Quantitative analysis is the process of analyzing financial data with the goal being to form risk models and financial strategies based on mathematical formulas. These types of jobs require a high degree of skill and strong mathematical skills. For some positions, you will need a PhD in economics or finance. However, even though these positions are challenging, they are also often very financially rewarding. After all, not everyone can devise an investment portfolio that will be used by pension and mutual fund companies.
Quantitative Investment Manager
Quantitative investment managers work closely with other analysts and portfolio managers to develop an investment strategy. A quantitative approach is obviously used to devise risk management strategies and investment allocations. Some firms require extensive knowledge of “Top/Down” and “Bottom/Up” approaches to research.
You may be required to be a Chartered Financial Analyst, with at least a masters degree in finance. You may also need at least a bachelor’s in economics. Your job would be a managerial position so you may need managerial experience with another firm depending on the company you are pursuing.
Risk management positions, including risk management modelers, are analysts that focus on risk management. As a risk modeler, your job would be to forecast your company’s prepayment and default models, investment risk, and other types of risk inherent in the company. Many employers will require you to take an active role in managing and reducing any negative risks to the company.
In most cases, will need a masters degree in a quantitative discipline like statistics, actuarial science, mathematics, quantitative finance, or economics. You must also have proven modeling and analytical skills for most jobs.
Your employer may also want you to be familiar with statistical methodologies like least squares, time-series forecasting, and logistic regression. A PhD is often required in statistics or some other quantitative field. You may also need to have a firm understanding of regulatory and compliance issues in your industry. Finally, you may be required to have certain risk certifications from PRIMIA or GARP.
Algorithmic Trading Quantitative Analyst
As an algorithmic analyst, your job will be to analyze trading data and recommend improvements to your company’s performance. You may also need experience with high frequency trading. Your employer will probably require that you participate in research related to algorithmic trading products, liquidity management, and market microstructure. You will also need to be familiar with various algorithmic trading software and be able to modify and improve models based on provable theory and empirical evidence.
You will need experience as an algorithmic trader for most positions, quantitative and analytical skills and experience with data analysis. You will also need an advanced degree or experience in financial engineering, financial mathematics, statistics, computer science, economics, and finance.
Innovation and Model Validation
Model validation is the process of analyzing existing risk management or investment models and ensuring that these models are valid and accurate. You will need to be good at researching and collecting data, organizing that data into usable information, and assessing model risks and limitations so that you can make intelligent and meaningful recommendations to your firm.
You normally need an advanced degree in economics, finance, mathematics, computational finance or some other related field. An MS is nice, but a PhD is usually preferred. You’ll also need several years of financial modeling experience with many companies. Finally, you must normally have excellent knowledge in statistics, mathematics, and financial modeling.
A financial analyst collects, compiles, and organizes data for an organization. As a financial analyst, you will be required to develop integrated revenue and expense analyses, make projections based on existing company financial data, generate reports, and make presentations. You must also create and analyze monthly, quarterly, and annual reports and ensure that your company’s financial information has been recorded accurately.
You may be required to have at least a bachelor’s degree and several years of prior experience in the field or a related area.
While a career in quantitative analysis is rewarding, it’s also challenging. Getting a PhD in economics or finance is no easy task, and takes many years of work. Even when you are finished with your doctorate, there’s no guarantee of a job. If you’re going to pursue this type of career, make sure you are 100 percent committed to it and that you aren’t willing to accept failure as an option.
Guest post contributed by Charles Ronson. Charles is a freelance business writer. He has extensive experience as a business consultant. His articles appear on various small business blogs. Find out more about WongaBusiness.com who are specialists in Business loans.