| FRM | Meet the man leading a team of 80,000 q...

| FRM | Meet the man leading a team of 80,000 quants

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Deal Colonel


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Jonathan Larkin has the fate of 80,000 wannabe quants in his hands. OK, this may be something of an exaggeration, but as the newly-installed chief investment officer of ‘crowd-sourced’ hedge fund Quantopian, he’s responsible for uncovering talent within its large ‘community’ of programmers, quants and data scientists.

Quantopian started life as a community of quants, providing a browser-based trading platform for its members to develop and experiment with investment ideas. It offered prizes and the coveted role of ‘quant in residence’ – an online mentoring role for top-performing members – to encourage participation.

If this all sounds like good fun, it’s now starting to get serious – Quantopian is preparing to open its doors to external investors before launching its own hedge fund by the end of this year, and will be relying on its members to come up with investment strategies. Larkin will be at the helm.

“We have 80,000 members, so to sift through these investment strategies to find the best, we rely a lot of an automated filtering process,” he says. “Once we identify the right strategy and the right candidate, we start the due diligence process and then commit to formally share a percentage of the PnL.”

In other words, you could essentially become a hedge fund trader based purely on the algorithms you create, rather than your experience or educational background. The reward for this is roughly 10% of the PnL.

Moving into managing money

This is an evolution for Quantopian. Previously, it offered top-performing quants $100k to manage for six months – they could keep any profits.

One winner, Simon Thornington, said it opened doors to an industry closed to those without experience. He’s since gone on to take a quant developer role at newly-launched hedge fund Mana Partners. A former ‘quant in residence’, Simon Meggs, is now a partner and head of trading at hedge fund Fulcrum Asset Management.

For Larkin, the CIO role at Quantopian represents a departure away from more traditional finance roles. He spent nearly nine years trading equity derivatives at J.P. Morgan before switching to the buy-side to lead Millennium Partners’ equities team.

Unusually, he then moved back to banking, as a managing director in Nomura’s prop trading division, Principal Strategies Group, in 2012. He stayed for just one year, however, before taking a role heading up equities at Bluecrest Capital Management in New York. He left in 2015 for a portfolio manager position at Hudson Bay Capital before signing up to Quantopian in June this year.

So, why move to Quantopian? “I’ve spent my career building the multi-manager business of hedge funds. We’re dramatically magnifying this – using the internet to scale a multi-manager hedge fund to a degree never seen before in the industry,” he says.

It’s also the chance to get into a business at the outset, he says. “I’ve always been interested in moving into a business where there’s a blank sheet of paper,” he says. “At Nomura, I grew the team from zero to 30 people, I joined J.P. Morgan’s equity derivatives team at an early stage and Millennium’s equities was at an inflection point when I arrived. Bringing my investment experience to Quantopian at this stage of the company’s growth is reflective of this.”

The data scientists, computer programmers and quants working on Quantopian can do so either full-time or as an aside to their regular job.

Hedge funds are currently struggling to find enough talent for these roles and many are having to come up with increasingly innovative ways to uncover new talent. Hedge fund Man Group AHL launched a coding competition last year, offering a $5k prize and a nine-week internship to the winner. Meanwhile, World Quant University – the educational arm of a hedge fund with the same name – offers an online Masters degree to aspiring quants.

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Deal Colonel

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Quant Finance Academy is a place to learn all aspects of Quantitative Finance with one goal “To Simplify Quantitative Finance”


Deal Colonel


A Little History

Project management has existed for thousands of years. Roman soldiers used project management skills and techniques to build fortresses, coliseums, and the like. In the 1950s, Henry Gantt, called the father of planning and control techniques, developed a tool that is now called the Gantt chart, and project management was then recognized as a distinct discipline. Organizations apply PM tools to engineering and technology projects (such as the Critical Path Method (CPM) developed by DuPont and Remington Rand Corporation in a joint venture; and program, evaluation, and review techniques (PERT) developed by Booz Allen Hamilton with Lockheed Corporation and a part of the U.S. Navy Polaris missile submarine program). In 1969, the Project Management Institute (PMI) was formed in the United States.

In this article, we will explore the pros and cons of getting a project management professional (PMP) certification.

Let’s Ruffle Some Feathers

This topic usually inspires some good feedback, so we are ready and looking forward to your comments.

Do you really need to become a PMP? Is it worth getting a PMP? Some websites claim that you can make about $10,000 more a year as a project manager if you have a PMP.[ 1 ] Some even quote 20% higher salaries for PMs with a PMP. But these articles rarely cite their sources, and the articles’ publishers usually disclaim the article by saying that the statements are the opinion of the author(s) and not the publication.

Many agencies (TEKSytems, Computing Concepts Inc., The Armada Group, etc.) say that the project managers they place predominately DO NOT have a PMP and that, for the most part, the project managers they place do not need, or need not get, a PMP. In some cases, recruiters have even said that PMs should not get a PMP, as it makes them a less effective PM by teaching technique and not common sense.

The cost of the PMP exam membership includes:

An initial fee of $129 and an annual renewal fee of $119.
Testing—pass or fail—is $555 for non-members and $405 for PMI members.
Several thousand dollars for 35 hours of education prior to sitting for the exam.
Ongoing certification requires ongoing education: 60 Professional Development Units (PDUs) per every three-year cycle. PDUs can be had for free or low cost, but there is usually some expense and definitely a time commitment.
The PMI provides continuing education (at additional cost) and advertises the benefits of having a PMP to technologists and other interested parties. Until now, this has spurred continued interest in companies preferring, but not requiring, PMP candidates.

Other learning organizations also attest to the value of a PMP; they just happen to offer courses for one to prepare to take the PMP and help PMPs meet their yearly educational requirements (at a cost). Seeing so many websites when doing a Google search helps cement the idea that a PMP is worth it.

The 2015 Global Job Report published by the PMI anticipates that there will be 15.7 million new project management jobs by 2020 and that the profession will grow by over $6.6 trillion in the same period.[ 2 ] But what does that have to do with getting a PMP?

A research study published in the Project Management Journal provides some insight.[ 3 ] The study reports the valuation of the PMP certification by IT recruiters and corporate IT executives, as well as a statistical evaluation of the PMP as an indicator of project success. Of the 15 core competencies surveyed, the PMP certification was ranked number 11 by IT recruiters and number 15 by IT executives (dead last!). Shown below are percentages of IT executives rating of “Important” or “Extremely Important” for each competency:

Leadership 95%
Ability to Communicate at Multiple Levels 94%
Verbal Skills 87%
Written Skills 87%
Attitude 85%
Ability to Deal With Ambiguity and Change 83%
Work History 69%
Experience 67%
Ability to Escalate 66%
Cultural Fit 57%
Technical Expertise 46%
Education 38%
Length of Prior Engagements 23%
Past Team Size 18%
PMP Certification 15%

Per the study, there was no statistically significant difference in the reported success rates for projects led by certified versus non-certified project managers when considered across five success criteria:

Cost/Within Budget
On Schedule
Quality/Met Technical Specifications
Quality/Met Client Business Requirements
Client/User Satisfaction
In the words of the study leaders:

Clearly, mastery of the project management body of knowledge is an important asset in the preparation of professional project managers. An understanding of the methodology is essential to the appropriate conduct of project management. However, based on the narrative explanations offered by both IT Recruiters and Executives, their emphasis on soft skills such as the ability to communicate at multiple levels, and the tacit knowledge of knowing when to exercise leadership and how to do this effectively are much more critical to eventual project success.[ 4 ]

Andrew Makar solicited feedback from the project management community via a survey on the need for a PMP. He provides some feedback in a TechRepublic article:[ 5 ]

“I’ve found that as experience builds through one’s career, a PMP is less essential to secure a new position or advancement. Real life experience is worth a lot more. With that said a less-experienced, newly graduated individual or someone moving into the project management field as a career change will find certification to be a door opener.”

“The PMP certification at the beginning helped me to progress within my company. Some companies are already looking for project managers with PMP certification and obtaining the certification makes the PM career progression easier. I always highlight the PMP certification to distinguish myself from other PMs that don’t have this certification.”

“I came into project management before the PMP existed, looked at it, but never thought it was a certification I needed.”
“The holder of the PMP credential gets an edge over other competitors only at the time of initial scrutiny of job profile and help build a trust factor in the customer.”

“The PMP was helpful to increase salary. It opens the door for discussion with particular employees because it explicitly shows that the person has project management knowledge as well as a positive attitude towards knowledge acquisition: e.g. reading, learning, sharing, and etc. The PMP is must in addition to project management experience in order to start professional career of project manager.”

“My PMP credentials got my resume past the HR screening process into the hiring manager’s hands. Once I got the interview the PMP added confidence while responding to the questions. Now that I have the job, the PMP adds to my credibility when interacting with other teams. It’s a high value credential, particularly working in a Department of Defense environment where many folks are titled ‘program manager’ but don’t have the experience. They often seek advice and I’m able to mentor new managers.”
“My PMP credentials boosted my self-confidence and skills. My organization currently does not recognize, support or require the PMP credential for any of our job classifications. I have promoted the value of PMP credentials to colleagues and several have pursued acquiring this credential.”

“By obtaining my PMP credential, I was able to end my 6-month unemployment period and get selected for a PM position which has helped me expand my career into Healthcare IT and onto becoming a Site Manager in Program Management”
“I got to know some people, but I could have done this also without the credential.”

“I have found the PMP to be a “door opener”—the minimum requirement for most opportunities. After that, it’s about how I apply the information, demonstrate leadership and apply the skills to project challenges that help advance my career."
It appeared that the majority of his respondents value the importance of the PMP credential; however, most view it merely as a certification to progress past the resume screening. [ 6 ]


Although obtaining a PMP is not a bad idea, it only has value in that it may help get the job interview over others. Experienced project managers who articulates their value during the interview process by clearly explaining how they will be successful in terms that all levels of business understand will get the job. Until a PMP improves your ability to effectively communicate at all levels of an organization, it alone is not good enough to make you a top project managers able to garner the best salaries in the field.

Author’s notes:

I reviewed sources (Google searched) on the Internet looking for articles that touted positive reasons for obtaining a PMP. I found:

Training companies that touted the benefits of a PMP because they earned their revenues by teaching students how to pass the PMP test and/or provided courses on helping PMPs maintain their PMP educational requirements. Their sites mentioned many reasons for getting a PMP, but they did not quote sources supporting these statements. This applied to the PMI as well.
Even when the PMP was touted as a benefit, it usually came with quotes like:
“It looked good on my resume.”
“It is good for people who have no experience and are looking to get in the door.”
“A PMP is good, but it’s not good all by itself.”
“It’s okay to have a PMP, but to be a good PM, you need great communication skills, the ability to work with all levels within a company, good written skills, good leadership skills, etc… and then a PMP can’t hurt.”

[ 1 ] See www.p...rg, www.brighthub...om, www.blog.softwareadvi...om, etc.

[ 2 ] PMI, Global Job Report (2015).

[ 3 ] Jo Ann Starkweather and Deborah H. Stevenson, “PMP Certification as a Core Competency: Necessary But Not Sufficient,” Project Management Journal, Northwestern University Department of Information Systems & Technology (February 2011).

[ 4 ] Starkweather and Stevenson (2011).

[ 5 ] Andrew Makar, “Project managers’ views on the value of a PMP certification” (July 9, 2013), TechRepublic, available at; http://www.techrepublic.com/blog/it-consultant/...

[ 6 ] Makar (2013).

Deal Colonel

Risk based lending: A new era in home loan?
Certain situations make it an attractive case of business for the home loan companies. Here is what you must know.

Read more at: http://www.moneycontrol.com/news/loans/risk-bas...

Sukanya Kumar RetailLending.com

Nityanand Bajaj is a successful businessman and well-known in his business circle of dealing in exotic fruits. His counter-sales is upwards of Rs 50,000 per day, plus his fruits go to retails shops in Mumbai and Pune. He is planning to expand his business into exporting, and this trading business is reaping him benefit since the last 20 odd years. All seems good, right? Not for a home loan lender, but. Bajaj does not show his cash sales completely in books and files a nominal income tax return file.

Category: No or low income documents. ~


Prahlad Tanti is buying a property in outskirts of Mumbai where most developers are making only holiday homes, as it is too far from the main city to travel daily. Prahlad will have his parents staying there as they desire a home of their own, and Prahlad can’t afford one within the main city-limits. Lenders were not comfortable lending even when he had the loan eligibility.

Category: Beyond approved geographical limit ~


Asokan V. has been brought up in a joint family in Chennai. When his grandfather expired, his five children, 4 sons and 1 daughter decided to sell the ancestral house in village, as no one was going to stay there. With the sum received, they had also decided to buy a new home in the city for renting it out and share the rental income equally. So far, so good. Sounds like a real fairytale. When they had shortage of fund and approached lenders, they all rejected as there were ‘too many owners’.

Category: Too many co-borrowers


Rajat Acharya was buying a huge penthouse from a highly reputed developer in Delhi. The price of the South Delhi property is close to about 24 crores and he needed 15 crores in loan. This was as per the advise from his CA, and not that he couldn’t afford it. Most bankers denied giving him the loan and the couple who agreed to, wanted additional securities.

Category: Loan amount too high
Shalini Bhagwat works in Delhi and she wanted to gift a small house in Allahabad to his parents who are currently staying in Nagpur. Why Allahabad? Because her mother was originally from that city and has her childhood memories attached to that house. Shalini incidentally found that same house to be on sale and could not keep her excitement of buying that for her mom. Lenders, however, do not share the same spirit.

Category: Property located in a city where the borrower is neither employed nor stayed ever. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Wondering what is this story about? Nityanand, Prahlad, Asokan, Rajat and Shalini fall in the same category. A risk-based profiling by the lender. Their rate of interest will have to be higher than other general applicants, processing fee will swell up and there will be more scrutiny while proceeding for sanction. If you find yourself in any of the above categories, I would suggest that you seek service from an experienced mortgage broker who will do the research for you, basis their experience and contacts and let you apply with the solo lender who will surely approve your loan. Getting your loan application rejected is definitely not a good experience. Risk-based lending is a product of all lenders, depending on the risk appetite of a particular lender but it is crucial for you to know before you apply. Applying in multiple banks/NBFC-s will not only make you feel dejected, will also lower your credit score. But does this mean unlimited expenditure in the name of rate, fees etc.? Not any more. RBI has recently made a policy that all lenders will have to submit a range for a particular category, wherein they will have to lend with that span. For example, if for self-employed businessmen the range is 9.50-9.90%, then under no circumstance, for sake of risk based lending, can be given a rate higher than 9.90%.

Deal Colonel

The Hottest Risk Regulation – FRTB

As we move from a ‘VaR’ to ‘Expected Shortfall’ (tail risk) driven regulations coupled with a focus on Liquidity as never before, I thought of sharing a perspective on one of the hottest regulation around the corner – Fundamental review of trading books (FRTB). This results in a lot of efforts for banks on beefing up systems and processes and at the same time opens up multiple career avenues for market risk professionals. Happy Reading!

What is it? FRTB is sequentially a succession for Basel 2.5 which continues the BIS accord of making a more stricter regime with much less discretion on the part of banks. The focus areas continue to be economic capital and its adequacy but with a perspective of Market Risk including stress testing, exposure and sensitivities. Few already term it as Basel IV.

Who is impacted? initially front line banks with largest assets are covered. This includes likes of Credit Suisse, Nomura, Bank of America, JP Morgan, etc.

Deadline? while the final draft is due on Jan 2019, the regulation will be applicable by end of 2019 as per the current accord. No delays & waivers are anticipated on this front. Having said this, banks have already started making progress on this front.

What’s New! compared with existing market risk regulatory capital rules (Basel II/III), FRTB incorporates the following key gradients:

· Expected Shortfall – FRTB exclusively focuses on tail risk component and hence replaces VaR with Expected Shortfall. The change requires computation of 97.5% expected shortfall as against 99% VaR in Basel 2.5. Mathematically (w.r.t percentile) this results in a 25% higher charge.

. More standardized rules for defining the boundary between trading and banking book. The ultimate aim to have a more synchronised ground to compare the results across different banks so that there is little discretion left with banks obscuring the provisions by taking advantage of its local regulations and on-going risk practices. This is what is commonly known as “Regulatory arbitrage” wherein banks tune the regulatory provisions to their advantage and this is where the Regulator wants to step hard.

. Risk factor buckets – for the very first time risk factors are categorised as being modellable vs. non-modellable. This is to ensure liquid traded factors are charged at a lower rate compared to non-modellable factors having limited data history & liquidity ( data ‘quality’ is key).

. Liquidity buckets – while earlier Basel accords did speculate some form of liquidity horizon calculations, the FRTB calls for multi bucket segmenting which magnifies the risk charge by the factor of time (capped at 120 days).

. Internal model multiplier – a new multiplier is set to 1.5 against 3.4 in Basel 2.5.

. Securitised instruments – these are to be exclusively handled under Standardized approach only.

. PL attribution – these are fresh set of ratios to evaluate model differences between’s banks risk/internal model to market PL. The back-testing requirement continues as in earlier Basel rules.

. Incremental Default Risk (IDR) – a new requirement designed to test the jump to default scenarios for debt and equity trading positions.

. Stress testing – a stressed expected shortfall is required for non-modellable factors plus an additional capital add-on for using internal approach.

To summarize the theme, FRTB brings along a more sophisticated standardized approach leaving less room for bank’s discretion coupled with a strong focus on tail risk supplemented by expected shortfall regime, stress testing, IDR and long liquidity horizons.

@ meritunion desk

Ankit Shah, ACA, CFA
Founder at MeritUnion Services LLP