Introduction to Quantitative Finance

9 min read

By Chainika Thakar

In your quest for gaining knowledge about Quantitative Finance, if you are wondering where to start, and what does it help with, then you must read through this comprehensive article. This article is divided into subtopics to help you understand Quantitative Finance in detail:

What is Quantitative Finance

In simple words, Quantitative Finance 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 or quants. Now, it is important to mention here that a quant uses mathematical models for:

  • Pricing derivative securities
  • Risk management.

Also, a Quant specializes in designing, developing and implementing the algorithm for solving complex financial problems. Let us now move ahead and find out why quantitative finance is important.

How is Quantitative Finance Important?

Quantitative Finance is the core where you learn everything you need to know to become a quant or quantitative analyst. Although Quantitative Finance is important to be studied for the aspiring quants, it is a fact that a lot of people who are a pro at trading knowledge are from all kinds of backgrounds.

It was observed in 2017-2018, that 60% of the participants who enrol for learning programmes in Quantitative Finance do not come from a finance background.

So if you are from a finance background it is great, but if not, you can enrol in one of the Degree Courses or Certificate programmes with ease.

After becoming a Quantitative Analyst, a thorough study in Quantitative Finance can help you with some broad areas like:

  • Portfolio Management
  • Currency Markets

Portfolio Management

Seeing the various advantages of Portfolio Management, it is crucial to have your portfolio diversified into stocks, bonds, derivatives and commodities. As a Fund Manager, you will be needing to study how various asset classes behave in a group as well as their relation with each other. Hence, with a good knowledge in Quantitative Finance, you can study the patterns of price movement of various asset classes. With this study, you can analyse the movement of asset prices and increase the gains.

Currency Markets

A lot of speculation goes around in the currency markets with regard to bond yields and movement of currency. Hence, an apt use of Quant Finance leads to an estimation and hedging against various risks. Also, it helps you in finding out the amount of assets that you should be buying at a particular price available in the market.

As these are the two categories which can land you financially rewarding jobs, we have mentioned some other rewarding and interesting jobs later in this article that you can take up as a Quantitative Analyst.

Now, let us see what all qualifications can get you closer to your goal of becoming a quant or quantitative analyst.

What Qualifications do you Need to Become a Quantitative Analyst?

When you aspire to become a quant or quantitative analyst, you need to select the right qualification, and that is why we have shortlisted some degree and certificate courses for you right here:

Degree Courses

There are a set of few Degree Courses that you can choose from for making your aspiration of becoming a quant turn into a reality. You can choose a degree course from the list which deems fit for you in accordance with your interest and background. Take a look at the shortlisted Degree Courses for you:

Masters in Financial Engineering

Since the Masters in Financial Engineering provides you with in-depth knowledge from evaluating statistics to econometric modelling, this is one engineering course to help you in the real world. 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 Financial Mathematics

This degree gives you a deep insight into the methodologies of quantitative finance. Since it is financial mathematics oriented, you will be equipped with all the knowledge you require to land yourself in the field of Quantitative analysis later. This course aims at making you skilled in practical applications of financial mathematics as a quant. Also, after completing this course, you will be able to make logical conclusions based on quantitative analysis. Some of the subjects (compulsory and optional) that you can cover in this course are:

  • Black and Scholes Theory
  • Stochastic Analysis
  • Optimal Portfolio Choice
  • Derivatives
  • Markov Processes
  • Financial Risk Analysis
  • International Finance
  • Forecasting of Time Series Analysis and some more.

Since some of the subjects above are compulsory, there are others which are optional to make it simpler for you to choose those which you find are needed for your prospects even later in life. The choice can also depend on whether there are any such subjects you have already covered earlier or not.

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. 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 the 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 and
  • Structures.

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

Masters in Mathematical and Computational finance

This degree course is aimed at providing the learner with a comprehensive mathematical background. This knowledge provides you with the skills needed to solve the finance-based mathematical issues. It revolves around the needs of the financial industry and the skills to cope up with the same. Since it is a course specifically designed to equip you with the knowledge of mathematical concepts and computational finance, it will help you implement apt tools. With this degree course, you can take up quantitative analyst as one of the job profiles and excel in the same. Various concepts in this degree course include partial differential equations, probability and statistics, financial markets and Python.

Masters in Applied Economics

As the title of this course says, it provides the learner with the comprehensive knowledge on economics and econometrics. This course covers an advanced knowledge in economics and aims to provide you with the deep insight in:

  • Applied Microeconomics
  • Macroeconomics
  • Econometrics and
  • Strategic decision-making

While aspiring to become a pro at quantitative analysis, Applied Economics will play a huge role in giving you additional expertise on the subject. This is the best degree course for those who have gained the basic knowledge in the sphere of economics and aspire to go ahead in this domain. If you wish to gain advanced knowledge in mathematics, statistics, and econometrics, then this course will serve your purpose of becoming skilled in the particular areas.

Masters in Finance

Coming to Masters in Finance, this degree course provides you with all the knowledge you need to gain an expertise in Finance. Specifically, for 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 its 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 analyzing 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 a great success in financial markets.

Okay now! As we have seen all the well-known Degree Courses, it is time to move further and explore some Certificate programmes as well.

Certificate Programmes

There are some Certificate programmes in Quantitative Finance that can help you advance your profession and skills alike. Whether you are looking for something to help you start your career or to boost the professional skills mid way in your career, Certificate programme serve your purpose. Here, you will find some helpful Certificate programmes we have shortlisted:

Professional certificate programme in applied financial risk management

This certificate programme is specifically aimed at making you more skilled in financial risk management. With the knowledge of tools and techniques required for managing financial risks, this certificate programme will give you a very important skill needed to function in the financial world. It will put the emphasis on the creation as well as implementation of risk management practices in financial institutions. Post this programme, you will gain the required knowledge in the spheres of mathematics and algorithms so that you are able to analyse risk in the market. And, with apt techniques learnt, you will be skilled enough to construct the risk management strategy and manage it. With this course, learn to:

  • Acquire the know-how of the relationship between risk and reward
  • Understand the impact of incentives on risk management
  • Manage the basic challenges that arise while measuring and managing risk
  • Construct and implement tools and techniques for measuring and managing financial risk.

If you wish to brush your skills up from the “risk management” perspective as a quant, then this course will help you go one step ahead in your endeavour.

Quantitative Studies for Finance Certificate

Since as a quant you require to be a step ahead in the mathematical and statistical knowledge, this course helps you with exactly that. This course helps you be skilled to gain an in-depth understanding of algorithms and investment concepts. This certificate in Quantitative Finance is aimed at enhancing your skills in:

  • Mathematics and Statistics
  • Quantitative analysis in financial markets
  • Investment related algorithms and techniques

All in all, this certificate programme aims to better your skills in quantitative finance and its functioning in the financial markets.

Quantitative Fundamentals Certificate

As the name of the certificate programme suggests, it is designed to provide you with a comprehensive knowledge of tools needed for quantitative finance sphere. With this programme you will acquire in-depth understanding of:

  • Quantitative finance
  • Financial markets
  • Investment industry

Since you will be gaining skills and expertise in fundamentals of mathematics, statistics, R programming and economics, this programme will help you perform your best in the real world financial situations. Hence, to be professionally sound and ready to face the financial world as a quant, this programme should serve your purpose well.

Masters in Data Science

As we have already mentioned Masters in Data science above in the Degree Courses, this certificate programme is simply an advancement of that to brush up your skills in the data science world. With fields like mathematics, statistics, computer science and information science, this programme aims at helping you be skilled to:

  • Research and analyse market trends
  • Make modeling decisions
  • Test new models
  • Maintain and modify analytical models

With this certificate programme, you will learn the above mentioned skills and much more.

Okay! So as we have mentioned all the Degree Courses and certificate programmes that you can opt for while aspiring to either become a quant or be more skilled at your designation, let us move on to see more. Ahead, we will see what all jobs you can look into in the sphere of Quantitative Finance and once you become a professional ‘quant’.

Jobs in Quantitative Finance

Since you have a wide scope as a quant, here we have briefly mentioned the job profiles which can be considered. Also, the news reports have indicated that, with the technological advancements, there is a need for such quantitative analysts who can utilise technology for analysing financial markets.

If you remember, we discussed in the beginning that a quantitative analyst makes use of data for analysing the markets and then designs algorithmic models to solve the complex financial problems. Hence, with all the data and the technology to analyse it and build algorithmic models around it, you are sure to carve an exceptional path for yourself as a quant or quantitative analyst.

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.

Without any further ado, let's take a look at what all career options lie ahead for a quant or quantitative analyst:

Risk management

As a professional in Risk management, a quant or quantitative analyst constructs the models or techniques for a better analyses of risk in the financial markets. Be it investment related or trading position related risk, a quant is skilled enough to analyse the risk. Also, the quantitative analyst constructs various risk management tools for implementing each in a particular situation.

Front office quant

A front office quant is the quantitative analyst involved in the operations like sales and trading. In this, the job responsibility includes handling sales and trading and also determining profitable opportunities for the traders. For making the profits increase, quants are needed to leverage quantitative methods in trading strategies.

Algorithmic trading

Algorithmic Trading is a process of converting a trading strategy into computer code which buys and sells (place the trade) the shares in an automated, fast and accurate way. Quants are mainly responsible for developing complex algorithms for trading.

Library quantitative analysis

In such a job profile, quants are required to analyse and validate the models that are already existing. The models are needed to provide relevant information and quants in such a job profile ensure that they do.

Furthermore, to know about the salaries of a Quant, read here. As you must have seen that there is a wide scope as a quant or quantitative analyst, the right degree or certificate course and the suitable job profile can help you build a great career.

Conclusion

In this article, we covered everything about Quantitative Finance from Degree Courses to certificate programmes and job profiles. This article intended to help you understand what Quantitative Finance is all about, and the opportunities you can get one you are into the field. As a Quantitative analyst, you get a whole lot of options in front of you when it comes to choosing the apt career. Since there are various career paths to choose from, a professional as a quantitative analyst has enough opportunities.

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