Roadmap for Graduate Roles at Quant Trading firms!
By: Finance Club, Iit Roorkee
Tags: Markets, Finance, Recruiting, Quant, Maths

“Quant Trading is like Playing in the Champions League” ~ Some Trader, who places trades worth millions of dollars daily!

Do you enjoy following sports? Do you fancy the thrill of driving a formula one car? Do you get inspired when you see Kohli chasing off the target in pressure situations? Do you admire the fact that sports-stars dedicate their mind, body, and soul towards one goal of thriving well in an extremely fast-paced and challenging environment?

Don’t worry! You did not click on some “Sports 101” blog, but if you do resonate with our thoughts in the previous para, then quant roles at trading firms might just be the perfect fit for you :)

Trading, finance, stocks, bla bla bla, all this stuff might sound way beyond our (engineers) area of expertise, and you might have started feeling like Buzz Lightyear!

But hold on a second, Quantitative Trading doesn’t need you to know all the things studied by your old school friends who took up commerce. Gone are the days when to be successful in markets, either you had to be a Ken Griffin (Founder of Citadel) or Harshad Mehta :P

The tide has been shifting towards mathematicians, physicists, and engineers since the 1980s, and probably, you will find more researchers in Wall Street compared to the top Ivy leagues. Why, though, you ask? Well, trading stocks or predicting market movements can be understood as just another mathematical modeling problem. It’s not that simple, actually. Markets are influenced by various factors, not only financial ones but also some behavioral factors such as greed, fear, and pride, that are extremely difficult to quantify. Going into specifics of Quant Trading is not the main focus of this blog, we have already covered a few blogs on these lines in the past, and there are plenty of useful blogs on the internet.

We are here to share our experiences interviewing for some of the largest prop shops and hedge funds in foreign and Indian markets.

Prep for Quant Trading Roles

Given that the number of firms in the industry is relatively small coupled with the massive number of applications from students having an M.S./Ph.D. in financial engineering/STEM, the competition to get in is tremendous. So, for graduate recruitments, firms rely on the conception that they can edify you how to trade but can’t teach you how to think. Thus, in lieu of testing candidates on complex derivative pricing theories, they prefer general problem-solving abilities, mathematics & how proficient you are at calculating things in your head quickly.

There are five major stages that you can expect in the process for most of the firms, Resume shortlisting, Online tests on mathematics, HR interview, Technical interviews, Interview Day/On-site round.

The process commences with resume shortlisting, where displaying an experience in a competitive/stressful environment is more than enough (precedent experience in quant firms will get you brownie points but is not a must). In the cover letter, they love to read about the motivation for trading, so mention specifically the attributes that describe your interest.

There are various online tests conducted focusing mainly on Speed math, Probability & logical stuff. Practice speed maths well before appearing for them as these tests are highly time-constrained(around 80 questions in 8 minutes) & are quite known for their ruthless labeling scheme(+1 correct, -2 for leaving a question or incorrect). Probability questions are generally discrete probability problems or based on Expectation value concepts.

This is followed by an HR interview round where you will be grilled on your motivation for trading, which is of utmost importance to these firms. Be honest with your views about the quant industry in particular. Knowing about the business of these firms (generally Market-Making) beforehand always helps.

The technical rounds are quite notorious for being extra competitive & stressful. It’s generally a no pen-paper round, and you will be asked to calculate an abundance of things in your head like probability questions, mental maths, puzzles & guesstimates. Questions go from what’s 7/19 to 5 digits precision to how many times you need to fold an A4 sheet paper to reach the moon or weight of water on earth (you’ll have 10–20 secs at max. for these questions ). You need to estimate answers to these questions & also estimate how well you estimate them. Interviewers will put you under a lot of pressure, giving looks or sound dismaying even when you answer correctly. Apart from this, there are few market-making games where you need to trade on any given entity after estimating its value. Being mindful & quick calculation is quite important for these games as you won’t be given any time to think about your answer or write anything & they can ask you about your previous trades, outstanding positions, PnL anytime. Last but not the least, if you have any previous experience in the field then you may be asked a few conceptual questions based on them or maybe questions on recent economic activities and their impact on financial markets/instruments.

Then comes the most consequential of all- The Interview day. It’s usually 6–8 hours long & pretty intense. This comprises a few group markets making games, 3–4 technical interviews, discussion on some economic topic & an HR round.

Amongst all, we feel group market-making games are the most important ones. It is quite similar to the previous one, the only difference being that you will be playing it against other peers, so things get more dynamic & competitive. For this game, as the fastest one gets to trade so, many people will commit mistakes here in a hurry, be aggressive with your trading style, and try to make the most out of the mistakes made by your fellow's XD.

Trader interviewers only get more difficult with lots of logical/betting games based on the concept of expected value where you will be asked to make optimal decisions under time-constrained pressure competing against the traders(at a point I was asked to bet my job on the correctness of my answer & they take it quite seriously :P). The key is to be quick, confident & mostly precise. In nutshell, everything in these interviews is rapid-fire, they try to create a trading simulation environment & then judge you based on how you react under pressure. So, going in with a fresh mind & taking challenges on the spot is the best way to tackle them, as they are looking for street-smartness.

A take on Quant Research roles

Interviews for quant researcher roles are slightly different. As a quant researcher, you spend all your time making complex mathematical models, and the implementation of these models is taken care of by the trader and not you. These roles expect you to be much more proficient in core mathematical areas of Linear Algebra, Probability, Stochastic Calculus as well as programming, speed maths isn’t a necessity here. Do note that competitive coding is not required at all as you just need to know the basics of programming thoroughly, to convince them that you will be able to code your research ideas in a programming framework. Top firms prefer Masters and Ph.D. students due to the research-centric nature of the role but prior experience as a quant researcher might go a long way in helping you get an interview as an undergrad. Knowledge of pricing models of derivatives is, again, not a prerequisite, but it will definitely give you an edge as you are competing against brilliant minds across the globe vying for a few handful positions.

A Final Word

By the looks of it, yeah, quant firms really expect you to be like our smart friend here

Hi pricing inefficiency, my algorithm will find you and destroy you!!!

But jokes apart, Quant roles are an ideal fit for people who have an inherent interest in Maths, Financial Markets and products. With all the hefty bonuses, these roles seem very lucrative but at the same time, they are highly challenging too. We would recommend quant roles as a career path only if you are really passionate about it. There is no hard and strict rule as to what these firms may ask in an interview as that pretty much depends on the interviewer as well as the role. For instance, some firms offer a mix of quant trading and research type of role and hence they test you on your speed, maths, programming as well as derivatives pricing part! The above paragraphs covered a lot of aspects that are tested in detail.

This is all from our side and we hope this blog helps you in landing an offer from a top quant firm!