<p>I keep hearing that to be an investment banker, a trader or a hedge fund manager you need analytical skills, etc. And that if you're "good" you'll do well. But what does this mean?</p>
<p>I read the day in the life of and the job descriptions for each of those job titles on vault.com. But I came away with learning that a trader simply takes orders from his clients and buys or sells the stock. Where's the analysis in this?</p>
<p>Where does the math come in? Can you provide a typical math question that these professions use daily?</p>
<p>You need to use sufficient mathematical jargon to convince the marks that you have the magic formula.</p>
<p>What you read is a flow trader's day in life and I am guessing mostly likely that of a equities trader. Flow traders are executioners. Now, for example, if you read the times of say a flow trader in derivatives who may have to develop custom products (and take the other side thus having a prop dimension as well) or a quant-trader on the high freq. desk then you would see where the math comes in. </p>
<p>Its not simply a math question/equation that they solve everyday. However, here is a paper on CDO pricing:</p>
<p><a href="http://www.mathematik.uni-ulm.de/finmath/ss_05/fe/jplaurentcomparative.pdf%5B/url%5D">http://www.mathematik.uni-ulm.de/finmath/ss_05/fe/jplaurentcomparative.pdf</a></p>
<p>You also have desks that develop software for the buyside to directly execute orders. When you have to unload 5MM shares you need suffient skill in understanding market microstructures to get the best price for the transaction. Thus, you have probabilities and game theory coming into the mix. You can also just browse through a paper on market microstructure on google scholar, proquest, jstor. Or get Larry Harris' or O'Hara's book. These are stuff used by flow traders in equities/futures who develop software for efficient execution as well as high frequency models to trade the bank's/HF's/trading firm's capital.</p>
<p>These are just very small samples of the quantitative aspect of trading.</p>
<p>Now here is a nice little day in life type of an article on a coal trader who has both a speculative (prop) book and a hedge book. Not a quantitative desk but you can see where game theory can play into the process:
<a href="http://www.americancoalcouncil.org/news/dayinlife.pdf%5B/url%5D">http://www.americancoalcouncil.org/news/dayinlife.pdf</a></p>
<p>And of course remember, 90% of all traders/investors/market participants lose. When you see those HF managers making billions, somepeople had to lose those billions for them to make that much cash. This is the reason why most people end up heading to banking etc.</p>
<p>Just search Wikipedia, they had a pretty good definition.</p>