Financial analyst versus Quantitative analyst

A quaint or a quantitative anaylst is someone who only uses statistical methods and the application of mathematical methods to risk management and financial problems. Persons who have careers in industrial mathematics and other similar industries will fall in the same category of professionals.
The original quantitative analysts were only concerned with risk management and derivative pricing, they were ’sell side quaints“ who were connected to market makers firms. There has been an expansion in the meaning of the term over many years, and now all the persons who are involved in all application of mathematics in finance; eg. Statistical arbitage, algorithmic trading, electronic market making, these are the buy side.
Quantitative analysis provides a huge source of emploment for persons who have PhD degrees in Mathematics and Physics; very often they come from physics, engineering and applied mathematics backgrounds and not economic related fields. They might need extensive skills in computer programming, commonly C, C++, Java, R, MATLAB, Mathematica, Python, or a financial mathematics masters degree.
Quantitative analysts use information from different forms of mathematics: calculus developed around partial deferential equations, linear algebra, statistics and probability, discrete mathematics and econmetrics. Some of those on the buy side use machine learning sometimes. A lot of quantitative analysts are not trained in mainstream economics, they often depend on a mindset taken from physical sciences. Quants apply mathematical skills they aquire from diverse fields sucg as engineering, physics and mainstream economics. The skills they use will include linear algebra, advanced statistics, and partial differential equations and solutions to these. That are based on numerical analysis.

Numerical method frequently used are:

Monte Carlo method- Even though Monte Carlo simulation is also popular in risk management, it is used to solve partial differential equations.
Finite difference method- is used when solving partial differential equations
Spint interpolation- required for imterpolate values from forward and spot interest rates curves and volatility smiles.
Ordinary least squares- In statistical regression analysis it is used to estimate parameters
Bisection, Newton, and Secant methods- maxima, roots, minima of functions (e.g. internal rate of return) are found using this method.

Financial analyst

Generally, analysts are divided into ’sell-side and ’buy side’. A sell-side analyst’s work is sold to the buy-side organisations for money or other benefits, it is not used by its employer to invest directly.
A buy-side analyst will work for a company that buys and holds stocks for itself, depending on what the analyst reccommends; these analysts are fund managers.
The sell-side may be higher paid, it is more like a sales and marketing role. There are persons who begin careers on the sell side at large banks before they move to the buy side at a fund. Research is regularly used as ’soft money’ and not sold directly, it is sometimes used instead of money when companies do business with preferrred clients; and used to promote the companies that are being researched when the sell-side has an interest in them, it is used as a form of marketing and leads to conflicts of interests sometimes.
However, the buy-side is sometimes thought of as more prestigious scholarly and professional even though the sell side can help persons to earn more.

Investors will either buy, sell or hold a security at the end of the assessment of analyzed securities after an analyst has provided a rating recommending an investment action. A ’sell-side“ (brokerage) analysts job includes writing by reports or notes, while the express opinions, this is not oftem required for the buy-side (investment firms) analysts. Analysts will use technical chart analysis and tactical evaluation of the market environment routinely along with fundamental analysis principles.
In the early 2000s there were legislative changes brought about by corporate scandals that masde information gathering by analysts potentially illegal and difficult in many markets; one example of this is Regulation FD (Fair Disclosure) in the US, similar rules were adopted by other developed countries as well. However, analysts have obtained information by participating in public conference calls and are able to ask direct questions to managers or by studying public records and other filings by the company. They also gather information in meetings where small groups are and they can interact with senior members of management teams.investment banks, banks,
Pension and mutual funds, hedge funds, securities firms, insurance companies and other companies will employ financial analysts, they help companies or clients to make investment decisions. Balance sheet analysis is done by financial analysts when they are employees of commercial lending entities. The examine corollary data and audited financial statements so they can assess lending risks. In an investment bank or in a stock brokerage house they read company financial statements they manage to determine a company’s value by analyzing sales, commodity prices, costs, expenses and tax rates. They also value and project future earnings in many insitutions. Financial analysts can meet with company managers and gain insight into the company’s managerial effectiveness and prospects in institutions. They will study an entire industry , as they assess current trends in business practices, products and industry competition, they monitor the economy to determine how it will affect the earnngs of companies. They also stay informed about new regulations or policies that could affect the companies they work for.

Spreadsheets and statistical software packages are used by Finacial analysts to analyze financial data, develop forecasts, see financial modeling and spot trends. They depend on their results to write reports and make presentations and they also make recommendations to those who want to buy or sell a particular security or investment. There are senior analysts who actually decide to buy or sell assets for companies or clients when they are responsible for managing assets. There are also analysts who can use data to measure financial risks that are associated with making serious investment decisions.
Financial analysts work in acquisition departments and mergers or take over of businesses. They may also make presentations to prospective investors about the benefits they can derive when they invest in new companies. They will ensure that forms and written material necessary for compliance with Exchange commision regulations and securities are complete and accurate. The Financial analysts who are in the investment banking departments of banking firms or securities will work in teams as they analyze the future prospect of companies when they want to sell shares to the public for the first time. As there are both buy-side and sell-side analysts.

The job of collecting industry data from balance sheets and capital adequacy and income statements in the banking sector, is hadled by financial analysts, they also handle mergers, acquisition history and other finance related news for their clients. They assist their clients to do peer analysis when they standardize different company’s data, so it looks uniformed, as the help their clients to make the best decisions as they invest across regions. Abundant financial ratios calculated from collected data is also gathered from financial statements by them to read the company’s bottom line. There job should not be confused with data entry, as it goes beyond that.

There are other financial analysts who are employed by rating agencies, they are called rating analysts, they do an evaulation of businesses or government and decide if can find a way to repay their debt. A rating team will assign an evaluation to a company’s or government’s bonds based on their evaluation. There are others who are responsible for performing budget, cost, and credit analysis.
StarMine that is owned by Thomson Reuters or Institutional investor magazine ranks analyst performance by a range of services.
Small companies that no analyst coverage under performed by 0.7 percent and those with analyst coverage out performed peers by 2.5% when research was done by Numis.

When companies fall outside or across multiple sectors, they are punished in ratings of analysts. A 1999 paper that was done by Ezra Zuckerman found this, Equity analysts divide securities by discrete sectors

Traders
A trader can trade based a many different strategies such as examining a company’s financial statements to determine its value to quantitative/scientific (using statistical analysis to determine market trends); they execute trades for banks, hedge funds and trading firms.
There are other traders who are execution traders, they simply execute the strategies of others, as they attempt to use strategies to get the ’best execution“ and trade many securities in order to get the best prices over a specific period of time. Having an under graduate degree in related fields (such as mathematics, economics and finance is not always needed) but this is enough qualification for these traders.
A trader can earn more money when they generate more profits for a firm or they can receive a salary with added compensation determined by the amount of profit generated for the firm while trading.
Skilled traders can earn huge amounts of money early in their career, but their job is unstable as they are quickly fired when they don’t perform well.

Quants

A quantitative trader or a quatitative modeler is refered to as a Quant, they work to develop computer-based trading strategies that execute trades whenever the right market conditions are met, to generate value that is based on statistical analysis. An advanced degree is sometimes required for persons to qualify for the job of a quantitative modeler or quantitative trader. The popular degrees are PhD in mathematics, computer sciences or physics. Financial Engineering and Quantitative/mathematical finance masters degrees are increasingly required in these roles. Quants usually receive salaries. Quants sometimes use fast-paced algorithmic trading. Financial models can be used to determine the movement of ecomomic factors such as interest rates or security based value.

Analysts

An analyst is involved in many different roles, from the lowest level financial employee to the senior employee in a fixed-income placement of companies and fundamental research on equity. Analysts require an under graduate degree in a related field. However, in order for persons to rise to the analyst level they will need to produce years of quality work and an MBA.

The Difference between quantitative finance and financial engineering ?
Basic Answer : Financial Engineering is profession where engineers creating products to help a given company and quantitative finance is profession where experts use math and statistics to measure risk, or invest money for a fund.
The difference between these two names gives us some idea about what we should be looking for, but there is a lot more for us to think about whenever we look at these words.

Developing applications with Mathematical theory that is related to Measure theory, Applied Walks, Continuous Stochastic Processes, Ito Calculus, Stochastic Differential Equations, Martingales, more akin to the Sciences, such as Physics, Mathematics (a more rigorous level of Mathematics) are all seen as Mathematical Finance.

Financial engineering involves option pricing, Secularization, Products of Structured Finance, more akin to Electrical Engineering, it measures interrelationships with Copulas. It is not as rigorous as Mathematical Finance and is more focused on a specific problem on financing the complex structure
Financial engineering involves the practice of programming, financial theory, tools of mathematics and methods of engineering:
{1} Persons have seen as the application of technical methods, more computational finance and mathematical finance, in the financing practice.
{2} Even though a number of financial engineers have studied engineering before and there are Universities that offers postgraduate degrees in this field have requested that applicants should have an engineering background, even though financial engineering does not fit in with traditional professional engineering.
{3} In America, the Accreditation Board for Engineering and Technology (ABET) offers no accreditation for financial engineering degrees.
{4} The International Association of Quantitative Finance offers accreditation for the financial accreditation program.
{5} Tools from applied mathematics, statistics and economic theory, computer science are used in Financial engineering.
{6} Persons who use technical tools in finance, such as computer programmers in banks or statisticians who work in government economic bureau, are seen as financial engineers.
{7} Even though, there are many practitioners who restrict the term to persons who are educated in the full range of tools in modern finance and there work has to be informed by financial theory.
{8} Persons have even applied more restrictions, and only consider those who originate new financial strategies and products.
{9} Financial engineering is very important for persons who are involved in the customer-driven derivative businesses
{10} This includes programming and quantitative modelling, risk managing derivative products and trading that will comply with regulations and Basel Capital/liquidity requirements.

{11} Quantitative analyst or Quant covers all persons who work with math for practical purposes, such as financial engineers Quant also refferred to as „financial quant.“ They are also similar to the financial engineers.
{12} A theoretical quant, or a quant in only one special niche in finance is different from financial engineers who are practitioners with broad expertise.
{13} The first generation Financial quants to arrive on Wall Street in late 1970’s to early 1980’s adapted the names Rocket Scientists or aerospace engineers an older term which was first used when rockets were developed in Werner Van Braun or WWII and more recently, the NASA space program.
{14} Disruptive innovation which includes fondness and adventurousness are synonymous with financial engineers.
{15} There were Financial ’Rocket scientists“ trained in statistics or finance, applied mathematics, they spent their whole careers doing risk-taking. They applied mathematical techniques to financial jobs or worked for themselves, because they were not hired for their mathematical abilities.
However, more recently the financial engineers of this generation are equipped with their PhDs in physics and mathematics and they start their careers in non-financial fields or academics.

Quantitative finance or Mathematical finance, is applied mathematics in one place, if you are only interested in mathematical modeling of financial markets overall, mathematical finance will change and widen the numerical or mathematical models without connecting with financial theory, observed market prices will be taken as input Mathematical consistency is needed, not like economic theory, therefore a financial economist may study the structural reasons behind trhe share price of a certain company, while a financial mathematician would settle for the price they are given without checking anything, or they would use stochastic calculus to find the equal value of derivatives of the stock (see: Financial modelling; Asset Pricing; Valuation of options) In mathematical finance the fundamental theorem of arbitrage-free pricing is a key theorem. However, for the Black-Scholes formula and equation are found in the key results.
In the early 1990s the first degree programs were set up for Financial Engineering, but over the years the number of programs has increased very fast. Persons now refer to those who have a degree in the field as ’financial engineers“.

The term ’aggressive restructuring of corporate balance sheets“ is sometimes seen as a disparaging term; persons use it when they are speaking out against persons who they think are profiting from paper games that will cost employees and investors as well. However, the term financial engineering is more widely used in recent times.
The fields of Computational finance and financial engineering has been overlapped heavily by Mathematical finance. Financial engineering focuses on modeling and application, stochastic asset models often assist here. While Mathematical finance focuses on building tools of implementation for the models generally and analysis. Advanced quantitative techniques are required for both branches of finance: derivative pricing on one side and risk- and portfolio management on the other side.
Louis Bachelier a French mathematician is seen as the author of the first scholarly work on mathematical finance, Mathematical finance became a discipline in the 1970s even though the work was published in 1900. It followed the work of Robert Merton, Fischer Black and Myron Robert on option pricing theory.

Many degrees and research programs are being offered today for Mathematical financing.

Answer: Main difference between a brokerage and a mutual fund is that brokerage accounts are utilized when an investor decides that he/she wants to buy, hold or sell securities and mutual funds are collective investment securities.

It is important for new investors to learn the main differences and similarities between mutual funds and brokerage accounts prior to investing. Each approach to investing offers its own advantages as well as disadvantages. The following will help to better understand and choose the best approach that is right.

What are Brokerage Accounts?

Like we see, Brokerage accounts are utilized when an investor decides that he/she wants to buy, hold or sell securities (stocks, bonds, etc.). There are a couple ways the investor may open brokerage accounts. Conventionally, he/she can use a full-service firm or with an online broker. Furthermore, a brokerage account can have two types of ownership: individual or jointly.

What are Mutual Funds?

Mutual funds are collective investment securities. They group together the assets from various investors to build a single portfolio managed by a professional. Additionally, a mutual fund can be used for investing in cash, bonds, stocks, or a mix of these type of assets. For instance, one way to remember a mutual fund is similar to a bucket holding anywhere from a few holdings to hundreds.

What are similarity and difference between a brokerage and a mutual fund?>/h2>
Although different types of investments, mutual funds and brokerage accounts still have several similarities. While they may be subtle, it is important that investors have a full understanding of them.
Below are the main similarities:
Taxation
While the similarities of taxation are slightly different between mutual funds and brokerage accounts, there are some important similarities to know about. First, any dividends and interest are taxed like regular income. Additionally, the capital gains are taxed as well.
Flexibility and Diversification
Both mutual funds and brokerage accounts have the ability to offer a wide diversification, meaning an investor can hold multiple types of securities in each investment approach. Although, the diversification range is decided by the investor. A brokerage account provides investors the option to hold various types of securities, but it is up to him/her to diversify or not through multiple investment goals or asset types. Meanwhile, mutual funds have the option of being narrow, or greatly diversified. Therefore, investors have the option of investing within a single mutual fund, or several.
Professional Management
When a brokerage account is bought from a full-service style brokerage firm, there is typically an option to have the account(s) managed by a professional. Therefore, allowing an advisor to make recommendations, or a broker to buy/sell the securities on the investor’s behalf. A mutual fund can be managed professionally as well, but there are some that are passively managed, including index funds.

Difference between mutual fund and brokerage account

The following differences will help determine which investment approach will work the best.
Opening Minimums
When first opening brokerage accounts, investors do not have an initial fee. However, with mutual funds it is common to have an upfront cost in the form of investment minimums. Depending on the broker used, the minimum can range greatly, from $100 to more than $3,000.
Functionality
This could be the largest difference between the two types of accounts, and a key deciding factor, how they function.
Brokerage accounts are accounts which hold the investments made in a single, easy to manage location. Meanwhile, a mutual fund is not an account, but allows the investor to hold securities within another account. Securities within a mutual fund can be from a 401(k), IRA, brokerage account, variable annuity, even straight from a mutual fund company.
Future Fees
Depending on the approach used, the ongoing future fees may vary. For instance, brokerage account fees are mainly that of the trading cost, including commissions or transaction fees. When going through a broker, the commission rates are usually more than if the investor using a discounted broker. Meanwhile, there will be additional fees attached to mutual funds, including called loads with a sales charge, or there are options for no-load funding without a sales charge. Although, there will be an ongoing cost for every mutual fund as detailed within the expense ratio of the fund, usually averaging 1.00%.

Final Thoughts

When comparing the differences and similarities between mutual funds and brokerage accounts, it is easy to see how the two approaches are related, but clearly have two different purposes and uses. Whereas, the brokerage account is used for holding all the investments. Meanwhile, mutual funds are an investment on their own.

However, investors are able to hold mutual funds within his/her brokerage account for easy portfolio management.
Wanting investment flexibility that allows for various security types? Opening a brokerage account may be the best approach to use. If minimums are not an issue, the best approach is directly investing within a no-load, low-cost mutual fund company, such as Fidelity or Vanguard.

Microfinance institutions all begin with value capital. Aid organizations, depositors and banks all borrow them money. They borrowed according to their ability in terms of payback schedule, amount and interest rate without going beyond thresholds risk put up by conglomerates of lenders, board of directors and managements, also not breaking regulations set by local banking. Microfinance bank own divisional offices that being headed by credit officers who have cordial affairs with members of the community to deliberate on microfinance institutions products loan with them. They also take back interest and major payback if those that borrow money must pay back in cash, which they have no means to take it to the divisional offices. The head office and marketing department are the determinants of the loan approval processes. Which is subsequently implemented by the marketing department, department of operations, credit and product department at the head office, divisional office staff inclusive.

There are MFIs that are non-profit oriented, but these are just exception not norm. Although many MFIs kick off as non-profits later transformed to for-profits. Investors are profit motivated such are MFIs owners. Sometimes socially motivated funds are used by the owners to make investments, not always though. Large MFIs heads such as CEOs, COOs and CFOs are in mindsets similar to the managers of same sized banks in country like U.S or another country. They give back value to shareholders through planning to execute plans drafted with the concerted effort of the board of directors. To achieve this there is need to build a profitable, effective and lasting organization that earn respect and trust from its customers, lenders, workers and rural regulators. Some managers do feel concerned on building their countries to create opportunities for their people. While some don’t care. Putting their interest rates maybe thirty percent annually and their motives for profit making, the importance of microfinance is obvious looking at the other options costumers would opt in for if MFIs are not in existence. These other options could be local money lender that lend money at an interest rates not less than 500% per annum.

Highlight here are some factors distinguishing microfinance bank from commercial banks:
(A) LOWER COSTS OF CAPITAL RELATIVE TO RISKS: This can make MFIs more lucrative than traditional banks. Most investors putting their money in MFIs are not only motivated socially but also have minimal rates of return if required social standard are met. Far below market interest rates MFIs borrowed from their lenders e.g. aid organization, or perhaps part of a large western bank. MFIs grows by often taking deposits from their customers, motivating them with huge interest rates of 10% annually on savings account. Unlike FDIC in US, the government of countries where MFIs operate don’t guarantee these deposits. Deposits are attractive to financing independent because it helps them makes provision for financing independent of international capital markets. However, there increased regulation and high cost that often comes with deposit.
(B) NO COLLATERAL: Lending in traditional commercial banks is not unsecured but often secured by assets like land, vehicles, etc. In contrast, MFIs’ lending usually not secure. That is, the borrower’s assets are safe even if they fail to payback their loans, but with a penalty not to lend to such costumer again. Also they may report such borrowers to community leaders or may also lead to social consequence on such community by increasing interest rates on loans by any members of the community. Why didn’t MFIs take collateral? This is because the borrowers are almost poor or at poverty line. Hence it is unutterable by MFIs to investors who are socially inclined or local media.
Furthermore, MFIs jurisdictions legal systems are too feeble to support loan collateral. However, assets lending is not uncommon in MFIs when the loan is meant to acquire specific assets.

(C) GREATER LEVERAGE THAN TRADITIONAL BANKS: Microfinance is often at mercy of central bank compare to other banks in any country they operate. For instance, higher for MFIs than other banks are the maximum asset to equity ratio. A low income individual often benefit from certain percentage of their loans, this also make them to be licensed as MFI instead of a bank. MFI loan size average is usually under certain amount. MFI make access to capital easier for low income earners compare to other banks. This is as a result of their looser capital requirement.
(D) TARGET MARKET: The microfinance target market are low income learners that are not using bank. For instance, peasant farmers or petty traders earning between $800 to $5000 per annum. However, this doesn’t mean they are more generous knowing fully well that they charge these people higher interest rates more than the high income earner in the communities who possess assets that can be used as collaterals. The low income individuals given loans relative to their level of income are not riskier, provided their income is steady.
These MFI borrowers can also be diligent workers in their businesses just like other rich members of their community. They can as well be spurred to give their families opportunities even as they maintain their dignity and reputation in the community.
(E) GROUP LENDING: one of the lending methods in MFI is group lending. A group of individual in a community may come together to secure loans and also acts as guarantor to one another. The idea behind this is if one person could not refund others have to pay back or they all face the penalty of not getting loan from microfinance again. Due to the operating costs that accompany the implementation of this method it yields lesser profits compare to individual loans. However, it is not without benefit, among which are social pressure, also help the community.

Furthermore, MFI also have many players they partner with such as platforms like crowd-funding as well as insurance from micro-insurer. Some sellers of goods do partner with microfinance to boost the finances of their business.

Difference between microfinance and commercial bank by definition

Commercial bank as a financial institution is established based on the banking regulation act. They function solely to accept money and lend money out to costumers. Other functions include brokerage, insurance, stocks, security, etc. All this are non-banking activities. Commercial banks are profit oriented. Among the characteristics of commercial banks are dividends, payment of tax, registration, etc.

Microfinance is not profit minded. The activity in microfinance are done more in a group. Each members of the group have savings, thus the microfinance aims at giving loan to any member of the group. The group ensure the money is being used and the group member earn profit from any income making enterprises they engage in. Each and every member of the group is entitled to loan or perhaps get a loan. This in turn self-sustain the group. Unlike commercial bank, microfinance is devoid of registration, dividends, and taxation.

Difference between microfinance and commercial bank

GENERAL DIFFERENCE
They deal with different costumers in terms of definition. Microfinance render financial assistance and or give loan to low income earners of local families. While commercial banks on the other hand give loan to people and big organizations that open accounts with them. Worth of note is that their difference per se is based on the costumers they deal with not even the magnitude of the loan.

SPECIFIC DIFFERENCE
MFIs basically lend money, funded by private equity holders and or individuals.So, sources of funds for microfinance institutions can different from private equity holders to individuals. Commercial bank offer financial services range from lending, savings to insurance and pensions. Commercial banks are funded through stock markets.
MFIs services are DOOR STEP that is, their staffs take financial services to costumer’s door steps. Whereas commercial bank services are BANK DOOR services, that is, the costumers have to go to bank to carry out any financial services.
Commercial banks loan risk is quite low. Thus, charge lower interest rate ranging from 10% to 16%. This low loan risk is predicated on the fact that they deal with people of high level of income. Contrastingly, microfinance loan interest rate is high say 20%-25% due to the fact that they operate collateral free loans, also the loanees are riskier.
Among other differences are dynamics in manpower, structures of governance, use of or ICT use, physical presence, etc.

History recorded it that in India, commercial banks do not understand the requirements of the local market. This birth the idea of micro financial institutions. They offer financial help to local families of low income that couldn’t transact business with commercial banks. With free collateral loan, they offer financial services to several poor people.

Whereas commercial banks cannot cope with the high risk of given loan to the poor that resident in rural areas whose small loans are hard to maintain in terms of cost. This challenges of commercial banks, microfinance rose to conquer by giving loans to the destitute.
MFIs help the poor in the remote areas to scale up their business by giving them small loans. No provision of other facilities like insurance, cash withdrawal from automated teller machines, credit/debit cards provision, etc. Whereas such services are available in commercial banks. Commercial banks also help to manage costumer cash, give reports on their accounts, etc.

There is no collateral free loan in commercial banks. MFIs give collateral free loans. There’s an extensive scrutiny in commercial banks before issuing out loan. Such scrutiny is not available in Microfinance.
In terms of deposit, some amount has to be deposited to the MFI before they give out loans to any group members. Whereas in commercial banks the depositor is required to pay a fixed rates of interest corresponding to specific amount to be given out as loan

MFIs seek to bridge the gap in the segment of the society not touch by commercial banks which exposed them to private borrowers.
Commercial banks’ lending operation cover areas like renewable energy, Agriculture, housing, micro, small and medium enterprises, education, etc.

They also differ in their approaches to risk management. MFIs manage risk by contacting their customers often. Also train their staff (off-field staff) and customer. Self-deserved as well as imposed risk management system which are advanced are used in commercial banks.
To meet up with their cost and make service available are reasons microfinance charge rates are higher than other banks.
However, the local money lenders whose interest rates can be up to thousands received far above this from people.
The microfinances still face challenges sustaining themselves in the rural areas. A case study that that exposed MFI environment is the Andhra Pradesh microfinance saga.

MFIs are not profits oriented, experts in giving loans to people in local communities, be it group or individual. They are into micro financing and do not lend huge money to customers.

On the other hand, commercial banks do wide range of financial services corporate bodies and individuals. They are profit minded. They offer other financial services like guarantees, savings, credits letter, etc.