What does a quant actually do
Tasks you can expect to do as a quant
In general, you can separate the different quant job titles as following:
Quantitative Researcher
Quantitative Analyst
Quantitative Trader
Quantitatigve Strategist
However, you should note that you can have the same title as someone else but be doing completely different things. Therefore, it’s important to understand what the role involves before taking a job.
In this article, I will break down the different tasks that a “quant” might do.
1. Researching trading strategies
When people think of quant roles, they think of the role that involves researching and optimising trading strategies. These quant roles are “alpha” researchers. Their role involves finding ‘alpha’ by researching features for a trading model. These roles involve a lot of statistics and machine learning.
High frequency strategies typically involve less complicated models such as linear regression whereas mid-low frequencies strategies might involve machine leanring and deep learning models.
2. Developing pricing models
Many exotic derivatives and structured products cannot be priced using the standard derivatives pricing formulas (such as Black-Scholes). These products may have unusual payoffs and conditions and do not have an obvious fair value. As a result, models need to be developed to price these products and to calculate their risks.
A quant position in a pricing models team might involve researching ways to improve the pricing and risk models for these exotic products. It may also involve validating existing models.
3. Pricing trades for clients
Quants on a trading desk or a client facing team may be involved in pricing specific trades that a client requests.
These quants will use the models built by the quants in the pricing team to price the trade and calculate other analytics that the client is interested in (such as the trade profile, richness or cheapness, etc).
These quants may also recommend the best trades for the client, given the details of the client request.
4. Developing tools for trading
A quant working on, or closely with, a trading desk may be responsible for creating tools for the traders and portfolio managers to analyse market data, scan for best trades, improving the pricing systems and anything else trading related.
This role might also involve automing trading processes, and other development work on the trading system or platform.
Conclusion
In conclusion, a “quant” can do many different things even with the same job title. Therefore, it’s important that you understand what the role involves by asking a lot of questions during the interview.
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