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quantalgo

Algorithmic trading quantitative analysts (ATQs) utilize advanced methods from various fields to optimize trading strategies. The importance of risk management has increased post-2008 financial crisis, leading to enhanced techniques and collaboration in financial institutions. Model validation has gained prominence as regulators engage directly with quants, highlighting the need for accurate risk assessment and model correctness.

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11 views2 pages

quantalgo

Algorithmic trading quantitative analysts (ATQs) utilize advanced methods from various fields to optimize trading strategies. The importance of risk management has increased post-2008 financial crisis, leading to enhanced techniques and collaboration in financial institutions. Model validation has gained prominence as regulators engage directly with quants, highlighting the need for accurate risk assessment and model correctness.

Uploaded by

derkuzesta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Algorithmic trading quantitative analyst

[edit]

Often the highest paid form of Quant, ATQs make use of methods taken from signal
processing, game theory, gambling Kelly criterion, market microstructure, econometrics, and
time series analysis.

Risk management

[edit]

Further information: Financial risk management § Banking, Investment banking § Risk


management, and Bank § Capital and risk

This area has grown in importance in recent years, as the credit crisis exposed holes in the
mechanisms used to ensure that positions were correctly hedged; see FRTB, Tail risk § Role of
the global financial crisis (2007-2008). A core technique continues to be value at risk -
applying both the parametric and "Historical" approaches, as well as Conditional value at risk
and Extreme value theory - while this is supplemented with various forms of stress test,
expected shortfall methodologies, economic capital analysis, direct analysis of the positions
at the desk level, and, as below, assessment of the models used by the bank's various
divisions.

Innovation

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In the aftermath of the financial crisis in 2008, there surfaced the recognition that
quantitative valuation methods were generally too narrow in their approach. An agreed upon
fix adopted by numerous financial institutions has been to improve collaboration.

Model validation

[edit]

Model validation (MV) takes the models and methods developed by front office, library, and
modeling quantitative analysts and determines their validity and correctness; see model risk.
The MV group might well be seen as a superset of the quantitative operations in a financial
institution, since it must deal with new and advanced models and trading techniques from
across the firm.

Post crisis, regulators now typically talk directly to the quants in the middle office - such as
the model validators - and since profits highly depend on the regulatory infrastructure,
model validation has gained in weight and importance with respect to the quants in the front
office.
Before the crisis however, the pay structure in all firms was such that MV groups struggle to
attract and retain adequate staff, often with talented quantitative analysts leaving at the first
opportunity. This gravely impacted corporate ability to manage model risk, or to ensure that
the positions being held were correctly valued. An MV quantitative analyst would typically
earn a fraction of quantitative analysts in other groups with similar length of experience. In
the years following the crisis, as mentioned, this has changed.

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