How to pick an MFE program

Aaron Brown

New Member
From Amsterdam to Zurich you can attend financial engineering masters programs in all the financial centers in the world, or places off the financial beaten path such as Bethlehem, Coimbra, Potchefstroom or Stillwater. You can be taught by some of the great names in academic quantitative finance—such as Carol Alexander, Marco Avellaneda, Emanuel Derman, Darrell Duffie, John Hull, Robert Jarrow, Mark Rubinstein, Philipp Schönbucher and Steven Shreve (leaving out many just as distinguished)—or by professors who may be as competent, but whose names will not resonate with as many potential employers. You can pay $20,000 to $80,000, and no doubt more or less, and spend one to two years or, in some cases, attend part-time.

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There are financial engineering programs with stellar international reputations, enviable starting salaries and top placement statistics; with graduates placed highly in most global financial institutions, but you can also opt for less famous programs that may be cheaper, easier to get into, more convenient or that offer special features that interest you. There are also programs as prestigious as the top financial engineering masters programs that offer similar master’s degrees such as computational finance, mathematics in finance, and financial mathematics. There are lesser-known programs associated with great schools, and top programs associated with less well-known schools. Then there are bad programs. There really are, and some of them are at schools with good reputations. I won’t name them. I’m not shy but I don’t want to taint their graduates. Anyway, it’s something you should find out for yourself. If you don’t do the due diligence to eliminate the bad programs, you won’t have the information you need to make a decision.[prbreak][/prbreak]

A bad program is a cynical attempt to get tuition dollars from students who are good at math and desperate for jobs, and deliver in return lectures from people who have nothing better to do. Some clues that a program is bad are:
  • Few students have financial experience or successful career experience.
  • Enrollment fluctuates with demand for financial quants.
  • No distinguishing approach, just a bunch of standard courses.
  • Instructors with no publications or experience in quantitative finance.
  • Few courses that truly combine math and finance, just pure courses in math, statistics, computers, and other quantitative fields, plus basic finance courses.
  • Dated content.
  • Exclusive emphasis on lecture and multiple choice or numerical answer exams.
Beyond these signs, you may be able to tell by the people you meet. Do the administrators, faculty, and students strike you as a group of successful people working together to create an exciting future? Or do they seem to be unsuccessful people trying to use each other for personal benefit?

Once you eliminate the bad programs, the next question is whether to try for a top program or select a lower-ranked one that may have other advantages. My general advice is to go for the highest-ranked program that will accept you, even if it is less convenient, more expensive, and less suited to your particular situation. That’s not universal advice. There are times to overrule it. But make sure you have clear, strong reasons if you do. Top programs have top faculty, top students, and top alumni networks. The best ones also have unique approaches. Along with the brand name advantage, those are powerful tailwinds to a career. Lots of people succeed without them, but why make things harder than necessary?

For some students, that is the end of the process. Once they eliminate the bad programs, they find there is only one acceptable alternative, or one obviously superior choice. But for many students, especially those who are willing and able to relocate anywhere in the U.S., there are going to be several suitable programs of roughly equal reputation and quality, at any level from first-tier to third-tier.

The next thing I would look at is the level of mathematics required. You have to dig deeply to find this out. There are, believe it or not, financial engineering programs in which a professor cannot work a simple calculus example and be confident that the class is following. Everyone passes a calculus exam of course, but that’s quite different from being able to use calculus or other mathematics in a classroom setting (not to mention a real-world setting). I think you will usually do best to choose the program with the highest level of mathematics that you can handle—and if that level is below calculus you should find another field. I’m talking about the actual mathematics used in classrooms, discussions and cases; not the course or exam requirements.

The other factors like faculty reputation and experience, placement statistics, rankings by independent parties, and admission metrics I lump together as general quality. They are too highly correlated to make decisions by weighting one versus another, you’re overfitting if you try (if you don’t know what that means, find another field). If you are accepted by two programs of the same overall quality and mathematics level, I think your choice is likely to come down to idiosyncratic personal factors rather than any systematic advice I can give you.

If everything above is not sufficient to make a choice, consider whether you are sufficiently decisive for financial engineering. After you get the degree, you will have to make much harder choices with less information at higher stakes if you want to use it. If you can make a choice, congratulations, and I wish you the best. I look forward to the benefits your financial innovations will bring to the world, making my eventual retirement secure and happy.

About the author:
Aaron Brown is risk manager at AQR Capital Management and the current Global Association of Risk Professionals Risk Manager of the Year. He is the author of Red-Blooded Risk (Wiley, 2012), The Poker Face of Wall Street (Wiley, 2006, selected one of the 10 best books of 2006 by Business Week) and A World of Chance (with Reuven and Gabrielle Brenner, Cambridge University Press, 2008). In his 31 year Wall Street career he has been a trader, portfolio manager, head of mortgage securities and risk manager for institutions including Citigroup and Morgan Stanley. He also served a stint as a finance professor and was one of the top professional poker players in the world during the 1970s and 80s. He holds degrees in Applied Mathematics from Harvard and Finance and Statistics from the University of Chicago.

A version of this article appears in the QuantNet 2013-2014 International Guide to Programs in Financial Engineering
 

Daniel Duffy

C++ author, trainer
Since mathematics seems to be important for MFE, why not just demand that a BA/BSc as a prerequisite and be done.

Then you can compare apples and apples.
 

bigbadwolf

Well-Known Member
It would be an amusing idea to make a list of all the bum MFE and MFM programs out there whose sole raison d'etre is to part students (usually unwitting international ones) from their money.
 

adiaz_vca

New Member
What would be your opinion on the new program by University of Washington, MS in Comp Finance & Risk Mgmt?
 
A very helpful post.
Thank you.!
Aaron , Can you please kindly throw some light on what kind of Job profiles we are usually offered after MS in Financial Engineering? Is it a right option after Bachelors and Masters in Economics, if I want to get into Portfolio Management in future?
 

Julianlapoutre

New Member
for quantitative finance don't forget French school and university like : El karoui , DEA Laure Elie (with very famous teacher like Peter Tankov, Giles Pages...) or DEA Lamberton or ENSAE Paristech
it cost only 500$ a year and you get one of the highest level in quantitative finance all around the world.
 
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