The real benefit of bringing Coders, Data Scientists and Quants together.
According to a recent Bloomberg article, Citi “isn’t just teaching traders how to code, it’s also making sure its coders know how to trade”.
When it comes to sport and exercise, the benefits of cross-training are well appreciated. The same is true in the data and statistics space.
Having spent much of my career focused on economic and financial numbers, in recent times I’ve had the opportunity to work with a broader range of data. Original scepticism as to how these data-sets would improve my understanding of the financial world has given way to an appreciation of how other industries and sciences emphasize different techniques and approaches. And the potential benefits from using some of these techniques in finance.
In economics and finance, there can be a tendency to see every problem as regression problem; every relationship as linear; and the best solution being a forecast.
By contrast, the following are some of the statistical relationships and methods that seem to be accentuated in other areas:
- Social Sciences – interactions, confounding factors and latent variables.
- Physical & Biological sciences – dimension reduction, non-normal distributions and feature engineering.
- Marketing & Retail – clustering, classification and unstructured data.
Good traders seem to have an intuitive ability to weight the political economy (e.g. Brexit, trade wars); detect regime shifts and effectively update Bayesian priors (i.e. use new information to accurately adjust probabilities). They understand the interplay between variables; and intuitively accept that many relationships are non-linear and non-normally distributed (including liquidity).
I suspect progress in modelling these attributes will surprise to the upside as skills and insights from other disciplines are introduced. Explainability and interpretability remain a consideration. However, progress in this area is also encouraging - from both outside, as well as inside, the industry.
So while Citi isn't the only financial institution bringing together its coders, quants and data scientists, it’s a good move. With the right collaboration and co-mingling of skill-sets and ideas, they should find a rich vein of opportunity. An opportunity that extends well beyond trading.
Views and opinions expressed are solely my own and do not express those of my employer.