Quant Finance Glossary

Essential concepts for quant trading, research, and interviews — explained clearly.

Concepts

Market Making

Market making is the practice of continuously quoting buy and sell prices for a financial instrument, profiting from the bid-ask spread while providing liquidity to other market participants.

10 min read

Trading ConceptsBeginner

Proprietary Trading

Proprietary trading (prop trading) is when a firm trades financial instruments with its own capital rather than managing client money, allowing it to keep all profits from successful strategies.

8 min read

Trading ConceptsBeginner

Bid-Ask Spread

The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask), representing the cost of immediacy in financial markets.

6 min read

Trading ConceptsBeginner

Backtesting

Backtesting is the process of testing a trading strategy against historical market data to assess how it would have performed, helping quants evaluate strategies before deploying real capital.

9 min read

Trading ConceptsBeginner

Efficient Market Hypothesis

The Efficient Market Hypothesis (EMH) states that asset prices fully reflect all available information, making it impossible to consistently achieve excess returns through trading — a theory that quant firms both challenge and exploit.

8 min read

Trading ConceptsBeginner

Algorithmic Trading

Algorithmic trading uses computer programs to execute trading strategies automatically based on predefined rules, enabling faster execution, reduced costs, and the ability to process vast amounts of data.

9 min read

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