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http://acidcow.com/pics/67731-these-gifs-will-help-you-with-your-math-skills.html

I love cookies.

Here's a VaR lecture I gave at MIT. I only recently found out that they taped it. http://ocw.mit.edu/courses/mathematics/18-s096-topics-in-mathematics-with-applications-in-finance-fall-2013/video-lectures/lecture-7-value-at-risk-var-models/

Read their study on corporate bankruptcy. They update it every year. They show one year and cumulative probabilities of default across all corporate issuance by issuance cohort. Do some reading on credit scorecards. Understand how a Merton model of credit default works. Understand...

I disagree. While most quants can code, I wouldn'let a quant anywhere near my production code.

@Osogordo , I've seen career-switchers have varying degrees of success. The key thing is commitment. When I interview people looking to make a big career change, I always ask why. Is their interest genuine or purely money-driven? You need a good story.

I think that engineering skills are useful, but not necessarily what you'd get in QF program. I sense a backlash because of the huge numbers of people coming out of these programs. They're great at math but poor at communication and often lacking in real world problem-solving skills

There are plenty of people in their 30s in QF programs.

One of the senior quants at B of A /Merrill has a degree from Denmark. This is from his NYU bio. I co-teach a course with him. Leif Andersen, Instructor since 2004. Leif holds an MSc in Electrical and Mechanical Engineering from Technical University of Denmark; an MBA from University of...

Thank you for your service. With respect to masters programs, go big or go home. Are you sure you want to be in Finance? PM me and we can chat. I've spoken to many guys coming out of the military about the Wall Street job market. I'd be happy to help.

I think (I know, in fact) that most firms don't distinguish between different types of masters programs in finance. They distinguish between masters and bachelors and between work experience and no work experience.

IRC (2-3 factor Merton model for default) CRM (credit derivs tail risk) IMM (copula-based counterparty risk) IRB (MC using transition matrices) The keys to the kingdom, or at least to long-term employment.

People have done it at NYU and Baruch. It's not easy and certainly not fun, but it is possible.

Do you have citizenship in one of those financial centers?

PM me to discuss.

What location?

Financial Regulation: Evolution and Current State Ken Abbott, Morgan Stanley Baruch MFE Master Class Saturday, February 7, 2015 The Baruch MFE Program will offer a one-day Master Class on Financial Regulation: Evolution and Current State taught by Ken Abbott, Managing Director, Firm Risk...

If you learn credit risk analytics (especially the regulatory piece) you'll be employable forever.

Once you're working, the material upon which it is based provides an excellent framework for understanding the technical, institutional, and regulatory structures in which we work. If you do it without any work experience, I'd see it as a waste of time.

No It would be. A waste of time before you have any institutional context.

Most risk people fall on the time series/econometrics side of their great quant PDE/econometrics divide. Most pricing analysis involved model sensitivities to different inputs. Stress testing is a big focus as well. Another major focus is quant stuff associated with reg requirements. Think...

The head Fixed Income strat is two doors down from me. He says to get a good night's sleep.

Get experience. There are way too many quants who have no idea how to solve real-world problems.

I teach the Advanced Risk Management course. PM me to discuss.

This has been postponed. The new date is February 7th at Baruch.

That has such people in't!

Do you mean the projection of a credit transition matrix onto a Gaussian density function? What is a CEV model?

Thank you.

1) Many people don't land jobs 2) Few (if any) stay at one firm their entire career 3) There will be exit ops, and people will need them 4) "Making bank" isn't guaranteed

Peace on Earth. Goodwill Towards Men.

Clearing is a growth industry. Knowledge of how the plumbing works is valuable.

I was a trader at a BIG trading firm. It was killing me. I've been in risk for 20 years. Life is good.

The real world is far, far more cruel.

Don't go straight to grad school. Get a job. Work for a few years.

Here is an oversimplification: Securities: PDEs and time series IB: Financial statement forecasting IM: Asset allocation

The term "wholesale" is linked to the Basel model taxonomy.

There's a ton of material out there that you can find through Google. You need to review that and come back here with specific questions.

This is all linked to Basel IMM and IRB calculations. Knowing this stuff well effectively guarantees full employment for the forseeable future.

Are credit spreads seasonal? Compare them to ag spreads which are seasonal and mean reverting. You can do mean reversion tests, ARIMA, and FFT.

I've been encouraging people (unsuccessfully) for several years to do a PCA of different yield curves pre and post crisis. Doing the PCA would teach you a lot about eigensystem analysis. You'd also be able to write about hedging efficacy before and after.

Yes, it will.

I will be teaching a one day regulation masterclass at Baruch again in November. I will be covering The microeconomics of regulation, Basel, Dodd-Frank, and regulatory models. Watch this space for more info. I'll once again ask people to make a donation to my favorite nonprofit instead of...

http://www.bloomberg.com/news/2014-08-19/credit-swaps-polished-in-19-trillion-derivative-overhaul.html http://www.ft.com/intl/cms/s/0/66fd5916-23eb-11e4-86fc-00144feabdc0.html#axzz3AsQQcxi3

It has recovered to some extent, varying by product area. This has gotten a lot of press in the last few weeks.

Structuring goes way beyond options and involves the specifics of a client's need across all dimensions: currency, booking entity, country, duration, industry, tax position, etc. etc. Its definition will vary widely by business. In commodities markets, it is something very different from that...

2 ways I can think of, SARIMA (or X-13 variant) or FFT. PM me if you want an FFT paper.

Also, if you're going to demand "carefully written answers," you need to start with a carefully written (and gramatically correct) set of questions.

http://www.itl.nist.gov/div898/handbook/pmd/section1/pmd141.htm

I posted a very simple QP model here a few years ago. I'll try to find it.

Bullet proof? No. In Risk, you can't take on the role of developer and change the model. Stress-tested? Absolutely. That's a key part of model review.

Plenty of research, but generally much more targeted. You are given a regulatory aim and perhaps even a model (e.g. single-factor Vasicek) and you have to implement it times 1 billion. Then you have to parse teh results and examine teh tail very, very closely.

I know Aaron Brown, who is their CRO. He used to work for me. He's a good guy and it's a reputable firm.

Declaration of Independence: 1 page Magna Carta: 1 page Your resume...

Liabilities like what? Debt instruments? Those won't be MTM like the assets. If you want to treat them like MTM instruments, use the Bloomberg generic curves or BB total return indices (The TR indices takes the need for convexity adjustment away).

If you want to work for a big bank or fund, then get a masters degree. If you want to do research and/or teach, do a PhD. The idea of doing a PhD only to prepare for the workplace seems a bit off-the-mark. You don't need a PhD to be a quant on Wall Street any more. Some of the best quants I...

Better to read OCC 2011-12.

The only quant roles in PE are industry specialists, e.g. petroleum engineers. There is little quant stuff required for the financials beyond the pricing of some contingent claims attached to the equity itself. This is usually contracted out to 3rd parties.

1. Undefined. Model review is largely a product of the regulatory landscape. It's likely to remain important, but sometimes I sense a movement towards a much simpler framework. 2. It depends. Broadly speaking, there are two types of quants in finance: statisticians and PDE people. Most...

There are many approaches to missing data. For the odd point, interpolation is fine. Beyond taht you can use a Brownian Bridge, regression against similar variables (in return space), or, if you're up to it, EM.

Risk uses statistics every day, especially times series. Linear algebra is handy as well.

You need to do the fundamental research. People here can direct you to sources of information, but you shouldn't necessarily expect them to do the work for you. Once you have narrowed down your choices, you can ask about the details of each program of interest.

I actually did start in risk management in my 20s, back in the 1980s. I was only there for a few months, though. I decided I wanted to gain a credible set of quant skills.

Yes. I established a clear-cut set of goals upon which I worked. Every. Single. Day.

Sorry about the profanity here, but this message hits pretty hard. (Andy, feel free to delete if you find it offensive.)

These statements are false.

Domestic students probably have a better feeling for the local job market.

I think you'd be better off making sure that finance is a field you want to enter, first.

I was unaware of these particular openings until I clicked the links (although as risk COO, I am generally aware of the large number of opening in risk overall.)

1) The move from FO to BO isn't that easy either. Movers are often regarded with some suspicion as people who are between FO jobs and looking for a place to hang out. They also rarely have the econometric skills and knowledge of regulation that is required. 2) The top quants in risk are as...

The is always some flexibility, but I have seen much less over the past few years. Don't take a risk job if your aim is to do something else. If you really want to do a front office job, hold out for that.

Interesting editorial in the NYT today about accounting. http://nyti.ms/QNrecY

These firms were all victimized by people with back office expertise using their skill to perpetrate fraud. I am unaware of anyone in risk management involved in anything nefarious, but we do often gain a very, very detailed knowledge of the data plumbing.

Me Metaphysical truth has nothing to do with it. It's about perception. The simple fact is that there's less mobility than there used to be. This is one reason.

Probably not a drawback, but there is some (unfounded) fear of bringing back office expertise into the front office after UBS, SocGen and Barings, but mostly wrt operations.

The workload in risk has increased by an order of magnitude since the crisis. A lot of it isn't glamorous, but it is engaging and a great place to cut your teeth. I say that because at some point, most people need to "put in their time." I don't mean to say it's just time-in-grade, but rather...

Amanda, without some ancillary skill, quants are largely undifferentiated (save, of course, for the usual PDE vs econometrician distinction). With some accounting, a quant could move to the price review function or the audit function easily. Accounting is a core skill in finance. Even a...

Nope. No relation. I want to help a friend design a class that will teach quants the accounting they need to know in Finance.

I have a question for practitioners: How much accounting do you feel you need to know to be effective? Clearly an understanding of VAs is requires, as is some knowledge of FV principles? I sense there's a gap here andI'd like to see it addressed.

First, with admission rates now hovering below 6%, you should broaden your perspective. The Almighty himself would probably get waitlisted unless he made the all-state soccer team. Second, @MNRC is right. Colleges like that aren't about preprofessional studies. Worry about getting and...

There are plenty of non-Ph.Ds in model validation.

The Canabarro and Duffie paper I posted in the Books section here under "Collection of important docs for risk management" has a nice description of CVA. There's also a lot of discussion of it in Basel III material, since B3 requires its inclusion in VaR.

There's an oversupply of MFEs. An MBA also allows more flexibility.

Basel regulation or Dodd-Frank regulation? Basel is forcing the standardization of IMM approached to CCP risk. Moving it to exchanges is the really hard part. That's DF. Fairness has little to do with it. The largely unregulated derivatives market came with attached externalities which were...

I have guest-lectured at Rutgers. I was unaware of the program at RPI.

Make sure you understand QP. Read sector research reports.

Time series. Multivariate stat. Regression.

@ygmwy, I've been thinking about your post here for a few days. I think it's a bit harsh. I have worked with many, many East Asian students and employees. Some have language challenges, with which they will have to deal to maximize their potential. For that reason, they may be less...

Daniel, your EE background may actually put you at an advantage. I've heard senior managers say they don't want MFEs and would prefer engineering students. Your biggest challenge will be convincing your interviewer that your interest in finance is genuine. Make sure your story is convincing.

The term "Risk Management" varies considerably from firm to firm and industry to industry. In Finance, it means market, credit, ops risk. Elswhere it usually means insurance. Most trading is handled by the treasury in corporate America.

Good luck. Keep us posted on your progress. People will be interested to hear about how things work out.

No. Most quants lack training in accounting, which prevents them from working in corporate finance, private equity, etc. It happens, to be sure, but more as the exception than the rule. Also, many quants are lacking in communication skills, which keeps them out of many areas.

Know Basel, know Dodd Frank. Know some time series.

Read the regulatory stuff I posted.

I've seen this kind of thing too, but not as well-done.

Personally, I'm not a big fan of thank you notes, but this deck provides some interesting food for thought. Job seekers: read and consider. http://www.slideshare.net/markrotoole/congratulations-graduate-eleven-reasons-why-i-will-never-hire-you

I just spoke with one of my quant finance ex-students on the west coast who told me he became a hero at work because he knew all about CCAR, the Fed stress test. It was a focus area of the class I taught. Just sayin'

You disliked my comment? Ouch! I have a paper I wrote 20 years ago on simple QP implementation. It's probably too basic for your needs, but let me know if you want a copy.

Congrats. I usually give a guest lecture in the fall. Look for me.

Are you looking to optimize using QP?

Ellen, typically these are distinct career paths. Many senior quants do end up in managerial roles, but that kind of management involves people and process and not many of the other things taught in an MBA program, like marketing. Unfortunately, the career flexibility that was common in...

One of the most senior quants at my firm has a formal education that ended with a bachelor's degree.

If the people at your firm suspect that you're just using the risk job as a stepping stone, things will not go well for you.

Well said.

You'd better not be looking.

According to the head fixed income strat, the best prep is getting a good night's sleep.

I can't say. I have never met anyone from either program and I know nothing about their curricula.

Quant Finance programs have become like law schools. Go big or go home.

1) Most peeple have at graduate degrees. The math required goes beyond that of most undergrad degrees, 2) The barrier used to be semi-permeable. It is less so now, after UBS, Soc Gen, etc. 3) Audit, consulting, fund management

Find out how the group is organized. That will tell you how they think about their product set. Do the have a big converts business? If so, know the converts and reverse converts space. Do they do a lot of structured stuff? Or are they primarily a vanilla player? Which models to they use...

Know the basic products. Read up on the "flavor(s) of the week." Pick one and read a lot about it. Ask about others. You can interview them. (For example: "I know something about (product) where (description of product's attributes), but how does that apply to (other product)? Be upfront...

If you guys can articulate 6 or 7 key questions, I can probably persuade the head fixed income strat at my firm to write something for this blog.

GARCH is often used in a risk management context to proxy implied vol when there is no market-observable data. To what extent does GARCH(1,1) on any underlying asset price approximate the observed implied volatility? Do any of the GARCH variants work better? When do these measures converge and...

The eigenvalues give relative weights to the orthogonal dimension-reduced components of the covariance structure. I posted an introductory paper on this topic in the recommended readings for risk section of this blog.

For For me, they would be probability, inference, and time series, but that reflects what I do for a living. Essentially, I believe quants in the finance business fall into two basic groups, the PDE people, who work on pricing models, and the econometricians, who do a lot do the risk work...

Agree. Even though we don't necessarily phrase problems in terms of linear algebra, the techniques and overall mindset are omnipresent. Consider that OLS, LP, and QP techniques are linear algebra-based. After basic calculus, it's probably the second most valuable skill to have.

...but not all. The first 100 pages of Figlewski provide the best intuitive description of option pricing I've ever seen. Indeed, it's what gave me the "aha!" moment 20-odd years ago. I have been recommending it to students for years, particularly to to ones who have the pure math but not...

That will vary from firm to firm. As I said sustained performance is the key to promotion, so ceteris paribus, many firms would promote the person with more experience. I'm not sure "elderly" is the term I'd use...

What do you mean? There is a concept of "time-in-grade" whereby people are expected to be in a position for a certain amount of time before they are promoted. The idea here is that promotion should be the result of sustained performance. That said, these rules aren't usually written down. In...

I can't speak for the Program Director, but as a faculty member I can say that it calls into question your commitment to finance.

Yes. For Figlewski, the Financial Options book. The first 100 pages explain the notion of the replicating portfolio exceptionally well. When I read that (20-odd years ago), the light went on. Also, Steve Allen has some stuff on model risk in his book, I think.

Well said.

Figlewski provides an excellent introduction to derivative pricing. Hull provides the ultimate reference. You should read OCC 2011-12 first, however, to get model review background.

You can't really "manage" to a disaster scenario. All you can do is have contingency plans. You could buy options, of course, but that will be very expensive. Firms usually run extensive stress tests and scenarios to estimate possible losses and develop plans.

Music brings insight. In college, when I first listened to a recording of Jaco Pastorius playing Donna Lee on the solo electric bass I saw God.

Andy is right. The OP's opinion might be considered a bit hyperbolic. See if you can get some people to write reviews.

Three years old, but who's counting?:)

Wei renmin fu wu, baby.

There is nothing wrong with giving it some thought, but many (if not most) of us changed our minds several times between ages 18 and 22. Concentrate on your classes. Xiang @wayoung tongzhi xuexi.

Ian, you will stick out like a sore thumb to any risk management interviewer, who will see you as yet another person who is interested in the risk side only as a second choice.

This is not correct. Dan is pretty tough. I have lectured at 10 QF programs. The Baruch students as a group have a far better command of English than those in the other programs.

Ken Baron at 2 Sigma wrote a book on using parimutuel analysis in financial markets.

This doesn't sound right. PE people get paid primarily on carried interest. I think the only ways this could happen would be if a) the portfolio had some troubled names and the grad had the specific expertise or b) the grad was pulled in to be CEO of one of the portfolio companies. Either...

Certain products are exempt. It's very important to read the fine print associated with the rule.

I'm not sure I agree. The interview process is stuffed to the gills with Billy-Big-Deal trader wannabes. I find myself doubting the sincerity of many people who say they want to be in finance. Middle- or back-office experience would suggest a sincere interest in the business and not simply a...

So you automatically reject the people that seem "too prepared?"

"Say its name." "Heisenberg."

I hope you all realize that admissions committee people from Baruch monitor this website. All of your speculation is likely to affect which questions they ask.

I don't know anything about this program. Sorry.

I don't serve on any admission committees. I'm not qualified to have an opinion.

Basel and Dodd-Frank overviews (posted). After the Trade is Made (book on securities processing) Federal Reserve Trading and Capital Markets Activities Manual

Going immediately to grad school is a mistake, I believe. You need to understand where and how these calculations are being put to use. When I went to grad school, which was after working for seven years, I could determine what I needed to understand fully (times series, inference...

Go work for a few years. MS degrees, IMO, are a waste unless you have the right institutional context.

Too many programs + Too little understanding of what skills are really necessary + Academics wanting to teach only what's interesting to them+ Overly aggressive marking + Not enough research by potential students on programs and job market...

That's a reasonable assessment. This is the superset of what I assign for the classes. I got tired of uploading it. The challenge with DF and Basel-related documents is that they usually have a shelf life. I tend to post the official document and the most recent interpretation. For Basel...

What does that mean?

Waitlisted at MIT, rejected everywhere else, poor grammar. Folks: I think we may have a troll here...

Well said on both points. OR skills are very, very useful, but you need the institutional context.

Many, if not most MS in Finance students (I hate the term "Financial Engineer") go in with some idea of what they want to do when they graduate. That allows them to focus their studies and to consider carefully how they will describe their growing skill sets to potential employers. Many, if...

Not necessarily. First, analyst programs often the flagship of the recruiting effort. They are expensive and create a key pipeline of badly needed people. Second, franchise/reputational risk is a consideration. If you fired first year analysts, you may have a difficult time recruiting the...

Interesting question. My guess: because OR people are often not as focused upon finance and don't market themselves as effectively.

My trading experience was many years ago. My management experience is in risk, where many quants go. I've been through the headcount reduction exercise many times. If analysts have an advantage, it's because people think they have no basis for judgement. Once you're in a job for a year...

Don't do another masters degree. You'll find that you may have already covered a lot of the material. I found my MS in Stat to be more than adequate, the only difference being that I did it at night and had 11 years of experience by the time I finished it in 1994.

While I agree on the point you make about a higher standard, you'll find comp levels are generally within 10k or so at the entry level. Also, when firms cut heads, titles often don't matter. An underperforming MD is as likely to be cut as an underperforming first-year analyst.

The GARP ERM readings provide a comprehensive introduction and review. There are two parts, online (generally publicly available stuff) and print (copyrighted material). It's voluminous (perhaps 1000 pages overall), but it covers the basis.

OK campers, I need your advice again. As some of you know, I teach at NYU, Claremont and Baruch. I've sponsored some very successful projects including ones on ES as a risk measure , commodities, and on regulation. I sit on my firm's sustainable finance committee as well as on the investment...

I wrote a quick-n-dirty paper on this many years ago. It's a very, very basic intro to QP that can be implemented in a spreadsheet. I usually assign this as a model review for my students. If you like, I could send some working examples.

I think full-contact origami is big. And absinthe, carefully strained through a sugar cube, is the drink of choice.

You can use the associate recommendation in addition to, but not in place of one from someone more senior.

BTW: IQ is a pointless measure. Once you're an adult, it tells you nothing. Furthermore, no one cares about IQ. In my 30 years in the business, I have not heard a single reference to IQ, which brings me back to my original point: intelligence is useless unless it can be applied. A moderately...

Wall Street is full of inarticulate intelligent underachievers. It's kind of like having a 1000 hp engine with no transmission with which to translate the power into motion. Without the ability to express oneself, intelligence is essentially useless.

I think you think too much.

Most people list relevant coursework on their resumes, but I don't see how that would make any difference in your application. Any school to which you apply is very likely to scrutinize your transcript.

Wow. Meshulum, I used this book back in the 1970's. I guess English hasn't changed that much...

It's been 8 years since I left B of A, but I'd imagine that the prospects are more or less the same for any MS students with a quant background. There's less differentiation at the workplace than many people seem to think. Either you can count to eleven with your shoes on or you can't. That...

It is demanding and it is risky. It's easily the hardest job I've ever done. It's also a line of work that attracts a lot of people who see it as a way to quick money, so firms look for a commitment to the industry, usually reflected in a genuine interest in the markets.

Here's what I suggest: have you ever seen the Facebook posts that relate "8 things you didn't know about me"? Start with that. Identify things about you that are interesting. You lost money investing? No one cares. Everybody did. How did you react? What did you do next? What's the worst...

I don't know what these risk programs teach, but I hope that there would be more time series and accounting and less PDE and C++. Database skills would also be nice. Be careful. These programs need to teach the regulatory stuff if they are to be taken seriously VaR methodologies IRC...

I count Abuses of Capitalization As Spelling errors.;)

@luckyboylxc , you can't simply slap something together and throw it up here, expecting everyone to make it better. This essay is filled with spelling, grammar, and punctuation errors. Most are easily identified in MS Word. If you make an effort to put a decent draft up here, I'll take the...

Operations Research has many non-finance applications. Think scheduling: rail, air, power.

Fundamental review of the trading book: A revised market risk framework, October 2013 I posted this in the risk books section here on Quantnet.

I recently asked a bunch of MFEs whether they ever used their knowledge of PDEs or stochastic processes in their daily work. No one said they did. I believe that core math, stat, and finance knowledge (eg bond pricing) are more essential that a lot of the material currently being offered at...

A feeble attempt at humor, I'm afraid.

Read the Basel "Fundamental Review of the Trading Book" documents. There's a move to replace VaR with expected shortfall, in part because of the latter's coherence. What interesting properties manifest themselves in its practical use as a risk metric? I had some Baruch students do a project...

Lately I have heard a lot of discussion about how useful engineering skills are.

First, clean up your résumé. I saw a guy get dinged recently because of bad grammar. Second, if you want to generate interest in your project, choose something topical. No one on the banking side is thinking much about new interest rate, cdo, or HFT models. Think CCAR, IMM, AMA. Third, look...

It depends. An MS (is there such a thing as an MA in statistics?) might imply a genuine interest in the subject matter. Many people assume that those seeking an MFE are just looking to make a quick buck. Fortunately, this usually becomes painfully obvious in the interview process when the...

Thanks for coming, everyone. I'll be sending the .pdfs out to you via email. I hope you enjoyed it as much as I enjoyed teaching it. As always, feel free to contact me with questions, either about the class or about the industry in general. And thanks for helping me support The NJ Scholars...

You can't assume that quants all sit on the desk developing models. Most quants I know are in supporting functions. They occasionally write snippets of code, but I wouldn't consider them programmers. In fact, at my firm, I'd guess that if you were to ask even the desk quants if they were...

Maybe a bit hyperbolic there, but I'm happy to be of use.

Thank you. This is perfect.

We get a model developer to develop one. I wouldn't let most quants anywhere near production code, unless I only needed the price once. If I need that price 10,000 times x 1,000,000 positions, I would give it to a programmer who could price efficiently.

Most of the quants I know spend little time programming. Those are the ones in the support functions- risk management, model review, price verification, audit.

Ok, forum. This time I need your advice. A colleague of mine is on the management fast track. She's smart, personable, and talented. Her challenge is that she has no formal quant training at all. She is destined to be part of senior management. A minimal amount of schooling would help her...

London Whale papers (plus more) EconPapers: Yale School of Management YPFS Cases

Where are some great papers on retail finance: https://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/file-pub-ch-a-rl.pdf https://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/pub-ch-a-ccl.pdf...

Andy has posted numerous job descriptions here.

Securitized

Regulatory

Quant

Private Equity

Models

Liquidity These are regulatory papers on liquidity risk management.

IT

Fixed income

Credit risk