Top hedge fund quants on how to get ahead in finance now
Technology – and quants – are the future of finance. Computers have crept out of the back office and have taken over an increasing role, especially in trading – Goldman famously replaced 600 traders over two decades ago with electronic trading systems.
However, the quant world itself is evolving and the Oxford-Man Institute, a research institute of the University of Oxford focusing on quantitative finance which is backed by Man Group, is at the forefront of that evolution.
The cutting edge of being a quant in finance today is machine learning, says Dr Anthony Ledford, chief scientist at Man AHL, the quant-based subsidiary of Man Group. And within machine learning, the future is increasingly about Natural Language Processing (NLP), a form of machine learning that analyses human speech.
“NLP has an increasing role within systematic trading and can also be applied to data analytics for detecting structural changes in financial networks, as well as developing tools to quantify similarities between financial regimes/states,” says Ledford.
NLP in finance involves using machine learning to analyse large amount of information to find specifics that are relevant to an investment decision, such as the sentiment of a prospectus or written aspects of a financial report.
It can also assist in internal analysis of contracts. Goldman Sachs, for instance, uses NLP to assess how changing market conditions might interact with existing contracts – and whether certain clauses might be worth activating in certain unpredicted market conditions.
Alongside NLP, Ledford says research efforts are being "deployed across all areas of quant finance, with notable evolution across trading models, datasets, markets and financial instruments.”
“We are also seeing increased quant research on topical and emerging themes – an obvious one is investment strategies for inflationary times, and sustainable investment is at the top end of the list too,” he says.
“All this growth has been enabled by the latest advances in technological infrastructure,” Ledford adds.
The big change in the future may yet be quantum computing, but the technology isn't mature yet. “Investment management isn’t currently an obvious “sweet spot” for QC [Quantum Computing], but we’re actively watching developments in this space.”
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