Why quants don't get paid

qlai said:
No I want to understand if its really the Math that makes them money or it's just a facade. There's a lot of talk about AI and ML, but is it really the alpha generator or is there a talented manager who, at the end, throws all this reasearch in garage and does what he knows works and always will. I'm asking, not stating.
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Personally I believe they have many powerful ways of making excessive returns, and I do believe they’re utilizing all of these and more:
- HFT
- market making (which may relate to HFT but doesnt need to as I also do this)
- volatility/IV-based options trading (I do some of this manually but see many opportunities for automation)
- riskless arbitrage (it’s rare but I catch some of those on options, while someone more sophisticated, esp market makers, may be able to do this in volume). But this could also fall under market making because it may be covered within bid/ask arbitrage.
- statistical arbitrage and various non-riskless arbitrage
- trading strategy/algo development similar to what many people here do, while combining thousands of strategies to have statistical advantage across thousands or millions of transactions - this is a big one. Some of the best traders may have small advantage like 51%+ (house odds in a casino), and they wish they could perform thousands of trades with small advantage. Rentec should not have a problem with this.
 
toc said:
Have heard that several HFT firms "did not" report a single losing day for weeks to even months at a time when the HFTs were in the high gear.
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It is easy not to have a losing day if you're running strategies with a Sharpe of 15. Problem is frequently, your profit does not cover the costs, which in HFT space are substantial. I don't have the figures on hand, but I think Virtu had a PnL of 700 million (raw revenue on their financial statement) and only had about 100 bucks left after costs.
 
i was a low paid quant back in the day. it was often suggested i should be paying my employers.

i was given whatever resources i needed to chase the holy grail. i traded test accounts with real money with no worry of losses. i had interns to help me with grand projects and meals served to my desk 24/7 if i wished to work at the office. otherwise i could stay home and work as long as i kept feeding ideas to the trading floor. it was heady times that i will never forget and it would be a rare occurrence to replicate today.

my employers knew i would work for free if i had to because above all else i had the quality that no other candidate possessed and that was PASSION. when you have passion it's contagious and people who are already successful want to help you succeed.
 
sle said:
It is easy not to have a losing day if you're running strategies with a Sharpe of 15. Problem is frequently, your profit does not cover the costs, which in HFT space are substantial. I don't have the figures on hand, but I think Virtu had a PnL of 700 million (raw revenue on their financial statement) and only had about 100 bucks left after costs.
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The trading side of Investment banks aren’t that different.
 
guru said:
they failed in making decent profits trading futures, which should be a component of HFT strategy
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Can anyone elaborate on this? So basically the stock side of the business did great and the futures side didn't make any money?
 
sle said:
You think? I.e. 80 percent of revenues go to things like technology costs? I was under impression it's closer to 50%, comp included.
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I take back what I said. I was mistaken.

Virtu made 1.8Bn T12M and earned 300MM in operating profit (about 15%)
GS made 35Bn T12M and earned 13Bn in operating profit (40%ish)
MS is in the 30% range for operating income

Greenhill and PJT are in the 20% operating profit margin (you would think it would be higher given that it's all fees and costs are airplane tickets, paper, and banker comp).
 
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