Build or buy for quant tools

It’s always tempting to do everything yourself. After all, it’s easy to think I know best. I once tried to make macarons. Once my uneven mess of macarons emerged from the oven, I had a much better understanding of what motivated people to buy macarons from Pierre Hermes. Subsequent attempts at baking them proved more successful. However, even after quite a few attempts, I had to admit to myself that my core expertise was eating macarons, rather than making them.

At the start of any big quant project, the immediate question that any quant gets from management is, should we build this project in house or could we buy it externally? I’m not talking about stuff like operating systems or attempting to create a new computer language, which are outside the domain expertise of a quant. If any quant suggests writing a computer language to solve a particular project, please run a mile.. writing a good compiler is not something you can do without a lot of work and is very much a specific skill. Instead, it’s more about stuff related to quant models.

I think most quants (including myself) would often think of first building a quant tool internally. However, in practice, the decision to build or buy isn’t always easy. There are numerous pros and cons, when it comes to building quant tools internally, which we list below...

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