How to Become a Quantitative Analyst?

9 min read

By Chainika Thakar

As a quant or a quantitative analyst who needs to work with a mix of skills namely mathematical, financial and computer, you are sure to fetch a high salary and will be in demand. Also, for the role of a quantitative analyst, you need to be having some skills, education and knowledge about the role. We have discussed such aspects and some more like salary, responsibilities and roles in detail ahead.

This article covers:

What is a Quantitative Analyst?

As a quantitative analyst one needs to perform the role of a professional, who uses complex mathematical and financial knowledge to price and trade the securities. The quantitative analyst is required to increase the gains and reduce the risk. Usually, quantitative analysts are high in demand at investment banks and hedge funds.

Also known as quants, quantitative analysts are gaining popularity and they work directly with the traders.

Now, let us find out the reasons you should become a quantitative analyst.

Why Should You Become a Quantitative Analyst?

As a quantitative analyst, you have a challenging yet an interesting job. Take a look at these reasons as to why you should become a quantitative analyst:

  • Rewarding job
  • Is a stimulating work
  • High demand in the industry

Rewarding job

Your professional as well as financial growth as a quant relies on your capability to perform your role well by maximising the gains. The main reason for salaries being so favourable is the challenging role of this job profile. This is the reason it is a dream job of many professionals.

Is a stimulating work

As a quantitative analyst, you are involved in a lot of work relating to solving the complex problems by researching, developing and implementing mathematical models as well as with financial and computer knowledge. This kind of involvement makes the job quite stimulating and your work requires minimal supervision while being under considerable work pressure. With such a competitive and demanding job, it becomes an extremely stimulating affair.

High demand in the industry

Since the nature of the job of a quantitative analyst is quite complex, there is a high demand in the industry. As a quantitative analyst is required in hedge funds which is on a rise, there has been a positive shift in the requirement of the work profile. Moreover, the risk management industry is another industry where quants are needed as Risk management officer.

Let us find out the job responsibilities/expectations of a quant or quantitative analyst.

Job Responsibilities/Expectations From the Quant

As reported by Economic Times, India’s data consumption is expected to grow at a growth rate of 72.6 percent to 10,96,58,793 million MB by 2022. With such massive data generation, companies will be in need of professionals who can find patterns and trends, build models, predict, forecast and interpret the results from such data.

Hence, with all the data and the technology to analyse and build algorithmic models around the same, you are sure to carve an exceptional path for yourself as a quant or quantitative analyst.

We have already discussed the job profile of a quant or quantitative analyst being a crucial one. With the involvement of the knowledge of a mix of subjects such as computer, mathematics and finance, a quantitative analyst is expected to perform the following responsibilities in general:

  • Helping with the trading architecture for placing trades
  • Evaluating trade ideas
  • Reducing transaction costs
  • Helping with the reduction of market impact such as recession
  • Reducing portfolio risk
  • Backtesting and executing new strategies
  • Making use of data for analysing the markets and designing algorithmic models to solve complex financial problems

There are different job responsibilities for different kinds of “analyst” work profiles that we have mentioned here at a well known firm iRage:

Junior Analyst

As a Junior Quantitative Analyst, you will be involved in analyzing the market from both micro and macro perspectives. Specifically:

  • Analyse the data from the exchanges to build trading strategies
  • Analyse activities of market participants at the microsecond time frame to ascertain micro behavioral patterns that can be traded successfully
  • At the same time, analyses information across much longer time frame (and from other financial instruments, fundamental data) to build macro trading strategies
  • Aim to automate all the trading strategies built above
  • Build engineering solutions to manage the complexity
  • Evaluate the profitability of various trading signals on various financial assets across various time horizons
  • Work with senior traders in the firm in performing analytical functions (profitability analytics, market trend analytics, etc.) and prepare reports accordingly

Skills Required:

  • Good programming in Python (C++ is desirable)
  • Basic awareness of financial markets and fundamentals
  • Strong logical & quantitative aptitude
  • Strong educational background
  • Zeal in working with big data sets

Quant Analyst

As a Quantitative Analyst, following are the job responsibilities:

  • Will work closely with CIO’s, PM’s, analysts and traders at top global hedge funds and asset managers
  • Ability to understand client investment processes, find the inefficiencies, and develop unique, intuitive, and insightful tools to help the client make better investment decisions
  • Analyse and interpret a wide range of financial and statistical data from a variety of sources, better understand the challenges involved and devise optimized solutions
  • Identify bottlenecks and make the code leaner and faster, creatively use tech skills to solve real world problems
  • Ability to multitask and thrive in a fast-paced environment, innovation, solution driven approach towards work

Skills Required:

  • Proficiency in R and/or Python
  • Knowledge and passion for financial markets
  • Personal trading account that you can speak to is a plus

Quantitative Research Analyst

For this profile, you need to have a firm grip on Maths and Econometrics coupled with the ability to understand and trade in the market while having a good hands-on experience in designing robust trading systems and refining programs to efficiently manage various types of financial market data that facilitate quantitative investment research.

Following are the job responsibilities:

  • Implement statistical methods to solve specific business problems utilizing PyTorch and Tensor Flow
  • Directly contribute to the design and development of automated forecasting systems
  • Collaborate with researchers, software developers, and business leaders to define product requirements, provide analytical support, and communicate feedback
  • Presenting critical data in a format that is immediately useful to answer questions about the inputs and outputs of Forecasting systems and improving their performance
  • Use cutting edge concepts like Deep Learning to identify patterns / trends in financial market data

Skills Required:

  • Should be comfortable in applying advanced mathematics / statistics concepts to large data sets
  • Excellent analytical and problem- solving skills
  • Must possess intellectual curiosity and be a self- starter
  • Experience of working and affinity with Python, Pytorch and Tensor Flow
  • Fascinated and interested in modern concepts of machine learning etc and quantitative finance theory
  • Research and analyze a variety of large data sets to develop and implement signals
  • Collaborate extensively with others to analyze performance, optimize the trading strategy and continue to advance the results of the team’ s research
  • Use cutting edge concepts like Deep Learning to identify patterns / trends in financial market data

Senior Quantitative Analyst

As a senior quantitative analyst your responsibilities will include:

  • Design, back test and implement trading strategies and work as part of the research team
  • Conduct research on historical market data
  • Develop new or improve existing indicators and trading models
  • Coding of various trading strategies
  • Monitor live trading strategies and maintain optimal performance
  • Analyze large financial data sets to identify trading opportunities
  • Provide real-time analytical support
  • Research, design, financially engineer and test quantitative models for trading securities, indices and their derivatives across asset classes. The person will need to understand research in quantitative finance
  • Create & review strategy code, preferably in R and MS-Excel but other languages are acceptable depending on specific candidate profiles.
  • Work as part of the strategy team to determine which signals and trading strategies to go live with under what scenario

Skills Required:

  • Proficiency in R and Excel for statistical/data analysis
  • Practical knowledge of machine learning and time series models
  • Strong work ethics
  • Interest in stock markets and financial data
  • Good problem solving, critical thinking, and analytic abilities
  • Knowledge of R Shiny, Markdown/ Latex and Python
  • Familiarity with Indian equity markets

Also, you can practice the quant interview questions with a whole course on Quant Interview Questions Preparation.

Moving forward, we will now take a look at the educational requirements/ skills required to become a quantitative analyst.

Educational Requirements to Become a Quantitative Analyst

Since a quant is needed to perform various functions which we just discussed, it is important to find out the educational requirements to become a quantitative analyst.

Below, we have mentioned a list of online courses, degrees as well as certificate programmes you can choose from, for becoming a quantitative analyst:

Masters in Financial Engineering

Since the Masters in Financial Engineering provides you with in-depth knowledge which ranges from evaluating statistics to econometric modelling, this is one engineering course to help you in the real world. Offered by various universities, you can enroll in this degree in any corner of the globe.

As you will gain expertise in quantitative analysis, you can confidently work as a quant post completing this. While doing this course, you will get thorough finance-oriented knowledge in the context of the important subjects like:

  • Statistics
  • Mathematics
  • Computer Science

All in all, in such a high-paced world, this course will equip you with the right knowledge for excelling in professional environments requiring exceptional work.

Masters in Data Science

In this degree course, you will learn all about data science which basically helps you to connect statistics, data analysis, machine learning. This degree is also offered by all the prominent universities. Once you are knowledgeable in all these spheres, and the related concepts, you can use the intricacies of the learnt subjects for practical applications. With broad knowledge from various fields like mathematics, statistics, computer science, and information science, this degree course provides you with a mix of important techniques. This is an extremely useful discipline with the knowledge of data from:

  • Several Sources
  • Dimensions
  • Types
  • Structures

With the advancing technology, the above mentioned spheres are used around data science for giving it an appropriate approach.

Masters in Finance

Coming to Masters in Finance, this degree course provides you with all the knowledge you need to gain expertise in Finance and is a very common degree offered by several universities. Specifically, for a quantitative analyst profile, a degree in Finance will provide you with a mix of mathematical, econometrics and programming tools. This knowledge helps an aspiring analyst become a pro at the daily responsibilities as a quant.

Completing the degree course in this sphere, you will be able to:

  • Apply finance related theories in real financial markets
  • Apply mathematics to the financial problems like forecasting the price of stock
  • Apply econometric theory for analysing the investment decisions

So, by opting for this degree course, you will get a fair share of knowledge on practical application of important tools in the real financial world. This will help build your skills for great success in financial markets.

Short Online Courses

There are some short online courses which are self-paced and interactive. Moreover, you can select the specific aspects which you want to learn offered by some well-known platforms. Some of the courses offered by Quantra are:

Introduction to Machine Learning for Trading

A free course to get you started in the world of Machine Learning for trading. Understand how different machine learning algorithms are implemented on financial markets data. Go through and understand different research studies in this domain. Get a thorough overview of this niche field.

Trading with Machine Learning: Regression

This course is perfect to create your first trading strategy using machine learning algorithms. Learn in a step-by-step fashion: acquire data, pre-process it, train and test the machine learning regression model, and predict the stock prices. Hands-on coding assistance provided.

Trading with Machine Learning: Classification and SVM (Support Vector Machine)

Learn to use SVM on financial markets data and create your own prediction algorithm. The course covers classification algorithms, performance measures in machine learning, hyper-parameters and building of supervised classifiers.

Neural Networks in Trading

This course is highly recommended for programmers and quants to implement neural network and deep learning in financial markets. Offered by Dr. Ernest Chan, learn to use advanced techniques such as LSTM, RNN in live trading.

Decision Trees in Trading

With this course, you will learn to predict markets and find trading opportunities using AI techniques. Also, you will be able to train the algorithm to go through hundreds of technical indicators to decide which indicator performs best in predicting the correct market trend. Further, optimize these AI models and learn how to use them in live trading.

Executive Programmes

With the executive programmes, you get to learn the practical aspects of the industry from various professionals, industry stalwarts etc.

One such executive programme is EPAT® which is a comprehensive 6 months’ virtual classroom programme  covering essential modules of Algorithmic Trading, such as:

  • Market microstructure
  • Financial instruments
  • Statistics
  • Data analysis
  • Portfolio management
  • Basics of coding in Python/Matlab/Excel
  • Use of machine learning
  • Trading, tech, infra and operations
  • Live trading strategy building

It inspires traditional traders towards a successful algorithmic trading career, by focusing on derivatives, quantitative trading, electronic market-making or trading related technology and risk management.

Next, we will see the salary/compensation of a quantitative analyst.

Salary/Compensation

The salary/compensation of a quantitative analyst is quite rewarding because of the job’s stimulating nature and requirement to be involved in a mix of subjects such as computer, finance and mathematics.

Below, I have mentioned a list of average base salary in each country in the tabular manner as follows:

Country

Average Base Salary


US


$117,000


India


Rs. 1,427,000


UK


£67,698


Canada


CA$87,000

Singapore

S$120,000


Hong Kong


HK$750,000


Australia


A$105,000

Source: Glassdoor

Conclusion

Becoming a quant or a quantitative analyst requires dedication and hard work. With all the knowledge, a quant experiences a successful career at a hedge fund or an investment bank since the demand at such firms is high for a quant. Also, a quantitative analyst’s career is quite stimulating and rewarding.

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