Career path related to quantitative research job in financial industry

[Stefan Du]

Hi, I am going to apply for 2015 fall MFE program and I am stuck by the career path since I have little exposure to the industry and I have no idea about the specific work in different positions. Thanks to Ivan, I think the quantitative researching area matches my background best.

Here is my understanding of the quantitative researching area: Looking for inspirations in academic papers and apply them to practical trading strategy. This needs the strong academic background to understand the paper and find the specific point that could be used in the industry. Strong programming skills and sufficient exposure to the financial industry is necessary since you need to make the idea work in the reality and you should know how the market functions.

Is there any problems in my understanding? Could you please give me some hints about this kind of job, like the requirement to be competent with the job or the specific company which would have this job.

Besides, what progress would this job make? Namely, could I become a analyst first and accumulate working experience, then turn to other department and finally become a portfolio manager? If not, what higher position could be reached within the researching area?

After all, I am preparing the career path in my essay of the application, there could be changes before my entering the industry. My focus is to figure out the career path which suits for me and is conducive to my application.

Thanks!

 

[Keith Tan]

finance is a huge industry and there is not knowing what you can achieve. with a MFE u can practically go anywhere you like. in terms of higher position and salary, sky's the limit. as long as you know how to value overvalued and undervalued securities and act on it. who knows, you might be a quant trader at a hft firm and earn more millions than a ceo.

 

[Stefan Du]

finance is a huge industry and there is not knowing what you can achieve. with a MFE u can practically go anywhere you like. in terms of higher position and salary, sky's the limit. as long as you know how to value overvalued and undervalued securities and act on it. who knows, you might be a quant trader at a hft firm and earn more millions than a ceo.

Thanks for your reply! But I need to know the specific position in the industry to make my career path. I have little exposure to the industry in America since I am a foreigner. So where could I catch the background related to the position?

 

[Andy Nguyen]

quantnet.com/guide
There is much reading to be done, both via books, free guide or online articles.

 

[MiloRambaldi]

finance is a huge industry and there is not knowing what you can achieve. with a MFE u can practically go anywhere you like. in terms of higher position and salary, sky's the limit. as long as you know how to value overvalued and undervalued securities and act on it. who knows, you might be a quant trader at a hft firm and earn more millions than a ceo.

Delusional.

 

[Keith Tan]

well, i forgot to add a disclaimer: was describing top mfe grads. hope u are one of them.

 

[pingu]

well, i forgot to add a disclaimer: was describing top mfe grads. hope u are one of them.

double delusional

 

[Keith Tan]

double delusional

right. stay off this list http://www.forbes.com/sites/nathanv...hest-earning-hedge-fund-managers-and-traders/

 

[Liam]

double delusional

Agreed - I think the OP should talk to someone like Dominic Connor on Wilmott.com to get some real down to earth perspective.

I'm one of these top MFE grads and while I have had decent jobs it's not come easily at all. Even when the market was good you needed a little more than just to be good at valuations to get a job - 10 years ago I'd see top quality individuals thinking they'd walk through interviews only to find they had to be at a certain level of knowledge beyond where MFE would have you. 3 months of bookreading from books like Hull to tough books on SDEs wasn't unheard of (indeed it wasn't until I did that that I started walking through interviews).

Now it's doubly difficult for MFEs to get jobs "easily" as finance is no longer huge and the equation solving researcher isn't such an easy fit - unless you buy the message of some promotional material of this site which doesn't look any different to what was being promoted 10 years ago. I mean take a look at some of the quants on my LinkedIn - one a PhD from top uni + 7 years experience as a quant - now unemployed for 2 years.

 

[Daniel Duffy]

Agreed - I think the OP should talk to someone like Dominic Connor on Wilmott.com to get some real down to earth perspective.

I second that.

 

[C S]

finance is a huge industry and there is not knowing what you can achieve. with a MFE u can practically go anywhere you like. in terms of higher position and salary, sky's the limit. as long as you know how to value overvalued and undervalued securities and act on it. who knows, you might be a quant trader at a hft firm and earn more millions than a ceo.

I don't want to pile on like the others. I like your optimism. But anyone that has that strength of conviction to achieve this kind of dream... why do they need an expensive degree like the MFE?

 

[MiloRambaldi]

t - unless you buy the message of some promotional material of this site which doesn't look any different to what was being promoted 10 years ago.

Good point. Self-reported fraudulent placement statistics can also feed these delusions.

 

[Daniel Duffy]

Here is my understanding of the quantitative researching area: Looking for inspirations in academic papers and apply them to practical trading strategy. This needs the strong academic background to understand the paper and find the specific point that could be used in the industry. Strong programming skills and sufficient exposure to the financial industry is necessary since you need to make the idea work in the reality and you should know how the market functions.

Anecdotal evidence suggests that > 60% of your work day is involved in software development (maintenance ?).

What is 'research' in this context?

 

[yetanotherquant]

Here is my understanding of the quantitative researching area: Looking for inspirations in academic papers and apply them to practical trading strategy. This needs the strong academic background to understand the paper and find the specific point that could be used in the industry. Strong programming skills and sufficient exposure to the financial industry is necessary since you need to make the idea work in the reality and you should know how the market functions.
Thanks!

Anecdotal evidence suggests that > 60% of your work day is involved in software development (maintenance ?).
What is 'research' in this context?

It is not [only] anecdotal evidence, this is MY personal evidence.
But guys, let us be not too sarcastic to Stefan. Finally, many passionate students go through this stage

Here is my story in short:
I have started doing more or less serious research as I wrote my Master Thesis in quantitative finance.
I read a lot and read carefully. In particular, I read 'Fourier Series Method for Measurement of Multivariate Volatilities' by P. Malliavin and M. E. Mancino ... and found a lot of typos and a mistake in the proof. Moreover, these typos ("+" instead of "-") migrated to the most of papers that cite Malliavin and Mancino.
As I found a mistake in paper (and how to correct it), I was very excited and wrote a note on it:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=989009
Did it bring me anything? No, just made my Prof. very angry, though he, himself, admitted that my counterexample was valid.

I also read a lot of papers which are just written to be published (because one needs it to make an academic career).
And believe me, nobody will publish an idea that really works. Have you heard about the famous Paper "Foundation of technical analysis" by Lo et al? "He said he's still curious about whether technical analysis really can beat the market after adjusting for risk--a question that his latest paper doesn't attempt to answer. If he and his colleagues discover that it can, he says, "We might never publish that paper". (http://www.businessweek.com/stories/2000-04-16/this-alchemy-may-yield-real-gold)
Apropos this paper, I tried to reproduce their results ... and was not able to do it ... at least with more recent data than they use.

After I graduated, I started as quant-developer but I wished (like you) to be a pure research quant.
It took some time to understand that this is a counter-productive attitude for career.
(With very few exceptions you can make a pure research only in academic world. But then you quickly degrade to "ivory tower scientist" who develops models that never work and nobody needs.)

But I did not give up, I just corrected my expectation and continued self-studying. However, I switched from fundamental things like measure theory (http://www.yetanotherquant.de) to applied stuff like Kelly criterion (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2259133).
And I learnt how to work with real market data (this is another big story beyond the scope of this post).

Currently I am working as a Model Developer. I may do some research in my work hours. But as Daniel pointed out, most of my time I spend is for software ... and mostly maintenance than development.


To put it briefly:
1. If you want to do research, do but have a realistic expectation
2. You are encouraged to learn fundamental stuff (measure theory, functional analysis, stochastic processes) in the university because there will be no second chance. But the closer you are to the (post)graduate level the more you should try to concentrate on more applied stuff.
2a. Learn programming (C++, Java) and data analysis (with R)
3. Do not expect that people in academic world are very smart. Most of them are lazy, unmotivated, write a lot and real a little and finally they are simply not good enough for the Wall street. (Of course there are some good and motivated professors but they are clear minority and the competition to be supervised by them is high)
4. I wish you a good luck

 

[Stefan Du]

Here is my understanding of the quantitative researching area: Looking for inspirations in academic papers and apply them to practical trading strategy. This needs the strong academic background to understand the paper and find the specific point that could be used in the industry. Strong programming skills and sufficient exposure to the financial industry is necessary since you need to make the idea work in the reality and you should know how the market functions.

Anecdotal evidence suggests that > 60% of your work day is involved in software development (maintenance ?).

What is 'research' in this context?

Thanks for your reply! As for 'research', I mean creating ideas of practical strategies or modify those models by reading papers or other researching materials. So from your perspective, what would a quantitative researcher do?(Is there any positions like quantitative researcher? I thinks this position may exist in hedge fund?) And what is the core characteristic to be a trader?

 

[Stefan Du]

It is not [only] anecdotal evidence, this is MY personal evidence.
But guys, let us be not too sarcastic to Stefan. Finally, many passionate students go through this stage

Thanks for your sharing your experience and detailed description! What I want is not pure research job, but something that I could apply theories or other techniques I have learnt to gain revenue, through the process like track and even predict the market(It seems to be impossible to predict the market).

I agree with your point that the realistic expectation is very important. So I won't expect to do research work in the industry. But the experience of academic life would at least worth something, right? Like the ability to read paper, understand the difficult theory, find out the mistake and write your own paper, would these have positive effect to help you land on the financial industry? And how to persuade others to believe that a strong academic background can bring the employer what they want?

Is there any possibility for a MFE graduate to become a trader? If the answer is yes, what should I focus on while I am pursuing my MFE degree?

Thanks!

 

[yetanotherquant]

I agree with your point that the realistic expectation is very important. So I won't expect to do research work in the industry. But the experience of academic life would at least worth something, right? Like the ability to read paper, understand the difficult theory, find out the mistake and write your own paper, would these have positive effect to help you land on the financial industry?

Of course these abilities may have positive effect but do not expect they necessarily will.
At least in Germany what you first of all need is good grades. And there is a dilemma: either you research and try to understand deeply, or you cram the sample solutions (because most of tests are not a matter of knowledge but the matter of ability to know the sample solutions).
And do not expect that you will be ready to read papers after you graduate from an MFE Program (unless you learn more than curricula implies, just have a look at this https://www.quantnet.com/threads/more-mathematics-than-steven-shreves-book.8141/#post-76683).

Is there any possibility for a MFE graduate to become a trader? If the answer is yes, what should I focus on while I am pursuing my MFE degree?

Yes and I know guys who did.
But you should understand that trading != quantitative research (do study Andy's reading list).

To sum up:
1) If you really want to work in financial industry, MFE (or some related degree) is very helpful, actually it is necessarily. But not sufficient. And do not expect too much from it.
2) I, for one, did my Master at the University of Ulm in Germany. For me it likely was the most clever solution because in Germany there are virtually no tuition fees and I it is easy to get a work permit after graduation.
The curricula and study opportunities in Ulm are (were) not worse than in leading US Universities. I mean: as a graduate student you learn the same ABC everywhere: Black-Scholes, Martingales, Girsanov, Ito... Of course it is better to be taught personally by Steven E. Shreve but if you have his wonderful book and a ready-to-help instructor then the result will be the same.
The only problem ... you should not expect recruiters from Goldman in Ulm (though guys from Deutsche may come. And Shiryaev was once a visiting professor for the summer school).

 

[tfors]

..

Interesting. But which master's at Ulm did you attend?

edit: already figured it out on the website