"An Overview of Quantitative Skills used
by Financial Institutions"
Joanna Gill & Robert Frost
Recruit Associates Worldwide
Who we are?
• Joanna Gill has twenty years experience
in Investment Banking, Corporate
Treasury and Finance and is a qualified
banker, (ACIB).
• Rob Frost has a BSc. in Physics from
Oxford and Nottingham and a working
knowledge of Quantitative Finance.
What We Do?
• We specialise in placing people in the
“front office” of Investment Banks, Hedge
Funds, Proprietary Trading firms and
Asset/Fund Managers.
• The vacancies we cover include,
Quantitative Analysts/Researchers,
Quantitative/Systematic Traders,
Developers and Financial Engineers.
Front Office
Client
Corporate Finance
Origination
Trading & Sales
Multi- Product
Multi-currency
Economists
Bond Analysts
Equity Analysts
Quant Analysts
M&A
Project Finance
Securitization
Research
Private Banking
Middle Office
Front Office
Compliance
Internal Control
Audit
Accounts
Risk Management
Treasury
Back Office
Middle Office
Orders
Confirmations
Reconciliation
Settlement
Corporate Actions
Credit/Margin
Cashiering
Quant Jobs-Buy Side
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The “Buy Side” is a financial term which describes any financial institution involved in the
investment and trading of financial securities. These institutions normally buy large amounts of
securities for money management purposes and will be a customer of a sell side institution, (a
bank or broker). Most normally these firms are Hedge Funds, Mutual Funds, Pensions and
Proprietary Trading desks. Buy side organisations generally profit from market movements and
accruals as opposed to sell side institutions who make recommendations to customers and who
generally profit from the difference in the bid/offer spread.
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The buy side is the opposite of the sell-side entities, which provide recommendations for
upgrades, downgrades, target prices and opinions to the public market. Together, the buy side
and sell side make up both sides of the investment community.
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For example, a buy-side analyst typically works in a non-brokerage firm (i.e. hedge fund, mutual
fund or pension fund) and provides research and recommendations exclusively for the benefit of
the company's own money managers (as opposed to individual investors). Unlike sell-side
recommendations - which are meant for the public - buy-side recommendations are not available
to anyone outside the firm. In fact, if the buy-side analyst stumbles upon a formula, vision or
approach that works, it is kept secret.
Risk Management
• Risk Management is concerned with separating risk control from the
risk takers.
• To control risks, they must be disclosed, reported, measured and
monitored.
• Risk Management therefore has to strike a balance between
compliance with risk limiting rules and the ability to develop new
business.
• On the “Buy Side” risk managers are not always “the policemen”. As
global markets continue to experience a tightening of the purse
strings, there is a need for Quants to not only help quantify the risk
of a particular asset, be that credit, equities, fx etc but also to help
with optimising the performance of a buy side portfolio.
Quantitative Job Market Share
Examples of Quant Risk Jobs
• Risk Reporting Manager
• Major Global Multi-Strategy Hedge Fund Risk Group is seeking a
Risk Reporting Manager with professional experience in risk
management. The professional will have experience designing,
implementing and running firm wide risk reports for senior
management on a daily, monthly and quarterly basis. This person
will identify and implement tools to transform large amounts of data
into risk information and will ensure that a minimum of risk data
quality is obtained for each risk report. Candidate will also have a
quantitative background on financial instruments pricing, risk
modelling and statistics. Candidate must be detail oriented, precise,
meticulous and able to communicate with traders, portfolio
managers and senior management.
Examples of Quant Risk Jobs
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Quantitative Risk Manager
A boutique derivatives trading firm seeks a quantitative risk manager.
Primary responsibilities include:
* Identification and analysis of risk factors to a portfolio of hedged vanilla American
and European option portfolios. * Scenario simulation and analysis of the
aforementioned portfolios. * Monitoring and enforcement of risk limits through active
interaction with the trading staff.
Ideal candidate will be a current assistant risk manager or a risk analyst seeking to
advance his/her career to the next level, with authority and responsibility to protect
the firm from portfolio risks.
This position will report directly to the CEO.
Required:
* Bachelor's Degree in science/math/statistics or quantitative/mathematical finance. *
One to three years of full time risk management experience. * Thorough knowledge
of financial derivative theories, products (Futures, Options, etc.).
Preferred:
* Familiarity with options markets (equity, fixed income, energy, etc.).
* SQL scripting.
* VBA in Excel.
* Working knowledge of Bloomberg.
* Matlab programming.
Computational Finance
• Computational finance or financial
engineering is a cross-disciplinary field which
relies on mathematical finance, numerical
methods and computer simulations to make
trading, hedging and investment decisions, as
well as facilitating the risk management of those
decisions. Utilizing various methods,
practitioners of computational finance aim to
precisely determine the financial risk that certain
financial instruments create. (source, Wikopedia)
Quant Analysts/Fin Engineers
• The Quants/Financial Engineers often have a MSc/PhD in
Maths/Physics/Computational Finance combined with strong
programming skills (Visual Basic, C++, under NT/Unix). They build
the analytical models, whose output is used by clients, traders, sales
or analysts.
• Many trading areas require such people, none more so than
Derivatives, which are complex financial products and require
“Maths” wizards to structure deals.
• A Derivative is a generic work to represent an instrument whose
value is priced off an underlying instrument. Examples of derivatives
are, futures, forwards, options and swaps.
Example of Financial Engineer Job
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Title: Financial Engineer
Reports to (position):
Duties and Responsibilities:
The role of Financial Engineer will work closely with members of QR and the Senior Portfolio Managers. Key responsibilities will be to provide support
and development of trading & risk applications and other quantitative systems within the Equities business. You will utilize C++ to enhance and develop
additional algorithms and models, as well as optimize, monitor and troubleshoot system performance. Development focus will be on portfolio
construction, transaction analysis & optimization, and risk management.
You will work on a team that will be building business services comprised of complex algorithms that are a part of this Hedge Fund’s quantitative
investment philosophy, and exposing that functionality through well-defined interfaces and systems.
Key job responsibilities include:
Responsible for the development and deployment of new analytics and models pertaining to the Business
Responsible for helping to architect real-time trading systems across multiple products and functions
Provide application and analytics support to Quantitative Researchers, Portfolio Managers and Traders
Implementation and productionising of the prototype models developed with QR
Develop new financial analytics functions using advanced mathematical skills and business knowledge to support QR’s need to analyze new products,
enhance risk mgmt, and or pricing functionality
Qualifications :
Minimum of 5 years experience in C++ in a Unix/Linux and Windows (Visual Studio) environment
Minimum of 5 years experience in multi-threaded and real time programming w/ trading applications
Solid skills in Perl, SQL, scripting languages. Sybase experience is a plus
Solid knowledge of financial products and valuation methods is required
Proven analytical, quantitative and solid problem solving skills w/ tangible experience developing sophisticated math models
Personality characteristics:
Passion for solving investment business problems through the use of technology and fundamentals
Strong interpersonal and communication skills
Strong critical reasoning skills
Detail-oriented approach to solving problems
Enthusiasm for learning & results oriented
Strong work ethic & high degree of integrity
Self starter and able to work with minimal supervision
Education:
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Masters Degree in engineering, science, or mathematics. PhD preferred.
Algorithmic Trading
• Research into execution algorithms,
transaction costs, Pre/Post trade analysis
• Work very closely with Traders and
Developers
• MiFID encouraging growth in this area,
less voice broking
• Growth beyond cash equities into FI,
Commodities and Options
Algorithmic Trading
• Developing advanced algorithms that go far beyond
basic TWAP/VWAP models to seek out liquidity in illiquid
and fragmented exchanges and dark pools
• Developing pre and post trade analytics to assess
performance and estimate market impact, involving
statistical analysis of high frequency market tick data
• Adding value by providing customised algorithms for
clients, and working with traders to advise clients on
optimal algorithms
• Programming ranges from SAS/Matlab to C#/C++ or
Java, depending on the firm and the role
Pricing and Valuation
• Usually sell side, supporting Traders and
Structurers
• Develop models to calculate the price and
risk of particular products
• Usually focused IR/Equity/Commodity/
Credit derivatives, often highly exotic or
structured products
• Can be sat on the trading desk
Pricing and Valuation
• Develop, implement and calibrate pricing and
risk models for new and existing products
• Explain model behaviour and predictions to
Traders
• Develop advanced analytics engines for exotic
and hybrid products
• Need awareness of traders timescales, accuracy
and be able to work well under pressure
• Generally require strong C++
• Particularly sharp Quants can often progress in
Exotic Derivative trading roles
Real Time Trading/Intra-day
• Trader holds positions for a very short time
(from minutes to hours) and makes
numerous trades each day. Most trades
are entered and closed out within the
same day.
• Highly speculative and potential high risk
activity.
• High frequency trading may deal with
millions of trades per day.
Quant Job In Real Time Trading
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Strong technical education, PhD (in Statistics, Mathematical Economics,
Mathematics, Physics) or PhD or strong MS/BS (in Computer Science, Electrical
Engineering).
Should be a strong programmer (enough to be a “user of programming tools” doesn’t
have to be a professional developer). C++ helpful, perl, any of R, S+, Matlab,
experience with UNIX environment.
Should have prior experience with data analysis (ideally with very large data sets).
Hands-on knowledge of various statistical and econometrics methods (e.g. time
series analysis) is desired.
Should be absolutely driven, “hungry” and commercial. Super-enthusiastic and results
oriented. Should have demonstrated it in his/her career. Ability to lead projects is
highly desired.
High frequency trading or statistical arbitrage (could be in any asset class) experience
is highly desired. Buy side experience is desired.
Market/exchanges/products knowledge is highly desired.
Handy Tips for Getting A Quant Job
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Ensure your CV/Resume is easy to read and gives a fair and accurate picture of your education,
(including modules/courses studied) and career focus. E.g. if you are interested in trading and
want to work in this area, back this up with certain books you may have read or traders who have
inspired you. Be honest, it is likely you will be asked to back up statements made either by a
recruiter or the hiring manager at interview. Always ensure your dates are full and complete as
offers can be withdrawn for any inaccuracies.
If you are a “problem solver” show how you have solved complex problems in the past and how
you maintained focus and motivation to a point of completion. Banks and Recruiters often need to
be convinced of how these problem solving skills could be transferred to solving real life complex
financial issues and often a PhD indicates the ability to complete a major project or research area.
Be familiar with what is going on in the Financial Markets. Start to read the Economist/FT/Wall
Street Journal. Clients may ask for your opinion on the Credit Crisis or the latest debacle with
Northern Rock. For Derivatives roles, clients often expect Junior Quants to have an understanding
equal to the content within Futures, Options and Other Derivatives by John Hull.
Your interests and hobbies are important and give an indication of your personality, which is key.
If you have climbed Mount Everest or have excelled in Maths competitions, state so. Find a
balance between promoting yourself well and ensuring you do not sound arrogant.
Research “Brainteasers” on sites like Wilmot-these are often Math questions centred around
probability. The client is interested in how you arrived at a decision and not necessarily the
answer.