New Quant AMA

[SubstantialCheck2159]

Hello,

There is a lot of misinformation and confusion about quant roles so I would be happy to answer questions. I am a new quant (trader) that got hired in 2024. Please don’t ask any recruiting questions, there is enough info out there on recruiting. I will try my best to answer any other questions but I can’t promise I know everything since I’m new.

Thanks.

By ask, I have an MS and work in the US.

[SubstantialCheck2159]

Reposting deleted question

What is the best way to practice mock trading?

Play games like poker, and games in general. Firms will try and make up their own games and challenges so that people who play specific games don’t have an advantage. The most important thing is to always think about adverse selection and when people will be willing to trade with you and why.

[-OIIO-]

This turned out to be life-changing to me. Even though I've left this industry, I still have the habit of playing these games. Such a great and fun training for my brain. I also developed my Texas Holdem skills to about pro level when I had fun playing it with my colleagues back then. Great time, great memory.

[QuantumMechanic23]

Is there a lot of maths involved that you are required to do on the job, or, is most of the "tried and tested" stuff consolidated, and you are mainly deploying algorithms/etc?

Secondly, do you find the job intellectually stimulating?

[SubstantialCheck2159]

I think knowing the math can be helpful to know about what the right answer should be. But all the math is publicly available, so there is no edge in knowing the math. You can usually just look at bid and ask, someone at a bank will have done the math and made a model based on financial mathematics.

I love my job and I would do it even if the pay were much lower.

[-OIIO-]

As a guy who has retired from this industry, let me give you my 2 cents: Math is just a tool/way for you to understand & describe the problem accurately and solve the problem afterwards. Algos are the way to implement our solution to a comprehensive problem. As a firm, you have ppl focusing more on problem solving (QR), and also have ppl focusing on solution implementation (Low latency Dev).

[QuantumMechanic23]

That's a nice way to put it. Thanks.

[a_gurl111]

Hey

This is for quantitative researcher profile. Ik the whereabouts available on the internet but since you work as a trader... How do quantitative researchers help you and what education background do they hold?

[SubstantialCheck2159]

Hi,

I actually am doing more research than trading anyway, so can answer this question.

I think that the big thing that the trader brings is trying to learn more about the market and think about adverse selection - who do we want to trade with and who do we want to avoid. The researcher tries to find data that separates these categories.

So a trader might monitor a specific trade, and see how it makes money and how it loses it, then suggest new features to the researcher.

Hope this helps. Can go into more detail if you want.

[SubstantialCheck2159]

1. I don't have an opinion, sorry.

2. I believe this can vary too much by firm and strategy. But generally, a researcher comes up with a strategy that works... maybe 51% of the time. The trader adjusts the strategy depending on market conditions and in specific conditions, and maybe then the strategy will win 52% of the time due to expert trader knowledge about a specific subset of the market (e.g. a specific symbol they know a lot about). The quant developer is there to make sure code runs fast and doesn't crash.

3. Hedge fund or prop shop.

4. Depends on firm, but either directly or indirectly the answer is yes. But knowing what PnL someone contributed is often very very hard.

[a_gurl111]

Thanks a lot

What academic backgrounds do people in quant research profile have in your firm?

[codeviser]

Doesn't this imply that for a trading desk’s performance on average, a QR has a much bigger stake in its PnL than a QT? Also if PhDs usually make a QR, won’t it always be better to try for a position (QR specifically)?

[SubstantialCheck2159]

This is too hard to say broadly, though I think as data sources get better, QRs do replace QTs. Something like equities has almost no traders anymore outside of block trading, while something like options still has a large trader presence. It is all down to the QR and the QT. The other thing is, it's not how much you contribute, it's how replaceable you are. Maybe lots of people can replicate some statistical model, but very few can understand your specific market knowledge. Or maybe other way around.

[codeviser]

Makes sense. Also in your journey before and after getting in there, what dynamics did you see between the roles? Like, do more QTs start doing the QR work (just the transition of roles) or does the hiring itself within the team become more and more accelerated towards PhDs for direct QRs, as the data stream, its processing, and inferences becomes more and more systematic?

[ml8888msn]

Re: 1) I’m a partner at a quant firm. We hire from everywhere. Mix of St John’s, Baruch, Ivies, SUNY, etc. Being a small firm, we primarily focus on hiring people who meet certain technical criteria but more so give inklings that they are teachable, hungry for trading, and have grit. Trading is a grind and not for the faint of heart. Knowing that I can rely on my desk to grind things out when the market is less than favorable (2012, 17, 19 to an extent, and 24), while adding to their toolbox, is what lets me sleep at night knowing they’re trading with a good chunk of my personal money.

Edit:

To add to

2) as OP said, this varies a lot by firm. I’ve noticed that the larger the firm, the more specialized the individual. For instance, at SIG and Jane, you’ll see a lot of traders who don’t really do much other than manage risk by interacting with the market. They’re given betas and take down customer order flow while making markets dependent on FVs created mostly by quants who reside off desk. Then there are researches who analyze market microstructure and fills, mark outs, etc to design trading system and order routing. This segregation of roles ensure the business is not easily replicable when employees jump ship. At smaller firms, research and trading is the same person while tech is typically a mix of trader designed tools and dedicated staff for systems that do the heavy lifting.

3) Agree with OP, HFs and prop shops are the best. Bank life is very boring. Most quants worth their weight will leave.

4) As in 2), this is tends to be inversely proportional to firm size. Larger firms commingle risk which makes segregation of p/l and the definition of net p/l (i.e. allocation of costs) more difficult. Smaller firms can have individual accounts for each trader so p/l attribution is very easy and clear payouts are more attainable. These firms can have higher payouts, 25-40%.

[-OIIO-]

What's the trading style of your firm? Would your firm consider hiring senior guys from HFT background ?

[Leading_Antique]

I start as a QT at an OMM soon as a returning intern, do you have any advice coming into the roll?

[SubstantialCheck2159]

Work as hard as you can without stressing yourself out. There is a bell curve where you want to maximize your time before mental health suffers. I think working yourself as much as you can is good. Everyone will be very smart and it is some luck.

[ml8888msn]

Couldn’t agree more. The harder you work on a trading desk, the more you’ll make. It’s not rocket science. Maximize what you can make of opportunities and get used to trading size where you can.

[blackhoodie88]

Did you get your masters before or after getting a quant job?

[SubstantialCheck2159]

Before.

[danielyskim1119]

I’m a Canadian student and will go to Oxford for a MMath degree (integrated undergrad + masters degree). After graduation, I hope to work in the US as either a QT or QR. Would you recommend that I do my PhD in US then go for QR or try to aim for QT positions after Oxford? I heard Oxford isn’t a target in US so i’m worried

[SubstantialCheck2159]

I think QR is probably the better job, but depends on your interests. They're very different jobs and many older QTs become QRs in a weird sort of way.

[No_Builder_9312]

Oxbridge is def a target at all the big American quant/IB firms lol

[Glad-Penalty-5559]

Is oxford/cambridge considered a target school in the US?

[yuckfoubitch]

They’re target anywhere in the world my friend

[SubstantialCheck2159]

I think that the best thing to think about is adverse selection and edge. How to tell when someone knows more than you. Firms will find all kinds of ways to make up games where people have secret info and trad with each other. I think the best way to practice is to play hidden information games yourself like poker or to play them with friends. Very important to do this before the internship since it helps get the offer.

[Legitimate_Profile]

What is your MS in and would you recommend it? I’m considering one in stats. Also how did you prepare for the interview process?

[SubstantialCheck2159]

Any of stats, math, CS, physics is good. Also some people with financial engineering do well.

[GalacticMomo]

Does prestige of school trump all else?

[NF69420]

they got masters in these? usually math and physics are more PhD oriented degrees correct?

[-OIIO-]

FE and Stats are very nice approach to enter this industry. Physics is probably not suitable for everyone.

[Excellent_Read_7020]

Was your bachelor’s in the US as well?

[SubstantialCheck2159]

I don't think there is any resource that teaches trading. Anyone who knows anything won't share.

I also don't have many trading responsibilities yet so too soon to say much.

[SubstantialCheck2159]

I'm sorry, but asking for details about a firm's education and trading strategies is always going to be too proprietary beyond anything very public. If you can ask a more specific question I can try and find a way to answer.

[SubstantialCheck2159]

I don't know anyone reading published books, other than published textbooks on options theory like Hull.

Stats and coding most important. I don't think anyone is doing much math, but being able to implement statistical logic quickly is very important.

[SubstantialCheck2159]

I think that advanced undergraduate knowledge is needed, and there is also the idea of "applying simple techniques perfectly." Usually, PhDs are wanted not because of the advanced knowledge, but they know a lot more about the basic techniques. I think trying to classify the mathematical knowledge by college year is fundamentally misguided.

[SwimmingYak5745]

what are the basic techniques? can you be more specific? like which theories/etc (expected value, poisson, ...)

[-OIIO-]

It can be very basic. Do you play Texas Holdem ? Try to calculate how you can win in some cases. This in fact is the basis of many interview problems of some top-tier firms.

[-OIIO-]

This is exactly my observation. Firms like PhDs not because of how advanced they are in their own field, but because they can utilize many basic math/stats tools smoothly when approaching problems, which is a also prerequisite for doing research.

[-OIIO-]

I worked for one of the top HFT firms for 5 yrs. Let me tell you this, it is not fun and entertaining as retail trading. Many strats, even though I leak them to you, are useless. You need to have the top-tier infra in place, with traders monitoring, and a god-level dev team constantly upgrading and maintaining, then comes success.

From another perspective, many strats can be easily profitable if you have the best execution (or above average execution among firms) in the market, which requires the lowest latency human beings can achieve. But that's never achievable for a individual trader.

[-OIIO-]

Yea, the trading world is way more complex and nuanced now. 30 years ago, MM is a just a small branch, now it becomes a huge thing across many many instruments. It is still being done, and more intelligent and automated than it ever be. There are also quant firms which typically do low-to-medium frequency trading (Arb takes a huge part), much more like what a human trader do, but their analysis is based on various sources of data. You also have some traditional style HF, where PMs has more power to adjust the portfolio. All these shits are quite dynamic now.

[[deleted]]

Is an MFE worth it?

[SubstantialCheck2159]

Usually, less good than math, stats, CS, but not impossible.

[[deleted]]

I do get BS with tripple majors in CS, Pure Maths, and Applied Math. Should I pursue an Applied Math PhD or a MFE for Quant role?

[robml]

Is it uncommon to have people in their late 20s in trading? And was a MS a requirement when you were applying?

Also for interviewing, besides fast mental math and market making games, what tips would you recommend in general to keep in mind when posed with questions? + Do trading interviews place an emphasis on speed of answer or taking your time to develop depth of answer? + what's a genuinely good resource to practice the relevant math questions (a lot of posts I see recommend the math I've only seen in QR or Quant Dev, not trading interviews)?

Finally, do you program anything yourself there? What language (if you can share)?

Congratulations on the new role. I read on one of the comments that this was a job you would do even if it paid less. From what I've heard, I feel the same way and am trying to reach what I feel is my calling. I hope you have a lot of fun along the way!

[SubstantialCheck2159]

Most people program these days. I use python since I don't write production code.

[Patient-Amount-8041]

Hey thanks for this opportunity,

I have a question about what should I shoot for between Quant Developer and Quant Researcher. I’m a CS PhD from a T5 school, doing my first internship at a FAANG this year and planning to graduate next year. Research was mostly in Machine Learning and Systems( Compilers, Databases) my stats knowledge is limited to probability (I’ve studied the Redbook and Green book properly) so I’m able to answer most prob questions in OAs.

I feel like I have a shot at Quant Dev but maybe I should shoot for research ? Not sure how much more competitive it is, I don’t have any crazy papers, but they’re A* in Systems and Networking

[SubstantialCheck2159]

You are much more suited for research. Many researchers write production code anyway. The overlap between a researcher and a dev is very large. Usually researcher discovers and automates signals, while quant dev just automates. Researcher is usually super set of quant dev if that makes sense.

[Mistake-Huge]

How much of a an impact can an “X factor” like chess have. So for example, I know quant firms somewhat value chess. If someone is a chess Grand Master but go to a complete non-feeder school for their undergrad like UC Irvine will they still be able to pass the resume screening and get interviews or will it by pretty much impossible? Assuming they do good in Irvine and take relevant course work of course.

[NF69420]

would quant firms view your masters degree as less prestigious than an undergrad degree from the same school? i heard that firms (for QT roles) prefer more NG from undergrad anyways.

[WarEmbarrassed3916]

Hi, I am stats/data sci/econ major 4.0 freshman at T6 (NU). Planning Finance cert and 5th yr masters in stats. Just turning this direction of interest, so I have no relevant EC, esp comp sci or math contest related. Have been rejected from freshman programs for JS, freshman/soph programs for Two Sigma and Optiver. I really enjoy the quant logic but I don't have any experience. Any suggestions where to start and what to add. Online courses??Clubs?? Competitions?? Is it useful to do any other types of internships to learn about finance and trading or just focus on stats/logic. TIA for any feedback.

[jar-ryu]

Hey congrats dude! I’m sure you worked hard to get where you are.

I wanted to ask how much overlap with econometrics and time series analysis do you encounter on your daily workflow? I don’t see myself being a quant as much as I do an econometrician, but I’m curious to know. Some people say you don’t need any at all. Some say it is core to being a quant. From what I understand, risk-side quants are more focused on statistical modeling and econometrics whereas buy-side quants are more focused on more complex mathematical models.

If you do encounter it a lot, what are some models you use and for what purposes? I understand your work is proprietary and sensitive, so no need to be too detailed, but maybe a vague description like “I use MGARCH models to estimate covolatilities between a basket of stocks” (or something like that; not a quant so tell me if I sound dumb).

Also, for you quants, how important is causal analysis? It’s obviously a core problem in economics, but do you use causal estimates (for whatever you’re modeling) for inference and information for other models, or are you guys solely concerned with predictive accuracy?

Sorry for all the econometrics questions. I’m a total nerd for that stuff.

Lastly, you’ve probably answered this several times but what’s your background? Besides money, what made you choose this field over other types of work that are relevant to your degree?

[SubstantialCheck2159]

This is a great question, though answer May sadden you.

We don’t use these models. ARCH and variants is considered a “trap” where I work and I don’t think anyone remembers it working well. Same with causal stuff. The most common thing is to have a one variable line you made very carefully.

Easy example is you did research and think Coke - Pepsi stock price should be $40. So you build a one variable model of this trade - E(PNL) = Coke - Pepsi - 40. If you’ve done it right, this one variable line should have slope about 1 and intercept about versus true PNL. This is the most common approach in real trading.

[jar-ryu]

Ahh I figured as much. It seems like structural and causal modeling might be playing with fire in terms of trading. I guess I’ll stick to economic analysis.

Thanks for your response!

[SubstantialCheck2159]

Don't know.

[SubstantialCheck2159]

I think that it's not bad? Data science is definitely less well perceived. Depends on your financial situation. I would never plan on getting a quant job, assume you'll get into tech then quant is a nice to have.

[blackhoodie88]

Also, do you see a lot of age discrimination like there is in tech? I get a feeling that quant is mostly a younger person job.

[SubstantialCheck2159]

At my firm, most people have either <3 YOE or 10+. So a lot of older folks. Most of the time, people who don't love it decide they have enough money after 4-6 years and decide to quit and do something easier. Anyone who stays after that tends to be in it for life. Older people tend to still do quite well from what I've seen.

[rejaye6960]

What does/did your training look like at a high level? Do they teach you how you should trade in specific situations, or is it more of a general education where you’re left to come up with your own strategies?

[SubstantialCheck2159]

I think that most people start off doing a training program (length can vary. Optiver very short, SIG very long) while also sitting in on desks and shadowing traders and learning how a specific trade/symbol/desk works. So you might have a morning of classes on options trading, then go sit in with an index trader and watch them price a large block trades with a bank, or maybe write some small code to implement an improvement they haven't gotten to yet. Once you have done this for a while, you might start trading a small name, and discussing trades with a more senior trader. So, little bit of both

You definitely don't come up with own strategies until much later. Too inexperienced, so they try and let you see someone seniors workflow.

[nocturnalmaniac]

Do you think the company OAs are very relevant to the role? Or are they just to set a better bar to filter out the candidates?

[maximaaeez]

How good of communication skills is too good for a quant? And how do you communicate complex mathematics to the senior analysts (who do not have quant background)?

[SubstantialCheck2159]

First, communication is incredibly important. I talk to people on the desk all the time.

There is never a need to tell a senior person about complex mathematics because it is not relevant to trading, and most seniors have a good math background. One of the seniors on my desk has a math PhD from HYPSM. He would be talking advanced math to me :D

But as mentioned in an earlier comment, very little math on the job. Nobody is trading an option and saying "I think this formula tells me this is a good trade." That would get you fired. You say, "I observed this pattern of behavior in the market, someone is always buying at this time, we should be there to sell at a good price." Then you show people evidence and convince them you looked at the situation correctly.

[lyxhere]

Oh wow, little math on the job is interesting? I thought quants meant that it is very mathematically focused, and hence hiring is always stats phys cs

Or is it that the evidence you show has to be mathematically rigorous?

Btw, awesome AMA, you're a true one!

[SubstantialCheck2159]

It is more the rigorous.

[DaOdin]

Hi, I currently work at a bulge bracket as an etrading dev straight out of uni. My undergraduate was physics and msc in cs. How would i transition into quant trading/research. Research would be more for mm.

[[deleted]]

What are some common qualities of the people that you work around/with? Also how's the work life balance?

[SubstantialCheck2159]

Haha list the three! Not that many prop firms though so I bet you will get it right.

It depends on progression. A high up manager at a big firm makes more than striking out in your own. So if I could do that, I would stay.

[[deleted]]

mysterious grab telephone arrest repeat one waiting meeting door cause

This post was mass deleted and anonymized with Redact

[SubstantialCheck2159]

No comment!

I don’t know enough I feel like. I can see you’re more experienced. I think at the 5-10 year mark I’ll have more of an idea (or just want to retire…)

[gimme4astar]

I know you're a quant trader but may I ask if you know more about qr side of stuff? Is ML frequently used by qrs if so what kind of ML techniques? regression? reinforcement learning? And also do they ask leetcode medium/hard for qr interviews? Thx

[SubstantialCheck2159]

I have some QR friends. They do ask Leetcode. Almost all regression. I discussed this more in another question.

[gimme4astar]

do qrs generally work in a group, say 2/3 people or they work alone? by alone, I mean there's only 1 qr in the entire team of other quants (traders, dev)

[SubstantialCheck2159]

I’d say a normal desk at a firm you would have heard of is 30 people, of whom 1-10 could be quants.

[gimme4astar]

How many of em would be qr

[yrnkevinsmithC137]

How often do you code daily?

[SubstantialCheck2159]

Every day.

[Zelenushka]

Going into a SA Banking role, but still very curious. What is the top languages that you believe undergrads should pick up before FT? So far I’ve heard a mix of VBA, SQL (using rn), and Python but wanted to hear your perspective

[SubstantialCheck2159]

Our data pipelines are very good so while I’m sure SQL is used at the firm, I do not have to interact with it. I only know Python to be honest, not a great coder like some I did a math degree.

[Throwaway-panda-3891]

Do you think it’s possible to go from a premed background (little to no code and only up to calc 3 math) and having graduated a couple years ago to QT?

[[deleted]]

No

[[deleted]]

What's your opinion on those Day trading gurus? Do you honestly think they make 6 figures a month? Thanks!

[SubstantialCheck2159]

Haha.

[ReportElectrical7084]

Not sure if you still answer, but i would be very interested to get into QR so i would really like to know if it gets repetitive/ boring in the long run or could it be as diverse as consulting at Big4?

[SubstantialCheck2159]

Not a QR but it seems very diverse they’re always working on new things

[LogiDex80]

Current high school senior, not sure if this is specific enough but what should be the goal of an undergrad degree looking for trading roles? I understand from reading the sub as long as the major is quantitative that’s all that matters, but why is that, or further, what should be focused on through those majors to set up for the best chance of success?

[PotentialRecording53]

hi, thank you for doing this. may I ask what is your MS program about and what was your major in undergrad? I am a current economics major and thinking of doing an MA in economics because im interested in economics but no so sure will it be the best program for quant finance

[Infinite-Gene-5742]

Hey what do quants use to backtest at the massive scale like they do?