Quantitative analysis (QA) is the use of mathematical and statistical methods in finance and investment management. Those working in the field are quantitative analysts. They tend to specialize in specific areas which may include derivative structuring or pricing, risk management, algorithmic trading and investment management. The occupation is similar to those in industrial mathematics in other industries. The process usually consists of searching vast databases for patterns, such as correlations among liquid assets or price-movement patterns (trend following or mean reversion). The resulting strategies may involve high-frequency trading.
QA provides analysts with tools to examine and analyse past, current and anticipated future events. Any subject involving numbers can be quantified, thus QA is used in many fields including financial analysis.
In the financial services industry, QA is used to analyse investment opportunities, such as when to purchase or sell securities. Investors perform QA when using key financial ratios, such as the price-earnings ratio (P/E) or earnings per share (EPS), in their investment decision-making process (e.g. whether to purchase shares of a company's stock). QA ranges from the examination of simple statistical data (e.g. revenue) to complex calculations (e.g. discounted cash flow or option pricing).