Quantitative Finance Interns Making $23,000 a Month

It’s no secret that Wall Street is home to exorbitant sums of money. Its coastal location allows traders to participate in Asian and European timezones, all while situated just a few feet from the New York Stock Exchange (NYSE). JPMorgan Chase, Goldman Sachs, and Morgan Stanley are just a few of NYC’s brand-name banks that have made their way from Wall Street into 81.5% of Americans’ wallets. Yet, while classic investment banking and private equity jobs have always been revered as the most lucrative, a new subsect of finance has been quickly climbing through the pay ranks. Quantitative finance, an integral component of Wall Street, is now one of the highest-paying forms of finance. Take a look into how these “quants” are disrupting the modern financial industry — and doing it fast.

What is a “quant?”

Put short, a quant uses mathematical and statistical models to analyze and solve problems within financial markets and securities. Diving deeper, quantitative finance covers two main concepts: derivatives pricing and risk management.  

A derivative is a contract whose value is derived from something else. This separate asset is known as the underlying asset, which can be a stock, bond, currency, or other financial medium of exchange. Derivatives can be used to hedge risk through future contracts. 

This is best illustrated by a hypothetical. Here, a corn farmer predicts the price of corn will decrease in six months, while a popcorn manufacturer predicts it will increase in six months. As a result, the two make a contract to meet at a corn price that both parties think is advantageous. The job of a quant is to conduct research to determine which “corn” price is optimal in this situation in order to minimize risk. 

On the flip side, quantitative derivative speculation is driven solely by profit opportunity, rather than risk minimization. From this, stem four types of derivatives: forwards, futures, options, and swaps. Sell side quants deal primarily with derivative pricing and risk management, while buy side quants focus on asset behavior models that are used to create price forecasts and trading strategies. 

In short, a quant’s job is to conduct scrupulous market research backed by complex models in order to mitigate derivative risk and increase profit. While this is an extremely oversimplified and underdeveloped explanation of the duties quants perform, it encompasses the basic role they play in the Wall Street big picture. 

The emergence of quant firms

As Wall Street moved from paper to computers, and, more recently, artificial intelligence, it brought with it an increasing degree of complexity. No longer is it a Wolf of Wall Street-esque game of charm as it is a race to develop the most successful and efficient trading algorithms adaptable to a constantly-changing landscape. 

Enter quant firms: specific institutions set up to do just that. Millburn Ridgefield and Renaissance Technologies, founded in the late 20th century, were among the first firms to specialize specifically in quantitative finance. Since then, hundreds of quant firms have surfaced, a majority of them headquartered in NYC. Citadel, Hudson River Trading (HRT), Two Sigma, and Jane Street are among the most popular firms today.

The pay

Evidently, the job of a quant is challenging and exceptionally important. As a result, the compensation is lucrative, to say the least. Starting at the intern level, undergraduates are met with wages greater than many senior level roles in other industries. Jane Street interns make $20,835 a month, plus a $10,000 signing bonus. Hudson River Trading interns take in $22,817 a month alongside corporate housing and a $10,000 housing payment. And to top it all off, interns at Citadel receive an average monthly pay of $20,800 a month, plus a $20,000 signing bonus and corporate housing.  

Source: efinancialcareers

These numbers only increase as interns move up to analyst and trader roles. A Jane Street quant trader’s annual base pay is $294,000, plus a $184,000 bonus for a total comp of $478,000. Total comp at Citadel is $353,000; at Jump Trading it’s $388,000. At these levels, quant roles directly rival competitive salaries of investment banking analysts.  

Source: 6figr.com    

Competitive? Very.

At its core, quantitative reasoning requires math. A lot of math. Quant recruiters seek individuals with masterful knowledge in calculus, linear algebra, differential equations, and probability/statistics, preferably at a Phd level. Aside from this, quants must have financial knowledge of portfolio theory, equity and interest rate derivatives, and credit-risk products. To top it off, applicants should also be fluent in C++, Python, Java, MATLAB, and Excel. Typically, MBAs and Chartered Financial Analyst (CFA) certifications are not enough to land quant roles. Regardless, thousands of applicants still apply for the positions. Last year, 33,000 students applied for 290 spots in Citadel’s internship program, marking an acceptance rate of 0.9%. This year, 69,000 students applied for 300 spots, decreasing the acceptance rate to just 0.4%. Evidently, quant’s high barriers don’t seem to daunt countless, eager students looking to break into the industry. 

Should you go into quant?

In the end, quant is for individuals who want to be pushed to the max by ever-changing problems housed within constantly-shifting parameters. This love of being challenged must be facilitated by another passion for complex mathematical, financial, and programming expertise, all of which come together to form the perfect storm that is a quant. Regardless, even as a bystander, it is hard to ignore the whirlwind grip quantitative finance has on the contemporary economic landscape. It is truly a nod towards Wall Street’s ultimate adaptability and future-proof mindset in an unpredictable world.