As finance is being used to meet the demand of the modern, global economy, risk must be considered. To conduct financial activities in this complex environment, major financial employers such as banks, hedge funds and private equity firms are always looking for skilled financial professionals who can identify the most profitable investment opportunities and reduce risk. Quantitative analysts have these skills, and are in high demand.
What Is A Quantitative Analyst?
A quantitative analyst, also called a quant, is a specialist who uses statistical and mathematical methods and applies them to financial and risk management challenges. A quant develops and implements complex financial models used by companies to make good financial and business decisions about investments, pricing and risk.
To be a strong candidate for quantitative analyst jobs, you need to have strong mathematical and statistical skills; strong skills in data analysis and data mining; strong financial knowledge; and excellent programming skills.
So if you want to develop quantitative analysis skills, how do you do it?
Please continue reading to learn more.
#1 Develop Technical Skills
Most quantitative analysis experts have high proficiency in database management and computer programming that is used to develop and implement mathematical models used in many financial applications. For example, the C++ programming language is thought to be one of the most important in the field of quantitative analysis. Other programming languages you may want to develop further, depending upon the position you seek, include:
Further, quantitative financial analysts should have extensive experience in statistical analysis software packages. Some of these include Matlab, R, S-Plus or SAS. Strong skills in Excel are also needed.
#2 Obtain the Chartered Financial Analyst (CFA) Designation
A common requirement today for many quants is to have their CFA, which is a financial analyst certification offered by the CFA Institute. The purpose of the designation is to measure the integrity and competence of financial analysts. Candidates are required to pass three examinations that cover accounting, ethics, money management and security analysis.
Before you can become a CFA, you must have at least four years of investment and financial career experience. All who enroll in the CFA program must have a bachelor’s degree. The CFA designation is one of the the most respected in the world of finance, and is highly desired by companies who hire quantitative analysts.
The three exams that are required cover the following topics:
- Level 1: Quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, wealth planning and portfolio management.
- Level 2: Focuses on valuation of many types of financial assets and stresses application of investment tools and concepts in various situations.
- Level 3: Stresses effective portfolio management and wealth planning by requiring you to synthesize all of the analytical methods and concepts in the whole curriculum.
The odds of passing all three exams in a row is less than 10%. Successful candidates usually take about four years to earn their CFA, but once they do, they usually have their choice of quantitative analysis jobs.
#3 Obtain Certificate in Quantitative Finance (CQF)
The CQF is a financial engineering program and finance designation that is newly offered by the CQF Institute. The CQF designation provides deep, practical training in mathematical finance, financial modeling, derivatives and risk management. It is six months long and is offered as a single class through Fitch Learning. This is a training provider for the financial services industry and is based in London.
The CQF designation is made for financial professionals who want to work in derivatives, quantitative training, model validation, risk management, insurance and IT.
CQF has two levels of courses, with each taking three months to complete. In the first level of the course, some of the topics covered include:
- Random nature of pricing; examination of financial data; why we need probabilistic models; drift and volatility.
- Examining of different asset classes; derivative products and common strategies for trading
- Applied calculus: discrete time random walks; Weiner processes through rescaling and passing to the limit; quadratic variation
- How to simulate and manipulate stochastic differential equations
- Conditional expectations; change of measure; stochasitc processes
- Binomial models, including up and down moves; delta hedging and self financing replication
#4 Obtain a Master’s Degree in a Technical or Scientific Field
Even for lower level quant roles, most employers will want to see a master’s degree online in quantitative analysis on your resume in fields such as quantitative finance, mathematical and computational finance, operations research or financial engineering. Taking this type of finance and math-heavy, rigorous degree program will provide you with the advanced quantitative skills you will need to succeed as a quant.
Unless you have outstanding computational and mathematical skills, an MBA is usually not sufficient to build the skills needed for quant positions.
You should look for a master’s degree program that will build these types of skills:
- Big data modeling
- Machine learning
- Data mining
- Object oriented programming
- Monte Carlo techniques
- Linear algebra and differential equations
- Numerical linear algebra
- Game theory
- Probability and statistics
- Portfolio theory
- Equity and interest rate derivatives
- Systematic and discretionary trading practices
- Credit risk products
- Financial modeling
#5 Develop Excellent Written and Verbal Communication Skills
Developing new mathematical models and analytical approaches are important, but analysts also must be able to clearly document and explain the results of their work to others in the company so they can be used in the business on a day to day basis. Analysts also are often required to work with staff to design technical systems to run the financial models they create. So, analysts should be able to communicate effectively with company management and other parts of the business to set design and research priorities.
If you focus on building your quantitative analysis skills in the above ways, you will be able to qualify for some of the most lucrative positions in the financial field.
- Why Develop Quantitative and Qualitative Analysis Skills? (2016). Retrieved from https://www.snhu.edu/about-us/news-and-events/2016/12/data-analysis-skills
- Strengthening Your Quantitative Analysis Ability. (n.d.). Retrieved from https://www.experisjobs.us/exp_us/en/career-advice/quantitative-analysis-ability.htm