Meet ‘the quants’
Quantitative analysis is the realm of financial engineers: the ‘quants’. They may sound like something from Star Wars or some sort of Call of Duty call sign, but it’s the nickname in the industry for the quantitative analysts.
Simply put, quantitative analysts use complex mathematics and statistical modelling to spot patterns in data and help them to ‘predict’ various aspects of the finance world; namely the direction of markets, earning potentials for certain investments, prices for asset classes such as derivatives or foreign exchange (currencies), and the risk levels implied by this all of this complex data.
This is serious maths and statistics territory, so if numbers give you the jitters then steer clear – even if the salaries are exceptionally attractive! These roles are reserved for the very top mathematical brainboxes. Quantitative analysis roles often demand at least a Master’s qualification or even a PhD in physics, financial mathematics, financial engineering or statistical engineering.
Quantitative analysis roles explained
Quantitative analysts can generally slot into core areas: technology, data and mathematics, and can work for investment banks, hedge funds or in market data research.
Quant/financial engineers or quant developers specialise in technology and have extensive technical skills coupled with the ability to use mathematics (stochastic calculus for instance) to model for pricing of various assets. Developers will sit in the front office of an investment bank, firm or hedge fund and interpret information from quantitative analysts in the middle office and coding for various programmes and applications used by banks and investors.
In terms of data, quantitative researchers will utilise their skills for research firms or investment banks in the middle office. In general, quantitative analysts will either specialise in either statistics/data or mathematics.
One of the big appeals for quantitative analysis is the potential dollar to be earned. Experienced quantitative analysts can easily earn in excess of six-figure-sum salaries for top investment banks and hedge funds. It’s a career option that could very well provide the opportunity to take early retirement if you have a good run with your results!
However, front office roles in particular can be high pressure and very long hours, and it will require substantial knowledge and abilities in a mathematical/quantitative subjects before you can even get your foot in the door. Consider what you want from your finance career and be honest with yourself on your own abilities before you aim for this particular area of expertise!