Quant news

See this for current quant market condition...

Cheaper quants?

This article says that IBs are increasingly hiring cheaper quants and setting up their quant teams in regions like Eastern Europe and India. Well, from both an economic and a business perspective, it seems like the right thing to do. IT and quant talent are in high demand, and they're looking for people who can do the job...it doesn't necessarily mean you must be educated in top UK or US schools, where graduates have a high remuneration expectation. If you're hiring large numbers, especially fresh graduates, you can't really tell who's going to be the next Black or Derman, can you? Besides, by setting teams in these regions, they can be seen as expanding their investor base.

Quant is a sexy term, but it doesn't mean you create a model, implement it and the firm makes tons of money. Especially in an analyst role, you're involved in, typically, a small portion of model-building, perhaps working on a certain aspect of the model library. The stuff you learn in school are mostly textbook-based, and if you think you've managed to write VBA codes for all the pricing formulae in Hull, hopefully you are not too naive to think you'll be a successful quant.

For e.g., if you're pricing an exotic credit derivative, how do you model changing business cycles and credit levels? You make assumptions, a host of assumptions ranging from model-specific to macroeconomic ones. And with a short history to calibrate your model, your outputs and forecasts are, at best, wrong. I'm trying to say models are what they are, models. Being able to read the market is crucial, and how you make money is by coming up with the correct strategies, leveraging on your perception of future market movements.

I urge you to think about the finance intuition, the model assumptions and drawbacks, possible extensions and how your users, whether traders or external clients will use them, etc. Being a quant can very quickly become non-sexy, when you deal with the nitty-gritty stuff and spend weeks or months trying to decipher someone else's codes, when they have left for a higher position in another IB or a hedge fund.

Don't be afraid to voice out your ideas, but do plenty of research - while they will tell you that there are no stupid questions, opinions, etc...I'm sure you have on more than one occassion say to yourself...that's such a stupid question, what an idiot!

Day 1: network...network...network...

Met the rest of the quant interns...just a handful of us. Brilliant people. Basically today was just some formal firm intro stuff and a lot of networking...and networking. Most of the summer interns are from UK schools, with the rest coming from top US colleges (Harvard, MIT, Columbia, UPenn, UChicago, NYU, etc) and other European schools (Insead, IESE, ESSEC, etc). Those from UK are dominated by grads from Oxbridge, LSE and Imperial. Apparently competition is extremely intense this year...less than 3% of total applicants got offered a place. Wow...seems much more competitive than full-time positions.

A very tiring day...talking to people and remembering names are far more exhausting than exam revision. Anyway, that's the nature of the business - building relationships.

From Quant to Riches

Finally found this article, thanks to Wallstyouth from the Quant Network forum.

Btw, there is an event "How I Became a Quant: Financial Engineers Give a Personal View of their Careers in Quantitative Finance", to be hosted by IAFE on 3rd Oct 2007 at Cass Business School, London.

Saturation point

Tons of graduates are flocking into IB. An article claims that there are now about 150 applicants per job position in the industry. And more people are being lured into quant jobs as well. More and more academics are trying to make the switch, perhaps by the paycheck or lack of success in publishing research papers. The main point is, when will the industry hit saturation point? Will it be the case like the IT bubble?

Being a quant sounds sexy, doing high-level sophisticated modelling and applying advanced math skills. But it is common knowledge that a quant spends around 60-70% of his time writing codes, doing implementation work, etc. Some people say that it is not that sexy, and most models are much simpler than what is perceived.

There are so many quant finance programmes now, and the best brains go to top US schools. Look at Berkeley's student profile, and you see a lot of PhDs going back to school for a MFE, almost guaranteeing them a job in Wall Street. At the same time, London is looking more attractive and many US grads are applying to London. Competition is just too intense.

It is debatable whether to start work now and gain some experience, or to get a PhD and finish it in 3 years. Some argue that the experience will be more beneficial, while other claim having a PhD moves you up the food chain faster.

Sometimes I wonder when this quant obsession of mine will end, since if I were to move back home, I'd be unemployed. The local financial scene thrives on retail banking, and a growing niche in Islamic banking. Maybe I should be looking at Islamic finance, and could perhaps put myself in a better position.

New book

New book to be released in July 07:
How I Became a Quant: Insights from 25 of Wall Street's Elite

Why?

Questions that have been frequently thrown all over the place: Why...
1) does a quant need a PhD?
2) isn't a Masters enough, since in the long run, knowledge and industry experience count more than a PhD under your belt?
3) do banks like mathematicians and physicists?
4) must I graduate from the top universities?

See here for a discussion.

The Quintessential Quant

I happened to chance upon this article published in Business Week. Thinking of working for Renaissance Tech or DE Shaw?

ps. James Simons is the 2006 IAFE Financial Engineer of the Year .

All-rounder

In this increasingly competitive society, a myriad set of skills is essential, in fact a pre-requisite for a quant. And this doesn't guarantee success. Success is a combination of motivation, desire, diligence, entrepreneurship, innate talent and an element of luck.

Just to get to the starting point of the race, one needs to have an advanced degree. A working knowledge of stochastic calculus, probability theory, measure theory, statistical theory, programming and simulation, ODE, PDE, numerical analysis, real analysis, complex analysis, functional analysis, metric spaces, optimization theory.

Is it all about math? Scientific curiousity, good business acumen, excellent presentation skills, ability to intepret results, client-oriented and being a team player - all come into the equation.

You have to understand the dynamics of financial markets, the behaviour of assets, how to replicate them and structure new products, transcation costs and liquidity constraints, impact of uncertainty as well as legal, accounting, tax and regulatory implications among other issues.

Seems daunting isn't it? But I wouldn't know until I have had a taste of it.

On a separate note, I'll be making a trip to Cambridge after my exams to visit an old friend who has just completed his PhD and will be working as a quant in a top-tier IB. He might be able to provide more insights from his past internship experiences. I'm looking forward to that. And I'm starting work next month too, I'm so excited.

Demand for quants

From the pioneering work on modern financial economics by Harry Markowitz, William Sharpe and Merton Miller to the revolutionary Black-Scholes formula by Robert Merton, Fischer Black and Myron Scholes, coupled with the advent of rapid technological progress over the past decades, the financial industry has undergone vast changes in terms of complexity and innovation. There is now an ever increasing need for highly quantitative and numerate people - mathematicians, physicists and engineers to work at the forefront of financial markets.

For starters, refer to the following resources for a better definition and introduction to the role of a quant.

wikipedia
Mark Joshi (pdf)