Quantitative Finance

Quantitative Finance is a field of finance that relies on mathematical models, numerical methods, and computer simulations to make trading, hedging, and investment decisions, as well as facilitating the risk management of those decisions. Quantitative Finance uses tools, of which financial derivatives is one, to synthetically create assets that can be used to solve risk management, taxation, regulation, and above all pricing problems.

The field is highly quantitative and those pursuing a career in this area are known as “quants”. Students interested in a career in this field should have a strong background in quantitative analysis (mathematics and statistics) as well as in computer programming (knowledge of programming in C++ and/or Matlab is typically expected). This area attracts students with engineering, mathematics, or physics backgrounds.

The typical entry point is that of an analyst or associate in a risk management firm. However, investment banks, commercial banks, and large corporations have their own risk management teams and seek employees with knowledge in this area. “Quants” are expected to have strong quantitative and programming skills, but communication skills are of secondary importance for a successful job placement.

Hedge funds in particular make extraordinary use of quantitative finance talent.

Suggested Courses

  • Finance 512: Financial Derivatives

    Introduces options, futures, swaps and other derivative securities; examination of institutional aspects of the markets; theories of pricing; discussion of simple as well as complicated trading strategies (arbitrage, hedging, and spread); applications for asset and risk management.

  • Finance 513: Financial Engineering I

    Provides an introduction to modern techniques for pricing options, swaps, and related financial instruments; the use of such instruments in managing financial risk; and the measurement and management of their risks.

  • Finance 514: Financial Engineering II

    Presents the main ideas and techniques of modern option pricing theory, including: the Black-Scholes-Merton analysis; risk-neutral probabilities and the probabilistic solution; numerical techniques for computing option prices; an introduction to term structure modeling; and perhaps other topics, at the discretion of the instructor.

  • Finance 515: Fixed Income Portfolios

    Conceptual foundations and implementation of strategies for the selection, evaluation, and revision of portfolios of fixed-income financial assets (bonds); examination of related research.

  • Finance 580 ERM: Enterprise Risk Management

    Enterprise Risk Management (ERM) is the application of the basic risk management principles to all risks facing an organization; ERM integrates hazard, financial, strategic and operational risks under a single framework; ERM is becoming an important issue partly as the result of the Sarbanes-Oxley Act of 2002 that puts greater responsibility on the Board of Directors for managing all of an organization’s risks; this course will present the legal and regulatory environment that sets the state for ERM, cover the technical tools used in risk analysis, examine data integration processes and show how risk measures relate to strategic and tactical business decisions.

 

        
uiuc.edu
© Copyright 2007 Department of Finance, University of Illinois