ON BECOMING A QUANT
1. What does a quant do?
A quant designs and implements mathematical models for the pricing
of derivatives, assessment of risk, or predicting market movements.
2. What sorts of quant are there?
(1) Front office/desk quant
(2) Model validating quant
(3) Research quant
(4) Quant developer
(5) Statistical arbitrage quant
(6) Capital quant
A desk quant implements pricing models directly used by traders.
Main plusses close to the money and opportunities to move into trading.
Minuses can be stressful and depending on the outfit may not involve
A model validation quant independently implements pricing models
in order to check that front office models are correct. Plusses more
relaxed, less stressful. Minusses model validation teams can be unin-
spired and far from the money.
Research quant tries to invent new pricing approaches and sometimes
carries out blue-sky research. Plusses it’s interesting and you learn a
lot more. Minusses sometimes hard to justify your existence.
Quant developer – a glorified programmer but well-paid and easier
to find a job. This sort of job can vary a lot. It could be coding scripts
quickly all the time, or working on a large system debugging someone
Statistical arbitrage quant, works on finding patterns in data to sug-
gest automated trades. The techniques are quite different from those in
Date: December 8, 2009.
derivatives pricing. This sort of job is most commonly found in hedge
funds. The return on this type of position is highly volatile!
A capital quant works on modelling the bank’s credit exposures and
capital requirements. This is less sexy than derivatives pricing but is
becoming more and more important with the advent of the Basel II
banking accord. You can expect decent (but not great) pay, less stress
and more sensible hours. There is currently a drive to mathematically
model the chance of operational losses through fraud etc, with mixed
degrees of success.
People do banking for the money, and you tend to g