The Finance Association at EPFL is starting a new season! At our first article this academic year we would like to give students of EPFL some insights from the industry of finance and point out at some career opportunities at this field.
While our editorial strongly believe that the main advantage of the EPFL students is the ability to quickly absorb information and becoming experts at any field they wish to work at, at this particular article we will mostly concentrate on the technical positions within finance, i.e. quants (thought there are a lot of EPFL graduates working at other fields of finance). This being said, let us give you a bit more clarification on who are the quants and what are their responsibilities in the modern job market.
To begin with, quants are people who usually have an education in mathematics, physics, computer science, engineering and who applies their expertise in finance. Quants are primarily running a quantitative analyst, which is according to investopedia “is a technique that seeks to understand behavior by using mathematical and statistical modeling, measurement, and research.”
Now, roughly speaking, we can divide quants into several groups: risk, research, developers and structure quants.
Of course, the composition of the office and actual responsibilities are heavily depending on the firm we consider. Here we intend to give a general description and preferred background.
As practitioners are saying, nowadays about 90% of job market for quants consist of the risk quants. It is a common view that after the crisis people tend to have less and less alphas (gains on the strategies), so what is of the attraction of the clients is how their investments are hedged. Risk quant is a person who is looking at the risks of the portfolio and who analysis how those risks should be hedged. We believe that here is a big room for mathematicians, since risk quant is a growing field and there are mathematically sophisticated models being introduced as we speak.
On the contrary to the risk quants who are concerned with distribution of losses, research quants are developing new models to gain a profit from the market. Here the difference in responsibilities is wide. At some banks usual day of quant researcher would be to investigate mathematical models to increase the profit of the strategies, that could be, for example, a problem of transaction optimization (the profit one might have from selling a stock could simply evaporate if we think of all the taxes and transaction costs linked to this position).
Developer quants usually have a strong background in programming, computer science and software engineering. In the modern world where about half of all the transactions in the market are made by robots, it is essential for the companies to be on the edge of the technology. Quant developers usually construct and maintain a trading infrastructure for the models, build new reporting and visualization tools, help research team to improve their code for the model. They should have an experience with code optimization and software development.
Quant structure is another position mostly seeing in the banks. These professionals develop pricing models for the products. For example, a client could ask a bank to sell a specific derivative, in this case, quant structure would develop a mathematical model to determine a fair price of such a product, then, in simple words, they use the data from the market to fit the parameters and get a fair price for the clients.
We strongly believe that there are a lot of career possibilities for the engineers in the finance field. Here we have tried to highlight the difference in responsibilities for the different quant positions and mention the preferred background.
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