Experiences of top quants

-Book review of ‘How I became a quant’

This book tells stories of 25 famous quants, and their stories were written by quants themselves. So, you will see their different writing styles and experiences.

·      Most of them have a Doctor’s degree in STEM. It is reasonable because quants need to apply quantitative skills in solving financial problems, and advanced degrees are a proof of their strong academic problem solving skill.

·      25 quants have careers in different areas, including structured finance, portfolio management, risk management, derivatives, algorithmic trading, etc. It shows the broad application of quantitative tools in current finance industry.

·      Many of them worked for small companies focusing on a small area. The other many quants led quantitative groups within big and well known financial groups.

Why CLO may be a good investment opportunity?

Development of CLO

Collateralized loan obligation (CLO) is a form of structured products. It pools hundreds of business loans and passes cash flows to tranches of different priorities in receiving cash flow. Normally, these business loans are from below investment grade companies, which normally need to provide higher yield in their bond issuance. CLO is great at attracting all types of investors from risk averse to risk taking, to invest in corporate debts which were considered risky and not suitable for risk averse investors.

The first CLO was issued in 1987, and it provided incentives for depository banks to securitize these loans and remove these loans from their books by selling them to outside investors. The 2007-08 financial crisis is a big hit on the CLO market, although the key reason for the crisis was from subprime mortgage instead of corporate loans. Investors doubted the safety of CLOs since they have a similar structure with problematic subprime Collateralized debt obligation (CDO) and CDO². However, CLO quickly gained favor from investors, and had been the first type of secured products that recovered to the pre-crisis trading volume.