Case Study Details - The Quantum Economy Network - Financial Crash Estimation in Enterprises

Brief Description

Focused on estimating financial crashes within a network of small and medium enterprises (SMEs) that are customers of Yapi Kredi Bank.

Detailed Description

Financial crash estimation problem has been a significant subject within the finance sector, focused on the prediction of prospective collapses in capital markets or organizations. These financial crashes are likely to have devastating impacts, resulting in crucial economic repercussions and diminished investor confidence. Accurately and timely estimating financial

crashes are essential for preserving economic stability, achieving risk mitigation, and making informed decisions to safeguard investments and avoid extensive financial crises.

We developed a quadratically constrained quadratic program as a mathematical optimization model aiming at identifying significant vulnerabilities and potential failure points in this network. By defining key parameters such as crossholding ratios, self-holding fractions, asset ownership proportions, and failure cost functions, we capture the intricate dependencies between these entities. The model is inherently nonlinear due to the quadratic terms and constraints, reflecting the real-world complexities of financial networks. Solving this NP-hard problem using classical methods is challenging; therefore, we leverage quantum computing technology to efficiently explore the solution space and produce decision variables that indicate the likelihood of financial distress for each SME in the network. The difficulty of this problem lies in the potential domino effect, where a single delayed payment can trigger subsequent financial distress among connected entities, leading to a cascading collapse within the financial network.

Customer Testimonials

This Application was started as a Proof of Concept (PoC) project albeit the results achieved from it have been discussed with business units especially the credit loan departments. Our commercial credit loan director stated : “The first outputs of this POC, which we conducted in light of the principles of responsible banking and know your customer, are very valuable; because financials consider the past; These equilibrium points reveals crises that have not yet been reflected in our customers' financials. Since we expect the sales turnover of our creditor customers who will be affected by the financial crisis to decrease, it will be visible on the screens of portfolio managers“

Publicly Available Technical Data:

Disclaimer

This Application is for demonstration and proof of concept purposes only and not for any other purposes. YKT owns all right, title, and interest in this Application. YKT makes no representations or warranties regarding this Application. To the extent permitted by law, YKT disclaims all liability including direct and indirect, incidental, or consequential damages, including loss of profits, arising out of or relating to the use of this Application. The laws designated by the YKT entity providing this Application will govern without reference to conflicts of law principles.