Nero Caesar Posted May 30, 2008 Share Posted May 30, 2008 I was wondering...what is the required mathematical background for working in the quantitative division of investment banks and what type of work are you actually going to be doing? Anyone with a direct experience? Thank you all! Quote Link to comment Share on other sites More sharing options...
tangsiuje Posted May 30, 2008 Share Posted May 30, 2008 Perhaps a degree in financial engineering or quantitative finance? Columbia, NYU, Stanford, CMU, etc. all put on relevant degrees. A PhD in physics works as well, I've heard. ;) There are a number of statistical/mathematical techniques, quite specific to the financial industry, which you need to be very familiar with. They test you on these for job interviews, etc. As far as I've understood, a lot of the work deals with quite sophisticated and technical computer modelling. My impression is that it has very little to do with economics. As far as I've understood, most people have maths, physics, or engineering backgrounds (perhaps some statisticians as well). There's a forum website called quantnet I believe, but people on there seem to be even crazier than TM people. Quote Link to comment Share on other sites More sharing options...
YoungEconomist Posted May 30, 2008 Share Posted May 30, 2008 A lot of what tangsiuje seems true (with my limited understanding of the industry). However, people on this forum often make it sound as though Econ PhD's are not very competitive at these jobs. I believe this maybe somewhat misleading. Although it's probably true that a PhD in Math, Physics, and possibly Computer Science are better, it seems that a good deal of Econ PhDs are qualified for such positions. A lecturer out my school worked as a Quant for Lehman Brothers after she received her Econ PhD. Likewise, a recent PhD job market candidate at my school accected a position at Goldman Sachs. I've also noticed that on some of the quant job search websites, it will say they're looking for people with a PhD in Econ. Just for the record, you'd probably want to specialize in Econometrics and Financial Economics at the graduate level if you are trying to go this route. I can't find it right now, but there was a link around here recently showing where some recent PhD Econ grads were hired, a few went into quant jobs for investment banks, and a few went into quant jobs for hedge funds. The link also listed their salary, signing bonus, and expected bonus. Quote Link to comment Share on other sites More sharing options...
tangsiuje Posted May 30, 2008 Share Posted May 30, 2008 Point taken. However, one might want to wonder why on Earth you would want to pursue a PhD in economics if you wanted to work as a quant? Given the pay in those jobs, the opportunity cost compared to doing a 1-1.5 year master seems... uhm... astounding. The point was that if you knew that you wanted to do such work before embarking on your graduate studies, doing a PhD in economics would be quite a waste of time, effort and money. Of course, the opportunity cost calculation is completely different if you've already completed (or you're about to complete a PhD), and suddenly realize that you just don't fancy academic/policy/government type jobs but would be happier making ridiculous amounts of money by working long hours. In that case, I'm sure YoungEconomist's point is perfectly valid. Quote Link to comment Share on other sites More sharing options...
YoungEconomist Posted May 30, 2008 Share Posted May 30, 2008 Point taken. However, one might want to wonder why on Earth you would want to pursue a PhD in economics if you wanted to work as a quant? Given the pay in those jobs, the opportunity cost compared to doing a 1-1.5 year master seems... uhm... astounding. The point was that if you knew that you wanted to do such work before embarking on your graduate studies, doing a PhD in economics would be quite a waste of time, effort and money. Of course, the opportunity cost calculation is completely different if you've already completed (or you're about to complete a PhD), and suddenly realize that you just don't fancy academic/policy/government type jobs but would be happier making ridiculous amounts of money by working long hours. In that case, I'm sure YoungEconomist's point is perfectly valid. I agree with a lot of what you said. However, I would like to point out one other important aspect. It seems that many people that pursue Econ PhDs, do so because they truly enjoy studying economics. In other words, people don't make their grad school decisions solely on the career afterwards. Therefore, some may prefer to have a job as a quant in the future, but be happier (and more motivated) during grad school in the Economics department in comparision to the Physics or Math department. Quote Link to comment Share on other sites More sharing options...
nash12 Posted May 30, 2008 Share Posted May 30, 2008 It seems that many people that pursue Econ PhDs, do so because they truly enjoy studying economics. I concur to the T. And I sincerely believe this should be THE reason for pursuing gradaute study in any subject. Because sometimes in the midst of the quest of acheivement, one tends to forget why he/she got into this in the first palce. Eventually what one ends up doing after a PhD can depend on a lot of factors- 5 years is a long time..! Quote Link to comment Share on other sites More sharing options...
Nero Caesar Posted May 31, 2008 Author Share Posted May 31, 2008 If one wants to try one of these interviews right after finishing his master's, what's essential math knowledge you need to be able to succeed through them? Furthermore, after taking a look around the various banks' websites, I think I saw the word economics (with regard to quant jobs) only on lehman brother's website. Quote Link to comment Share on other sites More sharing options...
Weary Posted May 31, 2008 Share Posted May 31, 2008 Grad level econ theory is irrelevant. Some kinds of econometrics might work. And, first of all, c++. For more, wilmott.com. Quote Link to comment Share on other sites More sharing options...
unitroot Posted June 1, 2008 Share Posted June 1, 2008 Note that "investment banking" DOES NOT refer to what the quantitative divisions of investment banks do. If you wonder what it is, look it up on wikipedia. MBA's are probably best positioned for investment banking jobs. In terms of getting into quantitative jobs with an economics PhD, I think it depends on the field of specialization. For example, you probably will be very valuable if you specialized in financial econometrics. The mathematical finance models that are used to price fixed income securities or various financial derivatives depend on parameters that need to be estimated from data. This is an example of application of econometrics in quantitative finance. However, very few economics or finance departments actually have faculty who specialize in that. I know that UNC, UCSD, and Chicago GSB who work in financial econometrics. Most schools have faculty who work in time series econometrics, but the questions they study do not necessarily apply to finance (most are geared towards macro). Still, I think being good at econometrics (specially time series, or even better financial econometrics), data analysis, and programming, could probably land you a good job. You could try this after getting a masters but the best way to become an econometrician is to get a PhD and the best econometrics jobs go to PhDs. You could also complete advanced coursework in mathematical finance and/or asset pricing, but those courses are often taught in other departments. However, some econ departments do have faculties for these subjects as well. Quote Link to comment Share on other sites More sharing options...
anon Posted June 1, 2008 Share Posted June 1, 2008 Most Hedge funds/IB's career website would have positions for those holding a Quantitatively heavy degree including Economics. Its a good option for those who have a flair for econometrics/ time series/ other finance courses and a PhD who would want to work in the industry. While Master's degree in FE or QF would be a good route for faster entry its also worth to point out that the degree would seriously limit options by restricting career to the quant profile. Quote Link to comment Share on other sites More sharing options...
Oikos-nomos Posted June 1, 2008 Share Posted June 1, 2008 As far as i know, average Phd economists ARE NOT well prepared to do this quant finance stuff. There are several (masters) programs geared towards this jobs, for instance in CMU, NYU. So as it was said before, getting a Phd just to get one of these jobs is not a good strategy. This kind of job involves programming (C++) and hard math, that is PDEs, stochastic proccesses (brownian motion, etc), time series and maybe some econometrics. So maybe a physicist is more suited for this kind of job. Quote Link to comment Share on other sites More sharing options...
YoungEconomist Posted June 2, 2008 Share Posted June 2, 2008 I can't find it right now, but there was a link around here recently showing where some recent PhD Econ grads were hired, a few went into quant jobs for investment banks, and a few went into quant jobs for hedge funds. The link also listed their salary, signing bonus, and expected bonus. I found it: http://www.bluwiki.com/go/Econjobmarket_offers Quote Link to comment Share on other sites More sharing options...
Bayern Posted June 2, 2008 Share Posted June 2, 2008 I found it: http://www.bluwiki.com/go/Econjobmarket_offers Extremely informative site. Thanks for posting it. Quote Link to comment Share on other sites More sharing options...
mpleportals Posted July 3, 2008 Share Posted July 3, 2008 Two types of Quants Sell Side: Physics, Maths, EE, Statistics (Probability) Buy Side: Statistics (TS, Statistical Learning, PR), Econometrics (TS), Computer Science (AI) Quote Link to comment Share on other sites More sharing options...
rcwlhk Posted July 3, 2008 Share Posted July 3, 2008 I know what sell side and buy side means --- but can you elaborate why one side would prefer a certain expertise / field over another? I thought there's a lot of personnel movement (and hence expertise movement) between sell side and buy side? Two types of Quants Sell Side: Physics, Maths, EE, Statistics (Probability) Buy Side: Statistics (TS, Statistical Learning, PR), Econometrics (TS), Computer Science (AI) Quote Link to comment Share on other sites More sharing options...
mpleportals Posted July 3, 2008 Share Posted July 3, 2008 I know what sell side and buy side means --- but can you elaborate why one side would prefer a certain expertise / field over another? I thought there's a lot of personnel movement (and hence expertise movement) between sell side and buy side? The job of the quants on the sell side is mainly to price complex derivatives. What is required for this role is stochastic calculus, PDE, numerical methods etc. Note: Main assumptions are market efficiency and normality The quants of the sell side identify market inefficiencies and develop trading strategies accordingly. That is done by using TS, Bayesian Nets, filters, Signal Processing techniques, Statistical Learning, AI etc. This role could potentially be suitable for an Phd Economist (econometrician) See: Finance Jobs UK: Investment Banking Jobs, IT Jobs in Finance & Accounting Recruitment in UK (quant analytics) Quote Link to comment Share on other sites More sharing options...
mpleportals Posted July 3, 2008 Share Posted July 3, 2008 Also note that the main reason why Econometricians are not good for quant roles (buy side) is because they often lack of computer programming skills (C++ and R is a must). Quote Link to comment Share on other sites More sharing options...
rcwlhk Posted July 3, 2008 Share Posted July 3, 2008 Interesting.... But just for the sake of pursuing this discussion further, may I ask --- wouldn't the buy side be EQUALLY interested in identifying market inefficiencies and also in pricing complex derivatives? Sure, the buy side wouldn't need to wholesale the stuff per se, and assuming the buyside you're taking about ARE engaged in some sort of active quant strategy (which they should be, else, why would they care about the complex derivatives and the numerical methods in pricing them), then my confusion remains: What differentiates the buy side guy and sell side guy? I'm by no means an expert in this arena, so please enlighten me! Thanks! The job of the quants on the sell side is mainly to price complex derivatives. What is required for this role is stochastic calculus, PDE, numerical methods etc. Note: Main assumptions are market efficiency and normality The quants of the sell side identify market inefficiencies and develop trading strategies accordingly. That is done by using TS, Bayesian Nets, filters, Signal Processing techniques, Statistical Learning, AI etc. This role could potentially be suitable for an Phd Economist (econometrician) See: Finance Jobs UK: Investment Banking Jobs, IT Jobs in Finance & Accounting Recruitment in UK (quant analytics) Quote Link to comment Share on other sites More sharing options...
YoungEconomist Posted July 3, 2008 Share Posted July 3, 2008 I always here some people on this board say that a PhD in Econ is not a good degree if you want to be a quant. Personally, I'm a little skeptical about this though. First, I agree that it's probably better to get a PhD in Math or Physics. However, many people do not have the prereqs to get accepted to either, and furthermore, many people find Economics more interesting and would rather pursue a degree in Econ (not to mention that you're more likely to actually obtain a PhD in a field that you're passionate about). Second, who says that there aren't quant positions for Econ PhDs? I've searched online and found some very attractive quant positions which are open to Econometricians. Furthermore, there are many quant jobs available to Statisticians, and I imagine an Econ PhD with a certain background could probably apply for those as well (such as metrics and a few stats grad courses). On top of that, I know of several people who received quant jobs upon obtaining their PhD in Econ. A few people in recent years at my school's PhD program (which is not even in the top 20). A lecturer at my school even started off as a quant after obtaining her PhD. Once again, I'm not saying an Econ PhD is optimal, but rather that Econ PhDs are likely competitive for many quant jobs. Quote Link to comment Share on other sites More sharing options...
mpleportals Posted July 3, 2008 Share Posted July 3, 2008 Interesting.... But just for the sake of pursuing this discussion further, may I ask --- wouldn't the buy side be EQUALLY interested in identifying market inefficiencies and also in pricing complex derivatives? ....................................What differentiates the buy side guy and sell side guy? I'm by no means an expert in this arena, so please enlighten me! Thanks! The whole derivatives pricing thing is based on assumptions on market completeness, efficiency and normality. If you don't assume efficiency then you can not exclude that arbitrage opportunities exist. So, we can not conveniently adopt the methods initially developed for statistical physics problems to price our instruments. Note that even with those assumptions, it is dead difficult to price complex derivatives. So the answer to your first question is that we make those assumptions because that is the best thing we can do (at the moment). The buy side on the other side is not so restricted. You can pretty much make any assumptions you want about the market (or even better test you own hypotheses real time as data becomes available). Now the sell side is dominated by people (e.g. physicists) who not only assume certain things but also religiously believe to their assumptions. They also think that history is irrelevant (everything is a martingale!) and thus there is no utility in studying any kind of data. Add to this their lack of knowledge on data analysis tools and you've got the answer. Exceptions exist. An EE for example could feel the need to move to the buy side in order to experiment his fancy signal processing tools on identifying trading signals. On the other side the average buy side guy does not have the necessary math background to work on the sell side. Additionally he may feel too restricted by these stringent assumptions which may not make any sense to him. I hope it is now clear. What is your background son? Quote Link to comment Share on other sites More sharing options...
mpleportals Posted July 3, 2008 Share Posted July 3, 2008 I always here some people on this board say that a PhD in Econ is not a good degree if you want to be a quant. Personally, I'm a little skeptical about this though. First, I agree that it's probably better to get a PhD in Math or Physics. However, many people do not have the prereqs to get accepted to either, and furthermore, many people find Economics more interesting and would rather pursue a degree in Econ (not to mention that you're more likely to actually obtain a PhD in a field that you're passionate about). Second, who says that there aren't quant positions for Econ PhDs? I've searched online and found some very attractive quant positions which are open to Econometricians. Furthermore, there are many quant jobs available to Statisticians, and I imagine an Econ PhD with a certain background could probably apply for those as well (such as metrics and a few stats grad courses). On top of that, I know of several people who received quant jobs upon obtaining their PhD in Econ. A few people in recent years at my school's PhD program (which is not even in the top 20). A lecturer at my school even started off as a quant after obtaining her PhD. Once again, I'm not saying an Econ PhD is optimal, but rather that Econ PhDs are likely competitive for many quant jobs. Physics and Applied Maths (Pure Maths is not good at all according to what I have heard) are not good for the buy side quants. Statistics (optimal I believe) or alternatively econometrics is. Computer Science (AI) and EE could also be very good. Look at my previous comment. Quote Link to comment Share on other sites More sharing options...
unitroot Posted July 3, 2008 Share Posted July 3, 2008 I think a PhD degree in statistics, finance, economics, applied mathematics with emphasis on the subjects relevant to quant work are the optimal academic paths (note that not every economics/finance/statistics/etc department has a good faculty support for subjects that are right on). Physicists, particularly particle physicists, can find a good employment in quant careers because most of them are very adept at computer programming, solving differential equations numerically, and modeling stochastic processes. However, in my personal opinion, it is silly to enter in a Physics PhD program with a goal of eventually becoming a quant. It takes 7-8 years on average to get a PhD in Physics even at the top schools, and even though some kinds of physicists get exposed to many subjects used in quantitative finance, most of their time is spent working on real _physics_ problems. What kind of motivation will a student have to work for 7-8 year on hard physics problems knowing that this is just for the purpose of attaining some exposure to useful applied math. May be 20 years ago it was optimal to pursue a PhD in physics for such careers because there were no better alternatives. However, now many economics, math, finance, operations research, and statistics departments have faculty whose primarily teaching and research interest is in quantitative finance and/or related subjects (like financial time series or numerics) Quote Link to comment Share on other sites More sharing options...
Oikos-nomos Posted July 4, 2008 Share Posted July 4, 2008 Aren't there Masters in Mathematical Finance better suited for these quant jobs ??? I mean, you can cut two years and also work on the topic, compared to a Phd in Physics. Carnegie Mellon has one, and also there is one in Brazil, at IMPA. Of course there should be many many more, but these two are the only ones that i am aware of. Quote Link to comment Share on other sites More sharing options...
Sam_Jackson Posted July 5, 2008 Share Posted July 5, 2008 Another good Math Fin MSc might be the LSE MSc in financial mathematics. The first batch is going to start this year. While speaking to the maths department, I heard they got many many many applications, however they are only taking on 10 people. That's a pretty neat class size. The course seems pretty good for such quant jobs. C++ with a lotta maths stuff. Sam. Quote Link to comment Share on other sites More sharing options...
LouisBD Posted July 5, 2008 Share Posted July 5, 2008 An answer to many questions regarding quant's can be found here: http://www.markjoshi.com/downloads/advice.pdf This is also a good site for gathering more info on quantitative finance. The author seems to be very respected in the quant community. Quote Link to comment Share on other sites More sharing options...
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