Quantitative Finance Finding a job in quantitative finance – tips and advises

6/2/20152 A Guide Writing a CV Writing a CV Contact Information Contact Information Be honest Be honest Interviews Interviews Preparations Preparations Books Books Practice Practice Brainteasers Brainteasers Finding a job in quantitative finance Finding a job in quantitative finance

6/2/20153 Quantitative finance Quantitative finance is in essence a multidisciplinary enterprise. To be effective, you must learn finance, mathematics and programming. 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. 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. Quants come in two varieties the pure mathematician and applied mathematician.

6/2/20154 Interview Questions Front office: Front office: 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. 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. Mid Office: Mid Office: 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 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 Back office: 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 of the back office position such as compliance related position etc. 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 of the back office position such as compliance related position etc.

6/2/20155 What Does Quant Do? A Quant design and implements mathematical models for the pricing of derivatives, assessment of risk, or predicting market movements A Quant design and implements mathematical models for the pricing of derivatives, assessment of risk, or predicting market movements Areas of Derivatives: Areas of Derivatives: FX FX Equities Equities Fixed Income Fixed Income Commodities Commodities Credit Derivatives Credit Derivatives Hybrids Hybrids

6/2/20156 What Sorts of Quant are There Front Office/Desk Quant Front Office/Desk Quant Model Validating Quant Model Validating Quant Research Quant Research Quant Quant Developer Quant Developer Statistical Arbitrage Quant Statistical Arbitrage Quant Capital Quant Capital Quant

6/2/20157 Front Office /Desk Quant Desk quant implements pricing models directly used by traders Desk quant implements pricing models directly used by traders Main plusses close to money and opportunities to move into trading 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 Minuses can be stressful and depending on the outfit may not involve much research Lot of programming Lot of programming

6/2/20158 A Model Validation Quant Independently implements pricing models in order to check that front office models are correct Independently implements pricing models in order to check that front office models are correct Less stressful, more relax Less stressful, more relax Far from the money Far from the money Less inspired Less inspired

6/2/20159 Research Quant Tries to invent new pricing approaches Tries to invent new pricing approaches Interesting work Interesting work You Learn a lot You Learn a lot Hard to justify your existence Hard to justify your existence

6/2/ Quant Developer A glorified programmer but well-paid and easier to find a job A glorified programmer but well-paid and easier to find a job This kind of job can vary a lot This kind of job can vary a lot It could be coding quickly all the time It could be coding quickly all the time Working on a large systems debugging someone else’s code Working on a large systems debugging someone else’s code

6/2/ Statistical Arbitrage Quant Works on finding patterns in data to suggest automated trades Works on finding patterns in data to suggest automated trades The techniques are different from those in derivative pricing The techniques are different from those in derivative pricing Most used by Hedge Funds Most used by Hedge Funds Returns on this type of positions are highly volatile Returns on this type of positions are highly volatile

6/2/ Capital Quant They works on modeling the Bank’s credit exposures and capital requirements They works on modeling the Bank’s credit exposures and capital requirements This are less attractive positions This are less attractive positions This positions are becoming,ore and more important with advent of the Basel II banking accord This positions are becoming,ore and more important with advent of the Basel II banking accord Less pay, less stress Less pay, less stress Mixed degrees Mixed degrees

6/2/ Sorts of Employers Commercial Banks, (HSBC,RBC,..) Commercial Banks, (HSBC,RBC,..) Investment Banks (Goldman Sachs, JPM, Morgan Stanley,..) Investment Banks (Goldman Sachs, JPM, Morgan Stanley,..) Hedge Funds ( Citadel Group,…) Hedge Funds ( Citadel Group,…) Accountancy Firms Accountancy Firms Software Companies Software Companies Information Systems Information Systems

6/2/ Mathematical finance This quant will have to know: This quant will have to know: 1. abstract probability theory 2. Stochastic Processes 3. Martingale Presentation Theory 4. Change of numeraire 5. Risk Neutral versus real 6. Numerical methods such as: a) Monte Carlo methods b) Techniques for speeding Monte Carlo c) Finite Difference or Finite Elements d) Newton Raphson Method: Root Finding e) Crack Nicholson Method f) Spectral Method, Fourier transforms

6/2/ Key area to brush up Diffusion equations generally Diffusion equations generally Finite Difference methods Finite Difference methods Finite Difference methods in several dimensions Finite Difference methods in several dimensions Different types of FDM such as: explicit, implicit and so on 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,. A stopping time with respect to a sequence of random variables X1, X2, X3,.stopping timestopping time

6/2/ Mathematics in finance Modeling approaches: Modeling approaches: 1) Probabilistic 2) Deterministic 3) Discrete: difference equations 4) Continuous: differential equations Tools: Tools: 1) Simulations 2) Approximations 3) Asymptotic Analytics 4) Discretization methods 5) Green’s functions

6/2/ What you must know PRODUCTS PRODUCTS Fixed Income, bonds, derivatives Fixed Income, bonds, derivatives Equity, dividends, derivatives Equity, dividends, derivatives Currencies – interest rates Currencies – interest rates Commodities Commodities Exotics, main types Exotics, main types Credit derivatives Credit derivatives

6/2/ What you must know CONCEPT CONCEPT Risk Risk Delta hedging Delta hedging Risk neutrality Risk neutrality Calibration Calibration Static and dynamic hedging Static and dynamic hedging

6/2/201519Models Binomial model Binomial model Lognormal Lognormal Jump diffusion Jump diffusion Stochastic volatility Stochastic volatility Interest Rate model, single, multi factor, HJM, BGM Interest Rate model, single, multi factor, HJM, BGM Credit derivatives Credit derivatives Transaction matrices Transaction matrices Numerical methods Numerical methods

6/2/ Programming skills Financial Instrument Pricing Using C++ - Daniel J. Duffy Financial Instrument Pricing Using C++ - Daniel J. Duffy Mark Joshi: C++ Design Patterns and Derivative Pricing Mark Joshi: C++ Design Patterns and Derivative Pricing The Practice of Programming - Kernighan & Pike The Practice of Programming - Kernighan & Pike Data structures and Algorithms Data structures and Algorithms C/C++, MATLAB, C/C++, MATLAB, Interesting puzzles and points in C++: Interesting puzzles and points in C++:

6/2/ BOOKS Problem Solving: Problem Solving: Mathematics of Chance - by Jiri Andel productCd html Mathematics of Chance - by Jiri Andel productCd htmlJiri Andel productCd htmlJiri Andel productCd html Timothy Falcon Crack: Heard on the Street 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 Vault Guide to Advanced Finance and Quantitative Interviews Available in: PDF Download and Paperback Print Version Author: Jennifer VoitleJennifer VoitleJennifer Voitle

6/2/ Books Paul Wilmott: Mathematics for Financial Derivatives Paul Wilmott: Mathematics for Financial Derivatives Baxter/Rennie: Financial Calculus, Cambridge University Press, 1996 Baxter/Rennie: Financial Calculus, Cambridge University Press, 1996Cambridge University PressCambridge University Press John Hull : Options, Futures and Other Derivatives John Hull : Options, Futures and Other Derivatives Peter Carr - Derivatives Pricing, The Classic Collection Peter Carr - Derivatives Pricing, The Classic Collection Emanuel Derman: My life as a Quant Emanuel Derman: My life as a Quant Steven Shreve: Stochastic Calculus and Finance Steven Shreve: Stochastic Calculus and Finance

6/2/ Useful sites: 1. QUANTITATIVE ANALYST Paul Wilmott 1. QUANTITATIVE ANALYST Paul Wilmott 2. Frequently Asked Questions in Quantitative Finance by Paul Wilmott 2. Frequently Asked Questions in Quantitative Finance by Paul Wilmott Paul WilmottPaul Wilmott 3. Math Finance 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 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 careersQUANTsterJobs for PhD's QuantLibSociety of Quantitative AnalystsA Community For Quantitative Finance StudentsCommunity for Quantitative Finance StudentsThe International Association Of Financial EngineersQUANTsterJobs for PhD's QuantLibSociety of Quantitative AnalystsA Community For Quantitative Finance StudentsCommunity for Quantitative Finance StudentsThe International Association Of Financial Engineers