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To the degree in which it's possible, I'd like to know what the community believes are the objective skills/knowledge required to run a successful Quant book.

I'm not interested in strategies, obscure maths or programming languages here. I'm interested in the practical realities of successfully managing/executing a strategy - the nitty-gritty, practical knowledge outside of the strategy that is required in practice (or a huge advantage to know). Such topics are often somewhat boring and are rarely taught in school.

This knowledge will overlap significantly with that needed by traditional PMs. Let's assume this Quant PM is at a relatively small shop which does not have a large back-office or particularly sophisticated traders.

I'm looking to fill in any potential missing areas of knowledge. I imagine other traditionally trained quants may benefit from this discussion.

Some possible suggestions:

  • The ins and outs of Securities Lending and traditional services offered by PBs

  • Marketing of strategy (internally, but perhaps formally to outside investors)

  • Regulatory Environment / Pending Regulation

  • Deep understanding of 'Liquidity' (beyond simply historical ADVs, this may include how crowded you believe your trade to be)

  • Algorithmic Execution (what is the best trading approach given strategy's alpha decay? Should you always be a liquidity demander?)

  • ???

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I am not sure I see this question as being on-topic for the site. –  Dirk Eddelbuettel Mar 10 '11 at 3:32
    
This is a very broad question that doesn't seem on-topic. Can you please tease out something particular that you're interested in re quant fin? –  Richard Herron Mar 10 '11 at 4:21
    
@ZAxisMapping: This is a great question! :) and I don't quite understand why it was considered a off-topic and less specific question? Orz BTW, I also just became a fan of your unique and insightful answers. Glad to find you here and look forward to more discussion and your sharing. :) –  楊祝昇 Feb 7 '12 at 13:23
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closed as off topic by Dirk Eddelbuettel, Richard Herron Mar 10 '11 at 4:18

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1 Answer

What does a PM need to know is very specific to the investment goals of a firm.

Regulatory issues are particular to location and asset class. For example, a firm that trades US equities may or may not have to become a member of FINRA, which in turn would dictate whether the PM must take the Series 7. The firm's lawyer should be able to address that.

Issues like liquidity and execution approach will be particular to the alpha model. Market makers primarily provide quotes, whereas large stat arb groups need to know their broker algos. And the broker algos for equities can be very different from the algos for interest rates.

The reason books and schools focus on programming and math is that those topics have some degree of universality. A lot of the extras are things a trader will learn on the job---often the "hard way"---which is why nobody becomes a PM without a lot of experience.

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