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  • Writer's pictureDhruv Syam

What is a Quantitative Analyst?

Quantitative Analysts or ‘Quants’ as they like to call themselves are often considered the nerds of Wall Street. The ones who use highly complex PhD level math and statistics to predict and profit on the stock market. This previously small section of the financial services industry now accounts for over 40% of all trades and continues to grow at an astonishing rate. So, who are these geniuses that make six-figure starting salaries, and what do they do?

The typical quant is an MBA or has a PhD in a highly quantitative subject like math or computer science and also often has a mastery of both programming and stats. They are quite different from other retail traders and use their complex models and algorithms to use logic to discern the market. As such, they also tend to work in large hedge funds with the necessary capital to satisfy the many millions of calculations required of computers.

A quant analyst falls into a further three categories of a researcher, developer, and trader.

The researcher is usually the purest maths-heavy type of quant and uses methods like stochastic calculus to, you guessed it ‘research’ new strategies. They usually don't implement their strategies but instead, pass that role to the quant developer. They mostly need to be proficient in data-oriented languages like Python as well as high-speed languages like C++ or Java. They often work for High-Frequency Trading Firms (HFTs) that rely on microseconds of data to make a profit. Finally, the most prestigious and generally highest paying job is the quantitative trader. They are less theoretical and seek the highest profits using econometric, statistical, and machine learning models.

A quant’s most valuable asset however is creativity and stable temperament. Quant trading strategies need to be changed every day in order to stay in touch with the markets and need to keep evaluating their model for weaknesses and risk. It requires good critical analysis and creativity to stay above the rest and failure to innovate can be devastating. As such, patience and calm problem solving is often demanded of a quant

Becoming a quant requires a special degree of dedication and competition is fierce. As a result, salaries and compensation packages can be immensely high with average starting salaries well over $100,000 and experienced quants can make up to $300,000 excluding other performance-related bonuses.

Looking to the future quantitative finance will continue to grow. It is true that certain sectors such as HFT have become commoditized but with growing trade volume and demand people will increasingly turn to quants over investment bankers. The initial boom of algorithmic trading has died down, but another larger revolution is on its way.

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