What happens when really smart people with access to massive data sets, advanced mathematical and statistical theory and computer skills, and the backing of financial powerhouses apply their skill sets to the world of finance? Quantitative analysts (or, more succinctly, quants), that's what. These highly skilled, highly trained experts provide high-level financial strategic guidance to investment banks, securities traders, brokerages, hedge funds, and even the government. Their research drives such rarefied investment techniques and instruments as derivative trading, statistical arbitrage, and algorithmic trading.
Given the skills and training required—many quants hold a PhD in statistics, mathematics, or quantitative finance—it should come as no surprise that quants earn a very comfortable living. The Bureau of Labor Statistics pegs financial analyst income in securities, commodities, and other financial investments at $124,810 per year. Some job-posting sites set average quantitative analyst salary even higher. In fact, some of these sources indicate that, when incentive pay is figured in, total compensation can top $200,000 in major financial centers.
Quantitative analysts work in a high-pressure, results-driven environment; this is not a job for those with weak stomachs. Think you can handle it? Then read on to learn what it takes to become a quant. In this article, we'll cover:
A quantitative analyst uses advanced mathematics and statistics to develop financial strategies and solve financial problems. They conduct research, perform data analysis, and create models to predict future trends and manage risk. They work in:
They contribute to the development and execution of many types of transactions, including:
A quantitative analyst's responsibilities typically include:
The world of quants can be divided into three categories:
Quantitative analysts are compensated well. According to Glassdoor, the average quant earns $129,000 a year in salary and incentive pay. Even entry-level quants earn good scratch; salary estimates range around $118,000 annually, according to Glassdoor. At the seven-to-nine year mark, a quant makes an average salary of $160,000 per year.
Indeed pegs the quantitative analyst median salary at $137,070, plus another $10,000 in incentives. According to the site, quants in big cities do significantly better: in San Francisco, they make $198,162 per year, while in New York City, they earn $178,378 per year. Of course, it costs $3,000 a month to rent a closet-size apartment in both of those cities, so there's that.
Investopedia reports that quants can earn a great deal more than that. The site notes that it's "not uncommon to find positions with posted salaries of $250,000 or more" and that, once bonuses are included, "a quant likely could earn $500,000+ per year." Contacts, experience, and specialized skills in programming or analytic tools and processes can improve your negotiating position and your salary offer.
Succeeding as a quantitative analyst requires a set of highly specialized skills. You might be able to land this job with just a bachelor's degree if you're some kind of savant with an amazing track record, but the odds against that are awfully long. According to Duke University's Student Affairs webpage, a Master of Financial Engineering (MFE) degree "can help when transitioning into quant careers." However, the site cautions that "for some quant roles there is a preference given to PhDs and research experience."
If you're looking for an online master's program in financial engineering, consider:
The MFE isn't the only master's degree that can land you a quantitative analyst gig. The master's in quantitative finance (MSQF or MScQF) also gets the job done. Any advanced degree that requires high proficiency in mathematics, statistics, and computer science—a master's in mathematics or physics, for example—should provide the necessary skills.
Top online providers of the MSQF include:
If and when it comes time to pursue a PhD, you'll have more choices. Because you can customize a PhD through your specialization and dissertation, you can become a quantitative analyst with a PhD in quantitative finance, financial engineering, mathematical finance, mathematics, statistics… the list goes on. What will matter, ultimately, is that your dissertation/culminating project involves quantitative analytics and that you attend a quality program.
Opinions differ on whether quantitative analysts need certifications. Some recommend the Chartered Financial Analyst (CFA) and the Financial Risk Manager (FRM) designations. Others—like this derivatives trader on Quora, argue that neither the CFA nor the FRM "hold much relevance to the job of a quantitative analyst. CFA/FRM are both used in financial modeling or risk management... Most [QAs have] either PhDs or a master's in mathematics, economics, finance, or statistics. These firms prefer a guy with a statistical background, not one with a financial background."
There's more of a consensus about the Certificate of Quantitative Finance (CQF), which, according to Quora users, "is the gold standard of quantitative finance certifications" even though "it's not widely known outside the quant community."
It appears so. North Carolina State University projects annual job growth for quants in the United States at 9.6 percent (and at an even more robust 14.1 percent for those in the Tar Heel State). The Financial Times projects 66,000 "new technology and data science jobs" in finance "by 2030 in such roles at computer programming." The article speculates that "perhaps the highest demand [will come] from quantitative investors that use AI to trawl markets and colossal data sets to identify potential trades." As Heidi Picket, assistant dean at Massachusetts Institute of Technology Sloan School of Management puts it: "Computer programming skill are becoming a must have… Financial institutions are looking for R, Python, or another programming language."
So the question remains, are you up to the challenge? There's no faking your way into this profession: you'll need plenty of smarts and the degrees to prove it. It's possible to find your place with just a master's degree, but know that you'll be competing with a lot of PhDs. That means a minimum of two years of study post-bachelor's, and perhaps as many as six. That makes quantitative analyst an excellent job for someone with the patience and persistence to complete advanced degrees, the aptitude to handle highly theoretical and complex mathematical and statistical concepts, and an interest in how financial markets behave.