Basically I see top math/physics/CS phds going to either a hedgefund or a PTF (prop/market maker). Wondering how quant life is different between the two
For quants, which is more attractive? (besides people/fit)
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They are pretty different roles. While math and computer science are used at both, the big difference I’ve noticed is around the strategy (obviously) and timeframe (not always true but HF tends to be longer holding periods).
The problem you are solving as a market maker is how to manage your risk and collect the spread, while very occasionally taking risk. You are rarely taking a one sided bet, and the views are short term (matching buyer to seller, managing risk).
At a HF it’ll depend on your strategy, but it tends to be longer term, taking one sided trades, and searching for alpha at scale (I.e. 9-10 figures). That’s one of the biggest differences taking one sided bets at scale (and then managing that risk).
So for PTF's, the higher the frequency, the math becomes less complex and tech becomes more important.
With HF's it's the opposite (mostly); there's more complex math imvolved.
But with market makers, is the problem of collecting the spread more/less interesting than what hedgefunds are doing? ( I know it's a generalization)
What area do you think pays better?
Well I’m biased since I work at a HF.
I find the HF problem more interesting/dynamic. The market maker is a bit more mechanical (this is an over generalization). I find it more interesting to be able to have “white space” to explore any asset class and try and find ways to finding alpha (instead of specific mispricing or similar).
As for pay, hard for me to know, the top prop shops seems to pay similarly to the top HFs. The risk is getting pigeon holed (and silo’d) at a HF, which is less of a risk at a prop shop. If that happens you will be capped earlier.
I largely agree HF has slightly more interesting work, but what's the challenge or intellectual allure at a market maker?
what do you mean by pigeonholed and siloed at a HF? just turn out signals w/o knowing how your signal perform aka operating in the dark?
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