How I Became a Quant (2007) [pdf]

Posted by sonabinu 5 days ago

Comments

Comment by neko_ranger 8 hours ago

I wonder how fun being a modern quant really is. It seems like one of those things that sounds more fun in your head, but the reality is different. Kinda like "studying physics", going pro in a sport, or becoming a rockstar. People see the end result and don't see how much work it takes to get there or what the day to day is really like

Comment by Agingcoder 7 hours ago

Im reasonably familiar with the exotics quant space.

It’s essentially IT/data work - the days of sophisticated maths are mostly gone. There always was a lot of code, but these days for most people there’s little to no new maths.

From what I’ve seen, post-2008 the job changed significantly, with more IT, less maths, more standardization - basically the job moved from bespoke everything to super industrialized. You’ll be able to have your model work for one underlying and one product, but what’s really useful is for lots of underlyings and many products - and that’s very hard.

That being said, and that’s important, you must understand the maths behind, otherwise you won’t be able to do anything useful.

Comment by lordnacho 7 hours ago

I started my career in derivatives. Mostly vanilla, but I did have a look in the exotics.

Intellectually, it's interesting when you start. There's all these weird payoffs that you are introduced to, and it feels like a game.

The thing is, there's a limit to how exotic things can get. People have already figured out how to price most of the things you can imagine, including all the things that customers normally ask for. Most of the day goes on looking after your hedges, basically implementing the model.

It's like a zoo. When you arrive there's a bunch of different, interesting animals. After a while, you've met them all. There's no new animals, just variations of existing ones.

However the thing that is really an issue is how the business works. Over time I came to the conclusion that the quants in the derivs space are really secondary to the salespeople. How important is the quant who can get the price right to within 1%, when the sales guy can talk the customer into overpaying by 5%? Sometimes it feels like the customer is not even shopping the structure around at all, he just feels comfortable with his sales guy and is willing to hand over a few million bucks of customer money with barely any thought.

Comment by fancyfredbot 7 hours ago

The salesman can't tell you how to hedge the product. If you can't hedge you will lose that 5% upfront pretty fast.

You need quants and sales and trading. Which is why all banks have all three.

Comment by lordnacho 5 hours ago

> The salesman can't tell you how to hedge the product. If you can't hedge you will lose that 5% upfront pretty fast.

> You need quants and sales and trading. Which is why all banks have all three.

I don't think anybody said you can just run without one of those. But it seems the magic is in spotting the fish, not hauling it in.

Comment by fancyfredbot 3 hours ago

Spotting fish who you can overcharge is not really a sustainable business model. You can do it once but your colleagues will find out, move to a competitor, and next time they'll rip them off a bit less than you did and you'll have to rip them off less than that.

There is, eventually, a shortage of dumb money. The sustainable way of making money involves competition, and this involves knowing the "right" price within a tight tolerance.

Comment by chaps 6 hours ago

This matches my experiences as a non-quant, but havin done support work for quite a few of them. You can feel the novelty slough off of them as they get burned down into realizing they're just fitting curves.

Comment by credit_guy 7 hours ago

> but these days for most people there’s little to no new maths.

You are right. For most people there's little to no new maths.

But not for all. There's still plenty of good quality math to be done in the exotics space. However, there's a bit of Catch 22 that prevents people from doing new math: all the big shops have had exotics libraries since before 2008, and because of the exotics hiatus between about 2008 and maybe 2013, the research momentum was lost. After that, most quants in the space were happy to find ways to use the old stuff, and apply small tweaks at the margins. Most small shops use vendor models (Numerix, Murex) or open source (QuantLib), and people who use vendor solutions or open source are not looking for cutting edge stuff.

But there's still good math left out there.

Comment by bmitc 6 hours ago

What is being meant by exotics in this discussion?

Comment by e-master 6 hours ago

I assume exotic derivatives (binary, asian, barrier options...) and structured notes that predominantly use above said derivatives (autocallables, barrier reverse convertibles, accumulators etc.)

Comment by bmitc 5 hours ago

Thank you.

No matter how much I try to understand the financial system, there seems no end to the nomenclature.

Do you or others know of any good references that help navigate this?

Comment by e-master 5 hours ago

Really depends how deep you want to go.

For a structured products introduction you may take a look at this one: https://sspa.ch/en/book/

It's a very simple book, very high level, but explains the most popular structured products in a very simple manner. If you can read a payoff diagram, then this is the simplest intro.

Looking at their website though, they seem to have some nice online material there also. For example this explains the 5 most popular products, and perhaps that's good enough for an introduction (really these 5 products cover 90% of the market anyway, though there's no limit to how exotic some bespoke structures can get): https://sspa.ch/en/lab/?underlying=CH0012221716&final_fixing...

In case you're interested in getting to get to learn about them on a deeper level I would recommend https://www.amazon.com/Exotic-Options-Hybrids-Structuring-Pr.... This book explains not only the products, but also the pricing dynamics and hedging too.

And just a small gem I found recently about volatility trading:https://www.ebay.co.uk/itm/306680584072?chn=ps&_ul=GB&_trkpa...

Despite its appalling Amazon reviews I consider this book to be a real gem when it comes to the introduction to vol trading (basically dynamic hedging of equity derivatives)

Comment by lordnacho 5 hours ago

Options, Futures, and Other Derivatives by Hull, that's the classic.

Not sure how exotic he gets but likely the page that sells this book will have other options books.

I think there's one by Espen Hauge about exotics.

Relevant book by Nassim Taleb (before his big break) is Dynamic Hedging, which tells you what to do with your option risk once you have it.

Comment by bee_rider 6 hours ago

What happened? Is this a case of the actual job changing, or just title inflation? I’d expect the quants to be the ones doing the math and implementing the kernels…

Comment by mikert89 7 hours ago

theres math, its mostly about pulling in obscure data sources, rank and file in alot of hedge funds dont even get to see what actually makes money

Comment by curiousgal 6 hours ago

There's definitely room for new math but , at least for banks, the process of getting your fancy model validated by internal model validation teams and regulators is so time and energy consuming that most people don't want to bother with using all the fancy math they could use and instead rely on simplifications and simple extensions.

Comment by 7777777phil 8 hours ago

I always wanted to be a quant, until I actually was a quant (internship). The division of labour in modern banks / market markets is so high that the scope of an individual’s work becomes much less than you would expect.

Comment by highfrequency 8 hours ago

Good instinct. A lot of the day to day is debugging nitty things, reconciling small differences in results, trying not to make dumb mistakes. Almost all attempts to do very smart theoretical novel work fail, often because of extremely mundane engineering and data issues.

Comment by Rzor 5 hours ago

>Almost all attempts to do very smart theoretical novel work fail,

Unless you happen to be in a place like RenTech, perhaps?

Comment by conformist 7 hours ago

Imo the fun quant stuff these days is about predicting returns and not pricing derivatives. As others have said here, the pricing part is mostly commoditised and more about managing software.

Comment by mhh__ 7 hours ago

Yes although if you are predicting the returns swaps and options and so on then you need to be able to do both

Comment by mhh__ 7 hours ago

What kind of quant?

Trading huge equity portfolios and getting paid a lot? Pretty fun

Pricing structured products all day in a bank that charges you for lunch? Not great

Comment by altmanaltman 6 hours ago

I don't think quants actually trade, though? Like the division of labor usually separates research, code, and trading. Unless you start your own sole prop quant trading shop, which is fun but unless you're the next Jim Simons it can be pretty hard to do it profitably.

Comment by frankc 5 hours ago

if you are doing equity statarb, its all low touch strategies, so yes the quants 'trade' in that they can write the strategies. The traders in that environment are more like support, usually.

Comment by mathisfun123 8 hours ago

i don't know what the point of this book is - there's nothing rockstar about being a quant. not only do not all quants "generate alpha", even the ones that do are just overworked data scientists. ask anyone that actually works in the industry - fancy math is no longer a thing ("exotic option pricing"). so would "how i became an accountant" be just as interesting? how about (more accurately) would "how i became a data scientist"?

Comment by 609venezia 8 hours ago

> ask anyone that actually works in the industry - fancy math is no longer a thing

Huh? What happened? This is a very interesting claim I would love to hear elaborated

Comment by sharifhsn 7 hours ago

The “fancy math” associated with quant usually refers to pricing derivatives like options.

The thing is that there isn’t really strong institutional demand for exotic derivatives, people are happy using existing methods and just applying those to current markets.

The other type of fancy math has to do with deriving alpha, which is also not that complex, from a statistics perspective you’re mostly using linear regression or other basic forms of regression.

The hard part of quant is implementation, making sure your data is right, hunting through poorly understood markets, and managing risks carefully and understanding them.

There’s also ML but that’s equally complex in quant as it is anywhere else.

Comment by kccqzy 7 hours ago

> The hard part of quant is implementation, making sure your data is right, hunting through poorly understood markets, and managing risks carefully and understanding them.

In my experience I have seen far more division of labor than you describe. Real quants don’t do work like making sure your data is right or even much of implementation; they delegate that to software engineers. But a cheap quant shop might be too cheap to hire SWEs so quants end up doing this work instead. The real quant work is just hunting through poorly understood markets.

Comment by stackghost 5 hours ago

In finance, if you have a better understanding of how to price a certain asset then you can make better trades than your competitors and thus make money.

Some assets are very easy to price, like bonds. Others are esoteric, like Exotics which are options or other securities with uncommon pricing structures. This is where the "fancy math" kicks in. But as time goes on, more and more firms figure out how to better price all the various assets that they trade, which erodes the competitive edge between market participants.

The assertion is that today, most firms have most things mostly figured out as far as how to value them. There's little to no competitive advantage to be mined from esoteric stochastic calculus. In contrast, it's rumoured that one of the most successful firms of all time, Renaissance, owes a large part of their success to their absolutely pristine data which comes from a massive data ingestion and cleaning pipeline, allowing them to get a clearer statistical picture of what the current market forces at play are, and how they're going to manifest.

Comment by gosub100 7 hours ago

and I wonder how much of your success / failure is luck vs advanced-anything. You could wager 7-figure bankrolls in vegas on blackjack or baccarat and _possibly_ double or triple it. Doesn't mean your equation-solving had anything to do with it (in fact it expressly doesn't in that case).

Comment by KellyCriterion 5 hours ago

Strictly wrong:

- a casino is a random game

- stock market is a game of incomplete informatoin

The one cant related to the other by whatever equation.

Comment by gosub100 4 hours ago

The series of a shuffle of a 6-deck shoe is not "incomplete information"?

Comment by mikrl 3 hours ago

Taleb calls it the Ludic Fallacy (game fallacy)

The statistics of games are understandable, defined and easy to work with.

The statistics of markets, as Soros spent his career investigating, are filled with feedback loops, and as Taleb investigated, fat tails.

Comment by TacticalCoder 6 hours ago

> and I wonder how much of your success / failure is luck vs advanced-anything

Well take someone who YOLO on a 0 DTE option and makes 80x (not unheard of) vs someone who wins the same amount over, say, four years and 8 000 trades... Well it's not impossible that the YOLOer is more skilled and has an edge (while also being a degen but that's not the point): it is just very unlikely.

Thousands, tens of thousands, hundreds of thousands of trades is not the same as "gambling one night in Vegas".

Comment by quanttnauq 4 hours ago

[dead]

Comment by conformist 7 hours ago

As a practitioner in this area, I’d say some of the authors here stand out as extremely influential to this day.

Clearly these include:

Cliff Asness (AQR is huge, lots of publications)

Ronald Kahn (early pioneer, standard book, successful ex. BGI people everywhere)

Neill Chriss (Almgren-Chriss)

Pete Muller (famous stat arb pioneer, PDT still going strong)

Not sure who I’ve overlooked.

Comment by TrackerFF 5 hours ago

Quant trading/research is one of those very, very niche fields that you likely only know about if you're:

A) A finance or STEM student at a fairly prestigious university, close to a major financial hub.

B) Belong to a certain social class where high finance is a known and respected field.

Of course, it has become more mainstream - simply due to the high comp, and high comp jobs eventually finding their way to lists with mainstream audience.

Comment by djoldman 9 hours ago

(2007)

MUCH has changed since then.

Comment by keiferski 8 hours ago

I came across this guide (dated 2025) a couple years ago and thought it was interesting. Not a quant or even in finance though, so I don’t know how accurate it is:

https://www.dropbox.com/scl/fi/da7zfjj2rplwzf2sfiriz/Buy-Sid...

Comment by bormaj 8 hours ago

Gappy is one of the more decorated, public figures in the space. That PDF gives a candid overview of what it's like to interview/work in the industry.

Comment by mhh__ 7 hours ago

Gappy is very good but occupies a slightly odd role in that he's sort of a jobbing philosopher for hedge funds at this point

Comment by bormaj 6 hours ago

The exception rather than the norm, yeah but IMO his takes are refreshing/insightful.

Comment by apt-apt-apt-apt 8 hours ago

What's a convenient and safe way to open PDFs safely?

Some options seem to be: Upload to google drive (inconvenient), use some open-source tool (LLM suggests DangerZone), use a VM (very inconvenient)

Comment by nebezb 8 hours ago

I use markitdown[0] religiously. You’ll lose fidelity for anything complex (math equations, images), but it does a great job 95% of the time in my experience.

I’m assuming the attack surface is reduced. I invoke it through a docker container. But this might be a misplaced sense of safety.

[0] https://github.com/microsoft/markitdown

Comment by philipkglass 8 hours ago

Open it with Firefox. The Firefox PDF renderer is implemented in Javascript and sandbox-restricted like any unknown web site.

Comment by qwertox 8 hours ago

Dropbox is rendering that pdf as html, so using that link should be safer than downloading the pdf.

Comment by g8oz 6 hours ago

Sumatra PDF if you are on Windows.

Comment by 8 hours ago

Comment by nickpsecurity 5 hours ago

A one-way link (data diode) transmits it to a box with simplified hardware (eg RISC architecture). The box has a dedicated monitor and keyboard. Once you're finished, you sell the box on Craiglist. Then, buy a new, sealed replacement from Best Buy.

Pay per view was an expensive, business model for cable. For PDF's, it's even more expensive.

Note: It's more convenient than full, per-app, physical security.

Comment by altmanaltman 8 hours ago

Don't think it's a guide like "Hey here's how YOU can BECOME A QUANT!" bs, more about the stories/history of 25 different quants. So more of a personal story/history doc. I think it's an interesting read if you are a finance nerd

Comment by r_lee 8 hours ago

Should be added to the title.....

Comment by dang 8 hours ago

Year added above. Thanks!

Comment by KellyCriterion 5 hours ago

yeah, nearly 20 years :-D

Comment by b00ty4breakfast 8 hours ago

that's a whole-ass book! I nearly crashed my poor little box, she barely has the ram to open 400+ page PDFs without my browser also being open.

Comment by anonu 6 hours ago

This sounds like you're on a Pentium 386

Comment by nickpsecurity 5 hours ago

It might be a custom chip with all SRAM, no DRAM, that they normally use for AI acceleration. Running Firefox and PDF's on the side would be a nice, value add.

Comment by huvarda 7 hours ago

Fake field for business majors to larp as programmers and make fake money off other people doing real work but muh market efficiency

Comment by nrclark 7 hours ago

Kind of reads 25 people's stories about "How I became a parasite". Why not create new things, instead of making a career out of leeching the wealth created by others?

Comment by keiferski 7 hours ago

This isn’t really a good angle to critique finance IMO, because it is indeed a necessary part of the modern economy.

A better angle is how finance tends to acquire a ton of smart young people that could/would otherwise be doing work that has more benefits to society. It’s hard to blame the individual here, because the salaries are orders of magnitude larger in finance vs. say, aerospace engineering. Would I turn down $700k at a hedge fund to earn $90k at a science lab? Probably not, unless I was already independently wealthy.

Comment by francisofascii 7 hours ago

"it's all just numbers really. Just changing what you're adding up. And, to speak freely, the money here is considerably more attractive." - Peter Sullivan in the movie Margin Call

Comment by Rzor 5 hours ago

I ended up rewatching that movie more than ten times a few months ago after I got stuck with a capped internet connection and not much to do online. It's one of those films where there isn't a single fucking scene wasted: everything plays out a little over a day, and the character dynamics and dialogue feel genuinely tight. Lots of great characters overall, but Jeremy Irons's John Tuld is just stellar in terms of presence and delivery.

Comment by DontchaKnowit 2 hours ago

How is that not a restatement of what OP said?

Comment by goodmythical 7 hours ago

Why not practice compassion instead of critiquing others?

Comment by stevenhuang 7 hours ago

Everyone benefits with more efficient markets.

It is easy to fall into the trap of thinking HFT/low frequency quant firms "leech wealth".

You can get out of the trap by learning about what they do and the essential role they play in the proper functioning of our markets.

Comment by bmitc 6 hours ago

It's an intentionally naive position to say that places don't leech off of others. Even large places like Fidelity and Schwab that respect customers aren't just keeping people's money in vaults. They literally take your checking, savings, retirement accounts, etc. and make money off of them while they "sit".

Firms specialize in intercepting trades and then placing trades faster than 99.9% of others.

These institutions hide behind "we provide liquidity" like it's a selfless act of kindness, whereas that's just a mere side effect, and just one of many.

The entire modern financial system is layers and layers of unneeded complexity that almost solely rose out of people trying to leech money from the system. These financial institutions have built the entire system around them so that now they can say "look at how essential we are!".

Comment by KellyCriterion 5 hours ago

> aren't just keeping people's money in vaults. They literally take your checking, savings, retirement accounts, etc. and make money off of them while they "sit". <

depending on jurisdiction and TOS, this maybe legal, but it needs to be announced somehow to the customer; a capital management firm of an ETF needs to buy the included shares, e.g; those have no money "sitting around"?

Comment by bmitc 5 hours ago

Sure, it's announced and by contract. But where else do you have to put your accounts?

Comment by gosub100 6 hours ago

the leeches are the publicly traded companies that are listed on the stock market. Any market should be happy to have more participants, unless you like price-uncertainty.

Comment by bmitc 6 hours ago

Said on a website hosted by a major VC that specializes in Silicon Valley types of venture capital, bringing the next data collecting mobile app to your doorstep.

Comment by fragmede 7 hours ago

Did you actually read them?

I didn't go to NYC, but Money is fungible so it's a simple math problem.

How much non-parasite good can you do making $50k/year * 10 years? Even if we ignore taxes and you donated your entire salary, that tops out at $500k worth. If instead you could make, say, $500k/year * 10 years, and then quit and form your own non-profit for $2,000,000 and do 4x as much good.

Comment by darth_aardvark 7 hours ago

I get your point, but that was the exact logic of Effective Altruism and Sam Altman is now jailed for the Largest Fraud of All Time. It's a slippery slope.

Comment by IrishTechie 6 hours ago

Sam Bankman-Fried. And I think he’s a bit of a special case, others do not need to be worried they’ll succumb to multi billion dollar fraud schemes if they try to earn-to-give.

Comment by antonvs 2 hours ago

I'm not defending SBF, but I think you may not be completely taking into account how strong the pressures are on someone like that. I'm pretty sure he didn't set out to commit a multi-billion dollar fraud, he was sucked into it as a consequence of the expectations on him and so forth. My point here is just that this is a symptom of a societal problem, and SBF is just a well-positioned scapegoat.

Comment by Smaug123 2 hours ago

SBF was really unusual in that he claimed to be a pure expected-utility maximiser. He admitted that he would take 51% coin-flips forever on Conversations with Tyler in March 2022, long before everything blew up:

> COWEN: Then you keep on playing the game. So, what's the chance we're left with anything? Don't I just St. Petersburg paradox you into nonexistence?

> BANKMAN-FRIED: Well, not necessarily. Maybe you St. Petersburg paradox into an enormously valuable existence. That's the other option.

I'm not saying the pressures are absent, but they are hopefully vastly less compelling for any normal person with a more standard view of risk and utility. ("Sure, I'll just cover up this little bit of fraud, because that's got a better than 50% chance of success" is a course of action SBF all but said he would take, months in advance!)

Comment by pinewurst 5 hours ago

Freudian slip?

Comment by nzzn 6 hours ago

If you’re only make on average 500k/year after 10y — you’re not really in the game at all

Comment by postflopclarity 6 hours ago

there are a lot of quants who aren't at T1 firms or in the hottest seats. plenty make less than this. obviously if you are top of class and getting headhunted by XTX, your offers will be much bigger than $500k ... but it's kind of obnoxious to claim that QRs making less than this aren't even players

Comment by antonvs 3 hours ago

The term "player" tends to imply something more than just someone employed in a field. I don't support all this insane inequality, but the other commenter is not wrong on the relative value assessment.