The Role of Quant Research in Finance

November 23, 2022

Technology has revolutionised the finance industry.

Technology in the finance industry has led to the rise of decentralised alternatives for many of the industry’s services, and given organisations a range of new opportunities to pursue.

From the digital ecosystems that employees now make use of every single day, right through to the volumes of data that can inform our decision-making, the ongoing development of technology in the sector has made a huge impact.

The digitalisation of quant research

In particular, over the course of the last 20 years, software has been developed that’s made significant improvements to the efficiency of operations in Traditional Finance.

This is especially true when it comes to markets such as HFT and FX.

Where before, financial markets were physical and floor-based; the industry’s electronic shift has “offered vast expansion, loads of trading data, new assets, and securities” (Source: Investopedia).

This has been further enabled by the conversion of traditional quantitative research techniques into a complex and ever-evolving mathematical model that performs accurate trading strategies.

“Most investment banks, pension funds, mutual funds, and hedge funds use algorithmic trading to spread out the execution of their larger orders.” - The Bust Trader

This development of algorithmic trading has allowed investors to become market-neutral, avoiding as much risk as possible simply by tapping into the vast amount of data available to them.

This has had a significant impact on finance, in a multitude of ways. According to a Forex study, 92% of businesses in the sector now make use of Artificial Intelligence to secure a profitable future.

The use cases of quantitative research in finance

The value that quantitative research lends Traditional Finance doesn’t stop there, however.

While it’s had an undeniable impact on trading, there are other use cases for it that can be utilised in the majority of the sector’s day-to-day business activities.

1. Data science

Outside of algorithmic trading, quantitative research can offer an advanced level of market and customer understanding to the majority of Traditional Finance firms.

Its use in analysing pools of data and testing hypotheses can inform your organisation’s decision-makers and accelerate your ability to adapt and grow.

2. Predictive analytics

Being able to find correlations in existing data is vital to anticipating the future fluctuations of a market. If you can do this, your potential will be unlimited.

For example, by using quantitative research to measure the health of the general economy (ie. measuring GDP), you can anticipate when to make certain investments.

3. Probability  

However, no matter how hard we try, it’s impossible to know exactly what will happen and when. This means finance teams have to take risks.

Thankfully, quantitative research can help organisations understand the likelihood of something occurring - significantly reducing wastage as a result and securing future survivability.

4. Statistics

As Investopedia said best, “certain aspects of statistics are the backbone of quantitative trading, including regression theory and time-series analysis”.

These are models that trading teams utilise on a daily basis, and a wider comprehension of the data available to them will grant a significant advantage in generating accurate results.

The opportunities quantitative research offers finance (Recap)

It’s clear that quantitative research has transformed Traditional Finance at a rapid and advancing level.

Its role in day-to-day business operations has influenced the work done by employees and opened the door to a whole new world of opportunities.

Further, the digitalisation of quantitative research (particularly in the form of algorithmic trading) has proven to be an irreplaceable asset that has improved efficiency across the industry.

How to make the most of quantitative research

With the ongoing incorporation of quantitative research into many Traditional Finance software systems, it’s easy to overlook the opportunities it presents.

Going forward, using it as an active part of your decision-making process could lend you the competitive advantage you are after.

To do so, we advise onboarding specialist talent such as:

Each of these roles can help you process data from across your organisation to enhance your business agility. They’ll prove to be an incredibly useful asset to your team.

However, you have to be clever with your recruitment process.

Qualified talent occupying these roles will already be sought after in a multitude of global investment banks, hedge funds, and trading firms (Source: Investopedia).

The demand for them is incredibly competitive, so reach out to the expert team at Source Control if you need help.

Recruiting with Source Control

We are the global experts in the placement services of technical professionals from low-latency and distributed systems engineering backgrounds into traditional and decentralised finance roles.

We place top-tier talent at all skill levels from junior to executive hires on a permanent, contract, contingent or retained basis.

If you’ve been looking to advance your company or find a rewarding job role anywhere in the US or UK, contact our specialist consultants today.


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