A quant developer is yet another interesting role in the quantitative trading domain. There is a whole lot of difference between an algorithmic trader and a quantitative developer. While an algorithmic trader is the one who executes the trading strategies after analysing the market, a quant developer is the one behind all the programming of the algorithms. Let us find out more about the quantitative developer as this article covers:
- Who is a quant developer?
- Types of quant developers
- Educational qualification to become a quant developer
- Skills/job description required as a quantitative developer
- Steps to become a quantitative developer
Who is a Quant Developer?
A quant developer is a programmer who finally develops the strategies with the help of a programming language. S/he is responsible for providing financial solutions to the quantitative trading industry. Quantitative developers, thus, need to have a thorough knowledge of applied mathematics, statistical models, algorithms and scientific computing.
Quantitative developers usually work at an investment bank, a hedge fund, a brokerage firm or a financial securities firm.
Going forward, let us find out the types of quant developers.
Types of Quant Developers
Mainly, there are two types of quant developers in the financial domain:
- Front office developers
- Middle office developers
- Back office developers
Front office developers
Quant developers who work with quantitative analysts and help to implement as well as optimise the financial models. This implies getting the prototype code from a programming language such as Python and then rewriting it in another programming language such as C++ or Java. Front office quantitative developers directly interface with the clients to deliver tailor-made software and analytical tools.
Middle office developers
These are the quantitative developers who perform a middle office role at the banks. At the investment banks, this implies working on large-scale systems. They are involved in coding of the trading infrastructure which helps the quantitative analysts or traders in running or executing their models on.
Back office developers
These developers are the ones who perform the role at the back office for tasks such as model validation and risk management. For this role, you need to have the theoretical knowledge/skills, analytical capabilities and a deep approach to a problem. Model validation helps with solving the problems at the back end so as to avoid any technical problems further.
Next, we will find out what qualification helps to become a quant developer.
Educational Qualification to Become a Quant Developer
As we discussed in the definition of a quantitative developer, it is the mix of finance, computer science, applied mathematics, statistical models, algorithms and scientific computing which a quant developer requires to be knowledgeable in.
An aspiring quant developer must learn a coding language, especially out of the most common ones, such as Python, C++, C#, R and Java.
Also, the knowledge of tools is required to become a quant developer since these tools help with backtesting and finalising the strategy for trading. Some of the general tools/platforms are discussed below in the article.
Moreover, Quantitative Finance is another subject which provides the knowledge required to analyze financial markets and securities. This analysis is basically done by using mathematical models and huge datasets, hence, the specialists in this field are known as quantitative analysts.
Nevertheless, a quantitative developer gets much better at the job if he/she possesses the knowledge regarding the financial markets and pricing securities so as to understand what to code for the analyst.
For instance, if the quantitative analyst comes up with a bull-market or bear-market strategy, the quant developer must have the knowledge of the intricacies of markets as well as the prediction/pricing practice of the securities.
Hence, quant developers need not have their own strategies. They simply need to understand and adopt strategies to perfectly automate them.
Moreover, it is equally essential to possess the knowledge of risk analytics for the management of risks which most of the financial models are subjected to.
Hence, it is really crucial to acquire the knowledge of using quant models that help the analysts to analyse past data, current as well as anticipated data for the future.
Let us now find out the job description for a quantitative developer.
Skills/Job Description Required as a Quantitative Developer
As a quantitative developer, the role that you take up is not only challenging but also exciting if you are into programming wholeheartedly.
Also, in order to become a quantitative developer, you must know how to go about it from honing the basic skills to mastering the advanced ones.
Below, I have mentioned all these skills as follows:
- Software development
- Communication skills
- Theoretical/technical skills
- Programming skills
- Machine learning and deep learning
Software development skill is one of the most important since it is an extremely important skill as a developer since it helps you understand the core of the development role. Moreover, automation requires a good knowledge of software development, this skill is highly appreciated in the finance domain as well. With all the development in your job profile, mastering the software development skill adds to the understanding of the core of the work.
It is extremely important that a quantitative developer maintains good communication skills/soft skills so as to be able to communicate well with the analysts and others for programming well. Knowing how to use the soft skills is a plus for any quantitative developer since it increases the efficiency and makes any quantitative developer successful.
As a quantitative developer, you would be needing to develop and maintain the quant models for several functions at the investment bank or financial services institutions. These functions are pricing, risk management as well as analysis. To develop such skills and for creating these models, you will need strong knowledge in the statistical and mathematical domain. Some of these models which are deployed for quantitative development are:
- Consolidation model
- Option pricing model
- Forecasting model
- Discounted Cash Flow (DCF) model
- Merger model
This model helps with consolidation of multiple business units into one model
Option pricing model
This model is on the basis of theories like Black-Scholes and binomial tree in trading
This model helps to forecast the pattern of a stock and make right decisions with regard to investing in the stock market
Discounted Cash Flow (DCF) model
This model happens to be important for calculating net present value and future values in the market
Also known as merger and acquisition model, it is computed with the primary merging companies
Next step is to gear yourself up by familiarizing yourself with efficient algorithms and the knowledge of programming laguages such as C/C++, Python, Java and, MATLAB. This will equip you to bea quant developer in the financial industry.
Programming skills are the most important for a quant developer and if you have all other skills but not a master at programming, then you can upskill anytime with the help of online learning programmes.
Machine learning and deep learning
With the machine learning and deep learning knowledge, you will be able to implementlogistic regression models, neural networks, LSTM among other ML techniques in the finance industry. Moreover, the machine learning technology is advancing and making it convenient for the financial domain at every step. With time, the advancement of the technology and knowledge helps a quantitative developer with its role on professional level.
To give you an instance, for the position of the quantitative developer at iRageCapital, here are the job responsibilities:
- The developer will work with our quant research/analyst team and will assist in projects to improve stock selection, portfolio construction or implementation
- Main goals for this person would be around developing internal research platform
- Strong coding and data management capabilities
- Ideal candidates would have basic knowledge of accounting and finance
- SQL capabilities and understanding of relational databases and intermediate knowledge of finance/accounting
- Learnability, teamwork and flexibility are important traits we look for
Moreover, following are the tools that the quantitative developers use to develop the financial models and the trading strategies:
Now, we will take a look at the salary/compensation for a quant developer.
A quantitative developer’s financial reward/salary is tremendous and it is so because the job of a developer involves everything from understanding markets to coding.
Below, we have arranged a list of average salaries/compensation for the role of a quantitative developer in different countries:
Average Base Salary/year
Although the abovementioned salaries are just a representation of average base salary for a quant developer as a fresher in each country. Whereas, a professional quantitative developer can earn almost around $2,50,000 a year excluding bonuses. With the bonuses added, the salary even goes up to $500,000 per year for a successful quantitative developer.
Now, let us see what steps you can take as an aspiring quant developer.
Steps to Become a Quantitative Developer
As now you have gone through the skills required for this role and the salary/reward to the quantitative developer, now you can see the steps to become a quantitative developer. In this subtopic, you will find out how to map the skills with the requirements of the industry. These important steps are:
- Identifying and developing the gaps in skills
- Shortlisting career opportunities
- Preparing for the interview
- Professional development
Identifying and developing the gaps in skills
First of all, as an aspiring quant developer, you need to find out the gaps in skills or such skills which are missing in your path. As you read in the above section, you need some technical, programming and software related skills as well as communication skills. Best is to find out which skills are needed to be picked and covered in order to avoid any hindrance.
For instance, if you are from financial market background and never could work on any technical skills, then you must opt for the courses which could provide you with the expertise.
Since it is extremely crucial to build upon these skills, you must enrol yourself in a course specializing in that particular subject which you need.
You can avail the benefits from courses offered online such as Machine learning and deep learning in financial markets, Automated trading using Python and Quantitative approach in options trading.
Shortlisting career opportunities
Secondly, you must shortlist the career opportunities available so that you can find out the one that deems you suitable. After shortlisting, you can begin applying for the quantitative developer role in the companies you prefer. Here is a list of top companies that hires quantitative developer:
Preparing for the interview
Preparing for the interview is the next step to look for when aspiring to become a quant developer. It is highly recommended that you take the professional help by gaining knowledge from an existing quant developer or enrol in a course such as quant interview questions preparation. It is much better if you prepare yourself with a mix of tricky interview questions for cracking the quant interview.
Last but not least is the professional development which implies keeping yourself updated all the time even after you have a job that you can rely on. Keeping up with the new opportunities and finding ways to better yourself professionally will help you enhance your capabilities. Also, you will be able to contribute exceptionally well to the company you are working for.
A quantitative developer’s role is spread across the application of several subjects such as mathematics, statistical models, algorithms and scientific computing. Since a quantitative developer is required to code and automate the strategies for the analysts, a developer must have all the knowledge of securities and financial markets as well. You must also have a good skillset for cracking the interview at a bank or a hedge fund for the role of quantitative developer.
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