The role of the quantitative analyst, or as they are sometimes nicknamed, “quants,” is to apply advanced mathematical principles to finance. These portfolio managers have an advanced command of the latest quantitative techniques.
Job Responsibilities of Quantitative Analysts
On a daily basis, quantitative analysts work with the front office trading and technology professionals in financial firms. Some of the responsibilities of a quantitative analyst’s job includes:
- Performing automated analyses, systematic analyses, algorithmic analyses and trades using quantitative software, systems and platforms
- Performing quantitative analytics, dataset manipulation and modeling
- Compiling reports based upon their analysis and present them to their supervisor or Chief Financial Officer
- Working closely with risk managers performing risk management
- Working closely with credit analysts performing credit analyses
- Developing trading strategies
- Helping to optimize portfolios
- Derivatives pricing and hedging
How to Become a Quantitative Analyst: Education Required for Quantitative Analysts
A bachelor’s degree in statistics or mathematics is a beginning for aspiring quantitative analysts, but a master’s degree is the preferred educational standard. A Master of Quantitative Finance (MQF) is the most popular graduate degree for quantitative analysts. Other graduate degrees that may be earned by quants include:
- Master in Mathematical Finance
- Master in Financial Mathematics
- Master in Financial Engineering/Master of Science in Financial Engineering (MFE or MSFE)
- Master in Computational Finance/Master of Science in Computational Finance (MCF or MSCF)
Coursework that is emphasized in a quantitative finance graduate program will include:
- Applied mathematics
- Computer science
- Computer programming (usually C++, sometimes SAS or SQL, STATA, DataFitting, SPSS, AMD and ENREG)
- Statistics
- Numerical methods
- Calculus
- Simulation techniques
- Time series analysis
- Asset pricing
- Financial economics
Certification Options for Quantitative Analysts
Certification for quantitative analysts is optional, not mandatory. The CFA Institute offers a Certificate in Quantitative Finance (CQF). The certification program involves six months of online study in six modules. Examinations must be passed after Modules 1 through 5, and a practical programming project must be completed after Module 6. Course materials cover the following topics:
- Calculus
- Differential equations
- Probability, random variables and random processes
- Linear algebra
- Introduction to quantitative finance
- Advanced modeling in finance using Excel and VBA
- Option pricing formulas
- Derivatives
- Numerical methods
- Monte Carlo Methods in finance
- Structured Credit Products (Credit Derivatives and Synthetic Securitization)
Once certified as a CQF, continuing education must be completed to maintain one’s certification.
Career Options for Quantitative Analysts
Quantitative analysts may work in a variety of financial areas: Investments, derivatives, information technology, insurance, quantitative trading, risk management, global investment banks, hedge funds, proprietary trading companies and asset management firms. Titles of jobs for quantitative analysts or those with a background/education in quantitative analysis include (but are certainly not limited to):
- Quantitative analyst
- Senior quantitative analyst
- Quantitative analyst, economic capital and stress testing
- Director of Risk
- Vice President of Risk Analytics
- Network Engineer
Salary and Employment Information for Quantitative Analysts
The Bureau of Labor Statistics (BLS) does not list salary and employment information for quantitative analysts, but according to business publication “Robert Half’s 2021 Salary Guide,” a Chief Risk Officer’s median salary is $187,500 per year, while the median annual salary of a market risk analyst with three to five years of experience is $91,500.
Unfortunately, with the growth of graduate school programs in quantitative finance, a glut of newly graduated quantitative analysts is seeking work in this lucrative field. The strong educational background that a graduate has will, of course, lend itself to many other financial positions in audit, risk, finance and operations.