How To Become a Quantitative Analyst in 2021

What is a “quant”? Quantitative analysts, or financial quantitative analysts, develop and implement complex mathematical models that financial firms use to make decisions about risk management, investments and pricing. Part speculator, part ruthless logician, a quant aims to reduce risk and/or generate profits.

What Does a Quantitative Analyst Do?

There is no standard quantitative analyst job description, and their day to day may vary depending on where they work. In general, quantitative analysts apply scientific methods to finance and discover new ways of viewing and analyzing this type of data.

In the trading world, there’s a high demand for financial quantitative analysts, and many offer investors an investment approach that seeks a better understanding of markets in terms of alpha generation as well as risk management. A typical day may also include educating others on the importance of quantitative analysis and why, if used effectively, it can be so powerful in comparison to more conventional methods.

Quant skills are useful in industries outside of banking and finance as well. You may also find quants developing risk evaluation for insurance companies or developing pricing models.

Quantitative Analyst Responsibilities

Responsibilities will differ according to the employer (e.g., hedge fund vs. investment bank), product focus (e.g., asset-backed securities vs. commodities) and level of expertise. A quant may be required to: 

• Research and analyze market trends and statistics to make modeling decisions
• Develop and implement complex quantitative models (e.g., models for trading equities) and analytical software/tools
• Perform daily statistical analyses (e.g., risk analytics, loan pricing and default risk modeling) and coding tasks (e.g., pattern recognition or machine learning)
• Detail model specifications and methods of data collection
• Test new models, products and analytics programs
• Maintain and modify financial models while in use
• Apply or invent independent tools to verify results
• Collaborate with teams of mathematicians, computer engineers and physicists to develop optimal strategies
• Consult with financial industry personnel on trading strategies, market dynamics, trading system performance, etc.
• Generate requirement documentation for software developers
• Present and interpret data results to senior management and clients

There are quants who are experts in a specific area – statistical arbitrage, derivative pricing, quantitative investment management, algorithmic trading or electronic market-making – and quants who play to specific strengths. 

For example, a shy and retiring “back office” quant, such as a quantitative modeler/researcher, may be deeply involved in researching and validating statistical models or generating new financial strategies. A high-octane “front office” quant, such as a quantitative trader, could be working one-on-one with traders, designing stock market algorithms and supplying colleagues with computer-based pricing and trading tools.

Important qualities quants should have are the ability to think for themselves and the inclination to always ask questions. They explore paths that few have considered and aren’t afraid to break away from the conventional models that the majority of quants use and favor. 

–Micah Spruill, co-founder and quantitative analyst at Aurora Investment Advisors

Steps To Become a Quantitative Analyst

If you’re interested in becoming a quantitative analyst in the financial field, there are a few steps you should consider. You may also want to consider your own educational background. Quants typically work in finance and have strong skills in math and statistical analysis. Here are the steps you can take to become a quantitative analyst:

1. Earn a bachelor’s degree in a finance-related field
2. Learn important analytics, statistics and mathematics skills
3. Gain your first entry-level quantitative analyst position
4. Consider certification
5. Earn a master’s degree in mathematical finance

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Quantitative Analyst Qualifications and Skills

What Kind of Degree Will I Need?

A master’s in a targeted program such as quantitative finance, mathematical/computational finance, operations research or financial engineering can be a useful degree when pursuing a career as a quantitative analyst. Or it could be in a related quantitative field such as physics, statistics or math that offers high-level coursework in mathematical modeling and quantitative techniques. Unless you have outstanding math and computational skills and real-world experience in financial analysis, an MBA is probably not going to cut it.

A Ph.D. may also be useful depending on the position and employer. Candidates with a Ph.D. are likely to have demonstrated that they have the ability to work independently on complex research projects – a valuable asset for large hedge funds invested in ambitious projects.

What Kind of Skills Will I Need?

Technical Skills

• Object-oriented programming
• Big data modeling
• Database management
• C++ (used for high-frequency trading applications)
• Python, SQL, MATLAB, SAS, S-PLUS or R (used for statistical analysis)
• Monte Carlo techniques
• Machine learning
• Data mining
• C#/Java, .NET or VBA, Excel
• Mathematical skills
• Calculus (including differential, integral and stochastic)
• Linear algebra and differential equations
• Numerical linear algebra
• Probability and statistics
• Game theory
• Financial skills
• Portfolio theory
• Equity and interest rate derivatives, including exotics
• Systematic and discretionary trading practices
• Credit-risk products
• Financial modeling

Business Skills

• Analytical problem-solving: Employing logic and mathematical/programming tools to tackle abstract financial problems
• Ability to work under pressure: Making key financial decisions in high-stress situations
• Independent research: Working without supervision on potentially insurmountable challenges; employing patience and dogged persistence to complete tasks
• Concentration: Tolerating long hours working with computer code and data
• Communication: Analysts must be able to communicate their ideas with firm management and individual contributors effectively so that others may use their work for day-to-day business

What About Certifications?

There aren’t many certifications explicitly targeted at quants. So before you invest in the Chartered Financial Analyst designation or the Certificate in Quantitative Finance , ask your professors and professional mentors if certification will have a measurable benefit to your career.

Chartered Financial Analyst (CFA)

Offered by the CFA Institute, this credential is geared toward investment professionals. To become a CFA charterholder, candidates must complete an independent study program and pass three exams. Each exam requires approximately six months of preparation. In addition, charterholders must prove they have four years of qualified, professional work experience in investment decision-making. 

Is the CFA worth it? The jury is still out. Some quants, like financial engineers without a Ph.D. who want to boost their qualifications, may choose to pursue the CFA in order to give them an edge over their peers. But it’s not often mentioned in job requirements for quantitative analysts.

Certificate in Quantitative Finance (CQF)

The CQF is more of a training course than a certification. This part-time, online financial engineering program is targeted at individuals interested in real-world quantitative finance. That includes derivatives, quantitative trading, insurance, model validation or risk management. Courses, workshops and the final exam can be completed as one six-month program or divvied into two three-month levels. 

Quantitative Analyst Similar Careers

Whether they’re energetic front office quantitative analysts or quietly working away in the back office, quants spend a lot of their time looking at screens. If you’re fascinated by the finance world and would like a broader set of job tasks, your alternatives include:

• Actuary
• Business Analyst
• Financial Analyst
• Financial Engineer
• Investment Banking Analyst
• Quantitative Developer
• Quantitative Trader

You also have the option to retreat into academia or research as a pure mathematician or buff up your programming skills to investigate engineering roles. Opportunities for senior-level quants include:

• Portfolio Manager
• Hedge Fund Manager