Principles of Quantitative Development

Preface

Times have changed. Not long ago, all that you needed for a successful career in the financial industry were good people skills, and modest arithmetic and accounting abilities. The derivatives market requiring advanced quantitative (or computing) skills used to be miniscule. Now, with the explosive growth of derivatives, those simple times are gone for good. Derivatives and structures have taken the centre stage in recent years.

The world of trading and structuring today relies heavily on mathematical models and sophisticated computational techniques. In order to stay competitive, financial institutions need quantitative talent now. They cannot expect their bankers, specialized professionals themselves, to be adept in other professional domains like computer science and applied mathematics as well. Banks, therefore, import talent from other unorthodox domains. They find a helping hand among physicists and mathematicians who can model and price complex derivatives. They also employ a small army of computer scientists and programmers to deploy the pricing models in systems and platforms that help their traders make money.

This development has created a knowledge gap between the conventional banking staff and the newcomers. Bankers and regulators do not fully understand what the quantitative professionals are up to. The professionals themselves have very little appreciation for how the business side of the financial institution works. Bridging this gap is one of my objectives ...