Quantum Physics (quant-ph); Portfolio Management (q-fin.PM)

arXiv:2608.14134 [quant-ph]

(or arXiv:2608.14134v1 [quant-ph] for this version)

https://doi.org/10.48550/arXiv.2608.14134 Focus to learn more arXiv-issued DOI via DataCite (pending registration)

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