What is a Quant? – Financial Quantitative Analyst #Finance

g’day youtube and welcome back to the asx Portfolio channel my name is jonathan so today we’re going to be talking about what a quant is and more specifically what a quant is not so here i’m going to give some book recommendations of what i think are the

essential skills that quants need and the misunderstanding of what people in industry believe a quant is compared to really where they need to be so moving into that what is a quant and what skills should they have so specifically here a quantitative person in the

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance industry is someone who’s actually studied mathematical none;">Finance now what do i mean by mathematical Finance i mean someone who’s understanding risk mutual pricing who’s understanding

Portfolio replication from a no arbitrage point of view so what does this skill set represent well it’s someone who knows probability and statistics very well it’s someone who has a good base level of understanding in

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance it’s someone who can actually implement models using computer science and really the core on top of those three skills is the financial mathematics background now financial mathematics is a pretty tough

course so i’ve studied it in a master’s program at the university of queensland but obviously there are very prestigious places to go and study financial mathematics around the world and especially in america and england so here i’ve got um really what is the base of the

curriculum of all these programs now and it’s this stephen shree’s books so volumes one and two and really they’re separated into discrete time and continuous time so what do i mean by that i mean the binomial asset pricing model for series 1 and discrete time no arbitrage models

are quite easy to understand and really if you type anything into youtube to do with option pricing you’re going to get CashNews.cos to do with this discrete models the really complex part is being able to understand continuous time series why is it difficult well first you need to understand

stochastic calculus and there’s a whole bunch of probability theory um sigma algebra which i hadn’t even heard of before i opened this book um that is really the base of understanding the probability behind continuous time series and stochastic calculus before you even get into the

model eValuation so it is a complex part of the degree but without having this knowledge really um you can’t describe yourself as a quantitative a quantitative analyst in the financial industry without having this base understanding and this base understanding is really

important as a quantitative researcher so understanding that the maths is really complicated is really important so this background is really essential now in industry there are probably three roles that i consider as being in you know a quant or a quantitative researcher so there’s there is

the quantitative researcher who does the modeling and this is the this is where you’re assigned a task for example a bank wants to start being involved in let’s say the second-hand robum exchange market so so you know someone here in australia wants to start exporting rubber and getting

customers on that basis and selling to you know different countries around the world now this second hand rubber market is quite hard to even understand and comprehend so how would you go about hedging some of this physical exchange well you need to start breaking down the base financial no

arbitrage theory so that kind of modeling will be assigned to a researcher then they will try and implement and and start solving that equation and they’re either going to do it through replication and having a Portfolio replication with no arbitrage pricing or they’re

going to do risk neutral pricing methodology now whichever route they do they’re just going to create a prototype of how this will work this is then going to be sent to an implementation team who actually have the knowledge um they they are also kind of like quantitative developers in the

fact that they understand some of the maths but probably not to the same degree as the quantitative researchers but they can then go ahead and implement these models in whatever programming language they’re doing now don’t get me wrong the quantitative modeler who was first doing these

models is 100 probably capable of um building the prototype and doing it but they are generally different skill sets now there’s probably one other quantitative research position that sits over the top of this and this is validation so validation is where you’re overseeing the model

development process and the implementation process and you’re in charge of really testing this end product so again someone with both skill sets but um so in my opinion a financial quant is someone who has all these skills they’ve got the financial math so those two books there um but

really more it’s really a life endeavor to understand quantitative Finance so they’ve got the mathematical

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance background they have a really strong background in probability and statistics and they’ve got a computer science element to it so where they can actually go ahead and implement these models so those are

really the core skills um that are required from a quant in my opinion now so the books that i do recommend to anyone interested in the area are 100 steven trees books here so volumes one and two and just remember we’re talking about discrete models here so really the binomial asset pricing

model tree models here and then continuous models so quite involved but really really good if you want to get a base understanding of the industry and really this is what all programs are trying to have as the background backbone of their financial mathematics program so if you want to skip doing a

masters and just head straight to these books you can get a good good pretty good understanding if you read those books about five times over each so for actually implementation um the computational modeling is quite involved i recommend this book here so implementing derivative models it’s

really really clear their implementation strategy their pseudo code’s really easy to understand and it gives you a good understanding of how you can actually apply all the mathematics in those two books that we’ve just we’ve just heard about in the real world this book is

especially good if you’re in interest rate Markets i think the interest rate models and implementations in this book are extremely good um but yeah i highly recommend this one as well

for more the computer science background and implementation now to aid in the probability and statistics i haven’t bought any throughout my program probably because i’m less interested in understanding the base probability and statistical models i just always you know would refer to the

base lecture notes didn’t want to do extra reading in my spare time what i was interested in is time series analysis and of course this does have a fair bit of probability and statistics involved in here found a really practical book in statistical analysis of financial data now this is in ah

but i i trust you if if you are learning python you’re going to be able to take up the notation here and be able to implement everything that is explained in python so it would be awesome if this said in python but it says in uh so trust me this is one of the best books you’re going to

find on time series or an introduction to time series modeling and also probability in the financial industry so highly recommend this book as well so yeah hopefully you guys got a little bit of value out of this CashNews.co in understanding what a quant is and what a quant is not so someone who is

not a quant is you know someone in the financial industry that can knows a little bit of coding well if they don’t know the mathematical background of stochastic calculus and being able to do risk neutral pricing and and pull apart all these assumptions in derivative modeling um and pricing

then are they really a quant um yeah that that is that really comes down to it if you have some parts of these things i i would debate that you know you’re not truly someone who understands financial mathematics and has studied this in great depth so hopefully this encourages you to go out

and do some research of your own maybe enroll in one of a program but um really financial mathematics is a lifelong endeavor and you should always be attempting to learn more so that’s what this channel is about hope you guys are getting a lot of value if you have any recommendations or you

want to leave your own comments on what you think a quant is go ahead and put them in the comments section below as always thank you very much for listening if you like the CashNews.co give it a thumbs up and see you next time