How the quant model is used in the trading?

MarkChan · October 23rd, 2008, 9:18 pm

Can somebody give me any idea about how a practical quant model is used in the real trading?Taking trading volatility for example, given the market data, a quant model may make a prediction on the volatility, which may higher or lower than the implied volatility. If the result coincides with the trader's judgement, he will take corresponding long/shot stratagy. Am I right about my guess?Is there anything else can we expect from a practical quant model?

pizza · October 23rd, 2008, 9:50 pm

What you are describing sounds more like proprietary (prop) trading, where traders take risky positions with a speculative stance.So far as I know, most desks in investment banking need to keep their positions hedged (ideally zero risk), and the profit comes from the margins, not from their view on the market.

MarkChan · October 24th, 2008, 7:26 am

Oh.So what kind of information can trader get from a quant model? BTW, how to make profit from margins?

pizza · October 24th, 2008, 11:10 am

>what kind of information can trader get from a quant model?price, risk>how to make profit from margins?pocket them