Transcript Quantitative Finance

Quantitative Finance
Finding a job in quantitative
finance – tips and advises
A Guide
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Writing a CV
Contact Information
Be honest
Interviews
Preparations
Books
Practice
Brainteasers
Finding a job in quantitative finance
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Quantitative finance
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Quantitative finance is in essence a
multidisciplinary enterprise. To be
effective, you must learn finance,
mathematics and programming.
There are many types of quants such as
front office, research, mid office and back
office. Quants come form different
mathematical background.
Quants come in two varieties the pure
mathematician and applied
mathematician.
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Interview Questions
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Front office:
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probability and brainteasers, stochastic process, derivative pricing models and
hedge, interest rate models, market related questions, contract specifications. In
addition, there would be questions on convenient yield modeling in commodities
and Gold, volatility models, numerical method, programming questions, time
series, statistics.
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Mid Office:
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simulation models, stochastic process, derivative pricing models, value at risk,
forward price simulation models, counting process, numerical method including
Monte Carlo simulation, some programming questions (not to much different from
the front office), statistics
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Back office:
In model validation position, the question would be the combination of both front
office and back office on the theory side. This type of job is more about the
correctness of the model related math and statistics. I am not sure about other type
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of the back office position such as compliance related position etc.
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What Does Quant Do?
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A Quant design and implements
mathematical models for the pricing of
derivatives, assessment of risk, or
predicting market movements
Areas of Derivatives:
FX
Equities
Fixed Income
Commodities
Credit Derivatives
Hybrids
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What Sorts of Quant are There
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Front Office/Desk Quant
Model Validating Quant
Research Quant
Quant Developer
Statistical Arbitrage Quant
Capital Quant
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Front Office /Desk Quant
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Desk quant implements pricing
models directly used by traders
Main plusses close to money and
opportunities to move into trading
Minuses can be stressful and
depending on the outfit may not
involve much research
Lot of programming
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A Model Validation Quant
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Independently implements pricing
models in order to check that front
office models are correct
Less stressful, more relax
Far from the money
Less inspired
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Research Quant
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Tries to invent new pricing approaches
Interesting work
You Learn a lot
Hard to justify your existence
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Quant Developer
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A glorified programmer but well-paid
and easier to find a job
This kind of job can vary a lot
It could be coding quickly all the
time
Working on a large systems
debugging someone else’s code
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Statistical Arbitrage Quant
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Works on finding patterns in data to
suggest automated trades
The techniques are different from those
in derivative pricing
Most used by Hedge Funds
Returns on this type of positions are
highly volatile
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Capital Quant
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They works on modeling the Bank’s
credit exposures and capital
requirements
This are less attractive positions
This positions are becoming ,ore and
more important with advent of the
Basel II banking accord
Less pay, less stress
Mixed degrees
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Sorts of Employers
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Commercial Banks, (HSBC,RBC, ..)
Investment Banks (Goldman Sachs,
JPM, Morgan Stanley,..)
Hedge Funds ( Citadel Group,…)
Accountancy Firms
Software Companies
Information Systems
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Mathematical finance
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This quant will have to know:
abstract probability theory
Stochastic Processes
Martingale Presentation Theory
Change of numeraire
Risk Neutral versus real
Numerical methods such as:
Monte Carlo methods
Techniques for speeding Monte Carlo
Finite Difference or Finite Elements
Newton Raphson Method: Root Finding
Crack Nicholson Method
Spectral Method, Fourier transforms
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Key area to brush up
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Diffusion equations generally
Finite Difference methods
Finite Difference methods in several
dimensions
Different types of FDM such as:
explicit, implicit and so on
A stopping time with respect to a
sequence of random variables
X1, X2, X3, .
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Mathematics in finance
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Modeling approaches:
Probabilistic
Deterministic
Discrete: difference equations
Continuous: differential equations
Tools:
Simulations
Approximations
Asymptotic Analytics
Discretization methods
Green’s functions
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What you must know
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PRODUCTS
Fixed Income, bonds, derivatives
Equity, dividends, derivatives
Currencies – interest rates
Commodities
Exotics, main types
Credit derivatives
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What you must know
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CONCEPT
Risk
Delta hedging
Risk neutrality
Calibration
Static and dynamic hedging
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Models
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Binomial model
Lognormal
Jump diffusion
Stochastic volatility
Interest Rate model, single, multi factor, HJM,
BGM
Credit derivatives
Transaction matrices
Numerical methods
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Programming skills
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Financial Instrument Pricing Using
C++ - Daniel J. Duffy
Mark Joshi: C++ Design Patterns
and Derivative Pricing
The Practice of Programming Kernighan & Pike
Data structures and Algorithms
C/C++, MATLAB,
Interesting puzzles and points in
C++: http://www.gotw.ca/gotw
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BOOKS
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Problem Solving:
Mathematics of Chance - by Jiri Andel
http://www.wiley.com/WileyCDA/WileyTitle/
productCd-0471410896.html
Timothy Falcon Crack: Heard on the Street
Vault Guide to Advanced Finance and
Quantitative Interviews
Available in: PDF Download and Paperback
Print Version
Author: Jennifer Voitle
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Books
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Paul Wilmott: Mathematics for Financial Derivatives
Baxter/Rennie: Financial Calculus, Cambridge University
Press, 1996
John Hull : Options, Futures and Other Derivatives
Peter Carr - Derivatives Pricing, The Classic Collection
Emanuel Derman: My life as a Quant
Steven Shreve: Stochastic Calculus and Finance
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Useful sites:
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1. QUANTITATIVE ANALYST
Paul Wilmott
2. Frequently Asked Questions in Quantitative
Finance by Paul Wilmott
3. Math Finance
4. Quantitative
Finance
5. Certificate in Quantitative Finance
6. QUANTster: The Quantitative Finance Job Market
Daily
7. Quantitative Finance Forum
8. Jobs for PhD's
9. QuantLib
10. Society of Quantitative Analysts
11. A Community For Quantitative Finance Students
12. Community for Quantitative Finance Students
13. The International Association Of Financial
Engineers
14. Efinancial careers
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