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The 10 day quant training plan to learning the Quantitative Finance language.

Over the last two years a number of our customers asked for a topic specific learning guide.

“If you had to pick up value at risk in a day, where would you start? What would you read? What should I buy?”

The “Where would you start?” question created the concept of the learning roadmap on our site. We have about ten of them and they are growing every month.

This month we were stumped by a new question.

“If you had to pick up everything you need to know to pass as a Quant, where would you start?”

This was a bigger challenge since for Agnes and myself, here at work, we have sort of forgotten where or when we started. Maybe Agnes hasn’t but I certainly have.

In a previous life we would simply ask candidates to start off with our free collection of risk and treasury management case studies or dump the sales and trading interview guide in their laps.  The case studies collection included about twenty odd detailed instances of risk management applications from the last decade. The sales and trading interview guide was our shortest path to getting a candidate comfortable with the language as well as the tools used in the field of risk management.

But the two sets were missing structure which is the reason why we roped in Danish and asked him to spend 10 days learning as much as possible from the subscription and free sites. We gave him a sample exam and 4 days to solve it. We gave him full access to the free site as well as the subscription portal. Here is what he found when he used a mix of free and premium courses to travel the path to becoming a quant.

What follows is Danish’s journey. At times fun, at times rewarding. Sometimes both.

Day 1 – The introduction to being a Quant

Start with the video Quant Crash Course. It is free and it covers the background and the context and gives you a quick review of “big picture” questions. If the theoretical background gets too much feel free to jump ahead to Day 2’s lessons on Value at Risk and then come back to this later. Alternatively preview the Quant Crash Course sample videos and circle back to selected full length sessions based on your knowledge gaps when you are ready.

Day 2 – Value at Risk – The VaR introduction and debate

While going through the Quant Crash Course, you would have realized the central role VaR plays when it comes to risk management frameworks. While the tool has taken a few hits recently, you still need to get comfortable with the concept and its applications.

Power point lectures are followed by hands on VaR model building sessions. Once you are done with the video walk through go through the 4 excel files mentioned in the Learning Road map for VaR. This would allow you to apply the concepts and see how far your understanding has developed.

Day 3 – Welcome to the Derivatives world

Risk Management and Derivatives contracts go hand in hand. The fancier the product, the more complicated the risk management. To get comfortable with the Black Scholes world, first begin with the free Understanding N(d1) and N(d2) course. It is painful and awkward but if you are serious about surviving in the quantitative world you have to get comfortable with both the language and the foundation set by the Black Scholes model.

Understanding Black Scholes probabilities. N(d1) and N(d2)
Understanding Black Scholes probabilities. N(d1) and N(d2)

The Derivative pricing course work comes in two modules. Module one comprises of:

  • Two text based introductions followed by a pricing guide, and
  • The “Selling Treasury Products” video course.

Go to ‘Derivatives Pricing-Learning Roadmap’ and thoroughly review the four foundation blocks starting from ‘Derivatives Crash Course for Dummies’ to ‘Advanced Derivatives Crash Course’. Then view the video course ‘Selling Derivatives Products’ .

Day 4 – Pricing Options & Derivatives Part I

In the second module of derivatives, we can now start with pricing Options.

Enter the world of Monte-Carlo methods. View the video course ‘Option Pricing using Monte Carlo Simulation’. Then go through the 3 excel files on ‘Monte Carlo-Learning Roadmap’ to simulate Commodity, Currency and Equities prices. This is the foundation for simulation-based derivative pricing models.

Day 5 – Pricing Options & Derivatives Part II

While Monte Carlo is conceptually difficult but easier to implement once you get the hang of it, Binomial Pricing is the other way around.

Go through the video course ‘Options Pricing using Binomial trees’. Then review the PDF ‘Derivatives Pricing- Binomial Trees- Efficient Approach’ available on the “Courses” page.

Follow through with the excel example ‘Derivatives Pricing-Binomial Trees’.

Day 6 – Asset Liability Management & Capital Adequacy

A necessary next step if you’re interested in this field is becoming familiar with banking regulation. This includes being aware of the reasons for having regulation in the first place. Watch the ‘ALM and Capital Adequacy- Video Course’ to learn more. If you have had it  with videos just go to the ALM training guide for ALCO and Board members for a quick review of the topic.

Day 7- Time for ICAAP

Continuing with regulation we now turn to Basel II’s Internal Capital Adequacy Assessment Process or ICAAP. Start with the PDF file ‘ICAAP- Overview & Core Concepts’ mentioned under the ‘ICAAP-Learning Roadmap’. Put your knowledge to practice by reviewing excel files ‘ALM Crash Course- EXCEL examples’ and ‘ICAAP-Credit EXCEL example’. Finish the day by going through the ICAAP Sample Report Template.

Day 8- The Basel Chronicles

Review the ‘history behind the current capital adequacy requirement framework’ by looking at the ‘Basel II and III Frameworks-Learning Roadmap’. This would significantly cover your exposure to the important Basel II and III frameworks.

Day 9- The Key to Treasury Part I

Understanding how a Treasury operates, what products it deals with and trading strategies and solutions it provides is a critical element of risk management. The ‘Treasury –Learning Roadmap’ should give you a sound base in this area. In particular read the PDF file ‘Treasury Crash Course’. This 230-page file should keep you fully engaged today.

Day 10- The Key to Treasury Part II

Continue reading what remains of the PDF file “Treasury Crash Course”. Once you’re done with it watch the ‘Cross Selling Treasury Products- Video Course’.