Computational Finance : The Quants Heaven

If you possess skills in Computer Programming, Mathematics, and Finance, you may be interested in a field known as Computational Finance or Financial Engineering. This discipline utilizes the power of Computer Intelligence, alongside mathematical-numerical analysis and simulations, to make informed decisions in investment, trading, and hedging. Individuals who specialize in this area are commonly referred to as “quants” a nickname that highlights the quantitative expertise required for the role. The primary objective of Computational Finance is to assess and quantify the financial risk associated with any financial problem by employing sophisticated computer intelligence and mathematical modeling techniques.

In Computational Finance, mathematical instruments such as Probability Distributions, Calculus, Differential Equations, and Numerical Analysis are employed to construct models for various financial issues. A notable example of such a model is the Black-Scholes model, which is an acclaimed Option Pricing model. This model generates partial differential equations, the solutions of which, known as the Black-Scholes formula, are extensively applied in the pricing of European-style options. For an in-depth exploration of this model, specific resources are recommended.

The scope of Computational Finance is broad, encompassing several disciplines including mathematical sciences and the application of computer simulations to assess potential risks and predict outcomes in trading, hedging, and investment strategies. This field finds applications across various sectors such as investment banking, financial risk management, options pricing, and strategic planning. Fundamental topics in Computational Finance include Monte-Carlo simulations, portfolio selection and optimization, and the analysis of high-frequency data.

Current research and development in the field of Computational Finance include:

1. Agent-Based Artificial Markets
2. Derivatives Trading
3. Investment Banking
4. Forecasting
5. Security Trading

Leading institutions offering specialized programs in Computational Finance, also known as Quant Schools, include Carnegie Mellon University, Columbia University, Cornell University, New York University, Princeton University, Rutgers University, Stanford University, University of California at Berkeley, University of Chicago, and University of Michigan. These institutions are recognized for their contributions to the field, as reported by sources in advanced trading.

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