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P-Quants v.s. Q-Quants

What are the main types of Quants? In this article, we discuss the different roles of P-Quants and Q-Quants.

What do Quants do? The skillset required to be a Quantitative Analyst (Quant) is quite diverse. It largely depends on which area of quantitative finance you wish to develop a career in.

There are two main types of Quants in the industry: P-Quant and Q-Quant.

Q-Quant: derivative pricing

Q-Quants mainly work on pricing of derivatives and new products. We can find many of them within the sales, trading and structuring product divisions of investment banks such as Goldman, Morgan Stanley and so on.

The goal of pricing is to determine the fair price of a an asset (a derivative or a more complex product) and the hedging strategy to minimise the risk impact of taking position in one.

The prefix Q refers to the common notation for the risk-neutral probability which is typically used for pricing and is characterised by the fact that taking risk is not rewarded.

P-Quant: portfolio and risk management

Portfolio P-Quants work with portfolio management companies, and the trading teams of hedge funds. The goal of portfolio management is to form a portfolio of security to improve the return of the investment.

Risk P-Quants work in helping manage the risk of a company. They play an active role in calculating price adjustments ( known as XVAs), determining strategies to hedge risk and calculate the amount of capital required for adequacy rules.

The prefix P stands for physical probability, which is realizes in historical data.

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An Introduction to Machine Learning in Quantitative Finance

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