Becoming a Quantitative Analyst
My aim with this hub is to not only provide a guide for future quants but also to do it in a way that someone can relate to by providing my own experiences with the career and coursework and how it can be useful regardless of whether you decide to be a quant or not.
Before you start reading this, I want to inform you of something. I literally clocked 20 man hours putting this very informative hub together. And that is outside of any prior knowledge that I have gathered and my own experiences in being a quant, however limited. So go ahead and read this and I encourage you to keep coming back to this Hub. Yes! It is that good!
When I started out as a freshman in college, I was actually a physics major and was highly interested in astronomy and astrophysics as I still very much am. But, as I progressed in my college career I wanted to get a bigger return on investment and wanted to move into finance/investment banking as I felt I could then have a better chance at making millions of dollars. So I changed my major from physics to economics. How little did I know then.
Before I get further with this Hub, I want to let you know that it is immensely hard work to be a quant and requires quite a lot of dedication in addition to the fact that you would need to study subjects that perceived as tough like physics, math and engineering to stand a chance at making it a career. As with all things in life, it is important to read the right material to move in the right direction and save a lot of time. This Hub definitely does that for you!
Quantitative analysts known as quants are known to have a strong background in physics and other quantitative disciplines such as mathematics and computer science and engineering. I would say that a strong suggestion would be to continue with a physics major if you happen to be good at it and then you can move into finance. Nowadays, a lot of universities are offering a Master of Financial Engineering or a Master of Quantitative Finance.
The basic idea of quantitative finance that took shape in the 1970s in the United States was when crafty investors started to utilize mathematics to calculate bond prices and stock prices. I think a key branch of mathematics that should be mastered is stochastic calculus that was introduced by Robert C. Merton who is actually one of the pioneers of the study of quantitative analysis.
Stochastic calculus is actually a course that is featured in financial mathematics masters programs from the research that I have done. But the puzzling thing is that I did have a college buddy who took a stochastic calculus course when I was at the University of Minnesota. I am still trying to figure out what was the course he took in the math course list, but it is definitely a great idea to look into math courses that deal with stochastic processes.
In terms of the computer software that should be mastered, a quant should have a strong understanding of spreadsheets especially VBA and have figured out C++ and MATLAB. It helps to have work experience that shows daily usage and/or some college courses. But I feel like nowadays a solid understanding of programming and languages translates into any industry.
The Different Types of Quants
I want to give you a comprehensive idea of what a quant typically does in the industry and how the work life is generally like.
The Front Office Quant
As in any position in finance, the Front Office Quant (FOQ) has a much better pay than an analyst in the back office. FOQs mostly work in sales and trading with their day-to-day routine revolving around managing risk, determining pricing and of course trying to come up with money-making prospects for the firm. Again, I stress here the importance of building programming skills and aiming for high proficiency. But time can be a problem and so it is essential to be able to find what you need to know on Excel and other programming tools.
Quantitative Investment Management
Asset managers employer quants and I think you should be look at AQR and Barclays Capital that love quants. But there are also those investment firms such as Citadel and Blackrock that employ quants but tend to use a mixture of strategies like fundamental methods as well.
Quants in Algorithmic Trading
These quants are usually the ones that make the most money. I guess you want to get that econometrics course down to prep for a career that will involve a lot of statistical arbitrage and hard to grasp concepts such as game theory.
Quants in Risk Management
There were issues with the hedging that credit crises made light. A lot of innovation has occurred as a result of the financial crisis with economists and mathematicians along with quants making continuous improvement of managing risk.
I would say one of the best ways to prepare for life as ‘quant’ is to actually go about reading the profiles of some of the quantitative analysts out there. Read as many of the profiles and look to browse through some of the articles about them as well that appear on leading financial journals and newspapers. This is actually how I built a lot of my knowledge whether it be in my attempts to become a quant or getting a better understanding of what makes an NBA superstar or any other thing for that matter.
So go ahead and take those advanced math, physics or computer science courses to prepare yourself for what is a very financially rewarding career as a quant. If you are already have then start making the necessary tweaks to your resume and cover letter which will be effective when networking and sending in your application to the investment firms that you have always dreamt of working for.
I just wanted to leave you with some of the best programs that you should consider in giving you that much needed advantage when starting your career off as a quantitative analyst.
Located in Cambridge, Mass it is very well-known for its math, science and engineering programs.
Carnegie Mellon University
Andrew Carnegie founded this private institution in Pittsburgh, Pa.
University of Pennsylvania
It is where the Wharton School is located!
In-state: $9,478 Out-of-State: $27,646
The Big Ten and the Midwest
University of California - Berkeley
In-state: $11,767, Out-of-State: $34,645
Overlooks the San Francisco Bay Area. No, actually there are just too many strengths.
Georgia Institute of Technology
In-state: $9,652 Out-of-State: $27,862
I guess schools with tech in it should be good.
University of Michigan - Ann Arbor
In-state: $12,950 Out-of-State: $37,265
It was the school I wanted to attend in the Big Ten!
New York University
The Big Apple!
University of Florida
In-state - $5,656 Out-of-State: $27,933
I must admit I did not expect to see this college on this list.
University of North Carolina - Chapel Hill
In-state - $7,008 Out-of-State: $26,834
America's first public institution
Source - US News
- 2018 Best Undergraduate Quant Analysis Programs
See the best undergraduate quantitative analysis program rankings at US News.
Don’t worry about the educational costs, I know how quants make bank and I just feel like we need more people in America who have majored in something like math, physics or engineering and who are also highly proficient programmers. Being a highly proficient programmer is a desirable skill on its own right with the chance to build a freelance career or get going as an internet entrepreneur. It is the reason why I am going to try my luck in becoming a quantitative analyst! Check this out..
Here are some resources that I am going to leave you with that I strongly suggest you to check out. This is a book that I highly recommend. The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It. Scott Patterson is a Wall Street journalist that has written a pretty comprehensive guide on quants with this book and it takes you into a world that is almost like a high stakes poker game.
For those of you parents out there, I would strongly suggest you to prepare your child in the world of business and finance by giving some informal education and movies such as ‘Wall Street’ and ‘Richie Rich’ are definitely a must watch. The formal education that a quant receives should be as much to do with those quant courses such as physics and calculus as possible. This is something that I really didn’t have growing up and awareness and a head start can really help leaps and bounds. There really is no substitute for some great parents especially when looking to take on a career as challenging as that of a quant.
More Resources to check out:
Society of Quantitative Analysts - http://sqa-us.org
Q-Group Institute for Quantitative Research in Finance - http://www.q-group.org/
CQA—Chicago Quantitative Alliance - http://cqa.org
International Association of Financial Engineers - http://iafe.org
Again, knowledge really is everything and being as familiar as possible with the nuances is very good, but it is no substitute for action. You must be willing to challenge yourself and take on those tough courses whether it be multivariable calculus or quantum mechanics.