Singapore-headquartered bank UOB has announced a collaboration with Singapore’s Centre for Quantum Technologies (CQT) to develop quantum computing applications for the valuation of complex financial derivatives.
Financial derivatives include instruments such as options, futures and swaps defined for different kinds of assets, and serve to manage financial and market risks. Valuing these complex instruments is difficult and poses substantial computational challenges, especially where closed-form pricing methods are highly impractical.
Currently, large-scale simulation methods, such as the Monte Carlo method, are widely used. These simulations run thousands of potential future market scenarios to derive fair values – which can be extremely time- and resource-intensive.
Through this collaboration, UOB and CQT will assess how quantum computing methods could process large volumes of scenarios more efficiently under certain conditions, to achieve faster valuation, improved precision and more scalable approaches to managing derivative risks over time. CQT researchers at the National University of Singapore (NUS) will work on the project with support from the National Quantum Computing Hub (NQCH).
The initial phase of the project will focus on path-dependent instruments, whose valuations depend on multiple market variables as well as historical price movements. These characteristics make them among the most computationally demanding products to value using traditional methods.
By combining UOB’s expertise in financial markets and derivatives risk management with CQT’s research capabilities in quantum algorithms, the collaboration aims to bridge the gap between academic research and real-world financial applications. The partnership reflects a joint commitment to translating advanced technology into practical solutions that can strengthen the resilience and efficiency of the financial system.
Mr Lawrence Goh, Head of Group Technology and Operations, UOB, said, “As financial markets become more complex, the need for faster and more accurate risk modelling continues to grow. By investing early and building a clear deployment roadmap, we are laying the foundation for the next generation of banking capabilities – where research and innovation are translated into practical solutions that strengthen risk management and resilience, catalyse scale, and provide long-term value to our customers.”
Dr Patrick Rebentrost, Principal Investigator at CQT and Associate Professor in the NUS Department of Computer Science, said, “We know in theory that quantum computing could help with the difficult task of pricing financial derivatives. The collaboration with UOB is an opportunity to advance that theory into practice, testing our methods against real-world scenarios. We will develop beyond-Monte Carlo quantum techniques that could significantly improve our ability to evaluate complex risk scenarios.”
The initiative follows Singapore’s National Quantum Strategy announced in 2024 to strengthen Singapore’s position as a leading hub in the development and deployment of quantum technologies. CQT and NQCH are both programmes supported under the strategy. NQCH, which has CQT as a member, provides access to quantum computers and drives public-private partnerships in quantum computing.
