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Illustration: Sarah Grillo/Axios

A new quantum algorithm could eventually make it easier for banks to manage the systemic risk that helped bring down the financial system more than a decade ago.

Why it matters: Major financial institutions spend huge computing resources in calculating the systemic risk that may be contained in their portfolios. Replacing classical computing with a quantum architecture could allow them to do it faster and cheaper.

What's happening: Zapata Computing, a Massachusetts-based quantum software company, and the Spanish bank BBVA are collaborating to develop a quantum algorithm to target credit valuation adjustment (CVA).

  • CVA is a change to the market value of derivative adjustments that account for credit risks from counterparties. It was introduced as a new requirement for banks following the 2007–2008 financial crisis, when the banking system was almost brought down because of failure to account for the risk.
  • This kind of analysis is so enormously complex that some major banks "spend half of their compute budget chasing this problem," says Christopher Savoie, Zapata's CEO and founder. "It's a big financial burden right now."

Where it stands: Zapata's algorithm outlines the hardware specifications future quantum machines would need to run it, which gives computer makers both proof of concept and a target to shoot for.

How it works: A quantum approach, says Zapata CTO Yudong Cao, can "actually bend the curve by taking advantage of unique aspects of quantum mechanics that doesn't have any classical counterparts."

  • While current-generation quantum computers are still too error-prone and small to execute Zapata's algorithm, if hardware can be improved, Cao says the algorithm could lead to a "hundred to thousandfold reduction in the amount quantum resources required" to carry out the necessary calculations.
"If you can have an output with the same accuracy in a simulation of possible future scenarios for example in 5 hours instead of 25 hours, you will have 20 hours more to analyze which decision is better."
— Escolastico Sanchez, BBVA executive director

The bottom line: Quantum computing hardware gets most of the attention — possibly because it looks like this — but quantum software is just as important.

Go deeper

China builds its own movie empire

Expand chart
Data: Gower Street citing Comscore; Chart: Kavya Beheraj/Axios

China blocked all four of Disney's Marvel movies from being released in its theaters last year, a grim sign for U.S. film giants being squeezed out of the world's fastest-growing box office.

Why it matters: The Chinese Communist Party is using domestic films as a key conduit for mass messaging aimed at achieving political goals, leaving little room for foreign views.

Distrust in political, media and business leaders sweeps the globe

Illustration: Sarah Grillo/Axios

Trust in government is collapsing, especially in democracies, according to a new global survey.

Why it matters: People also don't think media or business leaders are telling them the truth, and this suspicion of multiple societal institutions is pushing people into smaller, more insular circles of trust.

Great Resignation boosts White House's tech talent hunt

Illustration: Aïda Amer/Axios

The Biden administration wants to capitalize on the Great Resignation to fill thousands of expected government tech and cybersecurity jobs.

Why it matters: The administration wants to remake how government websites deliver services and improve the nation's cybersecurity, but it will need skilled workers to make it happen.