Quantum Physics

    

Quantum Amplitude Estimation for Expected Loss Computation under a Discretized Latent-Factor Model

Authors: Arghya Ghosh

We present a quantum algorithm for estimating the expected loss of a credit portfolio driven by a latent risk factor. The method discretizes a continuous latent variable, encodes its probability distribution into quantum amplitudes, embeds the loss function via controlled rotations on an ancilla qubit, and applies Grover-style amplitude amplification. The resulting state admits a two-subspace decomposition enabling estimation of the expected loss using Quantum Amplitude Estimation (QAE) or a maximum-likelihood estimator (MLE) based on Grover power measurements. The approach achieves a quadratic speedup over classical Monte Carlo methods.

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[v1] 2026-01-23 14:52:05

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