So You Want to Be a Financial Engineer?

Todd Fahey

Quant Recruiter
Preparing for a Career in the Field

When preparing for a career in Financial Engineering, it’s helpful to know what you need to know in order to be considered a good candidate for a job, as well as how to be successful in that role once you are hired.
First, you should know that the general utilization of an MFE degree tends to be oriented toward quantitative roles on the desk (i.e., working on the trading desk and delivering the models, risk calculators, etc., directly to the traders who utilize their products), or in risk management, model validation, and library control, CVA, or quantitative development and programming.

I’ve been a recruiter for more than 14 years, and have worked exclusively in quantitative finance for the last 12 years. My coverage spans global investment banks, hedge funds, proprietary trading companies, and asset management firms, focusing on the front-office quant and trading and technology professionals. The vast majority of roles that I cover are automated/systematic/algorithmic quants and traders through quantitative software and systems/platform developers and quantitative analytics and modeling on the desk. I will discuss in more detail how to prepare yourself for these roles, and help you focus on the subjects you need your degree program to teach you.[prbreak][/prbreak]

While the job market is very soft for new MFEs hitting the market to be desk quants, as well as those in exotics and structured finance, there is a significant need within the CVA, risk, and quant developer/programming fields right now. I anticipate this need will only grow stronger over time as there is significant emphasis on risk and credit at the moment—and the foreseeable future—specifically as it relates to the current regulatory environments both here and abroad.

The other area that is bright at the moment is within the world of automated, algorithmic, systematic, and quantitative trading. These roles are highly competitive for entry-level professionals. Further, they all require programming skills in core languages, along with a solid knowledge of statistical, neural network and/or artificial intelligence methods. If this is a route you are looking to pursue, you need to know that you will be facing some ridiculously stiff competition, and you may be best served by being open to relocation outside of the U.S.—Asia in particular. Also, work hard on getting solid skills and experience with C++, Python, Java, and/or Scala, as these tend to be the most utilized programming languages in the field.

My personal recommendation if you’re looking for a job now, in terms of target companies would be, in order: hedge funds, asset management firms, proprietary trading companies and, finally, banks. The reasoning behind this is that banks are in regulatory hell right now; proprietary trading companies could very well have some issues with the pending regulations in the U.S. and the UK, and there is still a lot of money waiting for deployment across the global spectrum right now. Asset management firms and hedge funds appear to be the beneficiaries of what we anticipate over the next 5-10 year stretch.

But how do you prepare for these jobs? First, it’s helpful to know what to prepare for in terms of education, based upon your interests. For example, if you desire to pursue a path in high frequency futures trading, you should be aware that the vast majority of these people do not have PhDs, and some employers in this field actually believe them to be detrimental. A strong background in electrical and/or computer engineering (with a master’s degree, preferably), very strong programming skills (C++, Java, C#, Scala, Python, etc.) and comfort with very large data sets is key. If you are more interested in the mathematical side, a PhD is the preference, although not a necessity (MFEs typically work in this arena, as well). Typical coursework for these careers is Operations Research, Applied Mathematics, Mathematics, Theoretical Physics (not experimental—not a desirable math track), Electrical Engineering, Computer Science or Engineering, and Mechanical Engineering. If you decide that this is the path to pursue, understand that strong programming is a requirement and will be done every day. It is no longer optional. And, if you can only program in MATLAB, SAS, S+ or another RAD or statistical package, you will be at a disadvantage compared with those who can program in advanced languages mentioned above.

What do you need to know to make yourself competitive in the market wherever you choose to work in the world? Let’s face it—this is probably the most competitive field of employment outside of professional sports. As such, talent alone might not get you in the door. There are things that you should do in order to make yourself stand out from the crowd. Including some things that may make you uncomfortable and push you in directions you may not have considered prior to pursuing this career path. I will highlight the things I believe that will best start you on the path to success:

Personality and Communication Skills
Believe it or not, you are not quite as unique as you might think you are. Everybody in this field is “smart”. The ones who get jobs—and then progress upwards through the ranks—have one commonality: people (at least someone) like them. You need to be articulate and outgoing. Inquisitive, yet thoughtful. One way to help your personality show through would be to join Toastmasters or a similar organization. While you may not ever be in sales or a refined public speaker, it will only serve to help differentiate yourself from being like everyone else.

Probably the most overlooked need beyond the technical skills required in this field is the need for communication, Specifically, communication in the English language. English is the universal language of finance—the same as if you were an international airline pilot. If you are not a native speaker, it would be extremely helpful to take communications courses to help with your grammar, presentation, and writing abilities. Even if this is not part of your curriculum, outside tutoring would not hurt you. After all, you may be the smartest mathematician in the world, but if you can’t articulate it so that people understand you, or if your writing skills are so atrocious (author included here . . . ) that it is impossible to follow in a linear fashion, you’re severely disadvantaged.

Programming
If you’re not good at it, get good at it. In almost every role in quantitative finance you will be required to program. The better you are, the easier it will be for you to land a job in the field. Languages to concentrate on are: C++, Perl, Python, Java, C# / .NET, Scala, Hadoop, MATLAB (not a substitute for C++!) and other functional programming languages.

Economics and Finance
In the world of quantitative trading, economics and finance classes are not important—other than for being a well-rounded professional at a macro level. Within the world of quantitative strategists, there is a chasm. Most banks and hedge funds look for those who have a rigorous math background. However, there are a number of hedge funds and asset managers who look to avoid those backgrounds. They want classically trained economists with PhDs from the major Ivy League schools. If you don’t have a PhD from one of those schools and a top undergrad from the same level institution—don’t waste your time. This field is fiercely competitive and you need to up your game to even have an opportunity to interview.

Math
There are a lot of different areas within math, but there is one thing for certain: if you’re going to be a derivatives quant, you had best be good at stochastic calculus. Other areas of note are linear algebra, spatial geometry, and familiarity with partial differential equations and ordinary differential equations.

Internships
The ability to secure an internship should be a priority from the moment you walk in the door as a freshman in college. You get to learn about what these people do on a daily basis, and you may have an opportunity for a rotation. You get to be on the Human Resource department’s radar—a big thing once you are ready to enter the job market. The best way to find a job is to have one in hand as you get ready to graduate because you’ve interned at the company and they feel they need to have you on their team because you impressed them so greatly as an intern. Most importantly, you begin to network with other professionals in the field. People move often and it is 99.99% likely that you will leave your first job within five years. The saying “It’s not what you know, it’s who you know,” carries a lot of weight in the hiring world. Get to know as many people as you can and actively engage with your network often.

Continuing Education
If there were ever a time to recommend staying the distance if you have your sights on a PhD, now is the time. Entering the market later with a PhD may put you at the top of the candidate list, as well as position you to job search in a better market. Not interested in a PhD? Not a problem. There are many different quantitative networking groups, conferences, and symposiums in every financial center to keep you engaged in the latest trends and ideas, and also—and I cannot stress the importance of this enough—the ability to network not only with your peers, but the level of successful professional that you all strive to be.

One other thing that you need to do is read. Voraciously. I’m not speaking about books, articles, and literature dedicated to your field of endeavor. I’m speaking of information flow that is real-time and/or relevant to recent events. If you don’t know what is going on around you, it is hard to have an opinion about what is going on around you. Read The Wall Street Journal, Financial Times, and other newspapers. Subscribe to e-zines such as Fierce Finance or FINAlternatives. Join specific web communities such as QuantNet, Wilmott, or Nuclear Phynance. Read books by Michael Lewis or other topical books relevant to finance (I’m personally a huge fan of Roger Lowenstein’s When Genius Failed: The Rise and Fall of Long-Term Capital Management). Become a well-rounded quant and you will start to move away from the pack.

The purpose of this article is to give you a general overview of the market, the trends, and what skills I believe you should have based upon what positive and negative stresses I see in the market now and in the next few years. Ultimately, I hope that you remember the ultimate lesson here: each of your own situations and experiences is unique to you. Clarity of your path is the most important thing to you. Keep the goal in mind as you make your decisions and, with a bit of luck and good timing, you will arrive at the point you’re aiming for.

****** I need to add a caveat to the article: please keep in mind that given the nature of the function I serve is to be able to 'find a signal in the noise', I receive hundreds of resumes and I can only devote so much time to each. That being the case, the above serves as a very generic, broad-based assessment. Further, our clients pay for us to find them talent that is already in the work force and are currently in a role that they need to fill. I never work with entry-level candidates as none of our clients utilize us for these roles. That said, I am always willing to offer the best advice I can, but please understand that each individual, each role and each company is unique and all of the above or none of the above may apply. ******

Todd Fahey is Executive Director, Global Head – Quantitative Strategies Practice, at Sheffield Haworth, Inc. He has trained quantitative and technical recruiters; published articles, blogs, and e-zines; and presented at various business schools. He can be reached at fahey@sheffieldhaworth.com.

This article is featured in the QuantNet 2012-2013 International Guide to Financial Engineering Programs.
 

AnubhavM

New Member
I work in the front-office technology side of an Investment Bank as a developer of fixed-income risk systems. But my role is limited to developing applications that feed data to the system because until one year ago I had no background in banking or finance. I want to work in the core areas of the system - risk calculation, rates derivation etc. and become a pricing developer. I am a self-learner and confident in my ability to acquire new skills and knowledge. I am making efforts to understand bonds, risk calculations through books recommended here and elsewhere. Although intense, I don't find it particularly difficult. In parallel, I am pursuing a Master's degree in Statistics to advance my career so I know I can handle the Math (not the quant one, but I am not targeting to become a quant for now).

Would some here be able to advise me as to what skills/knowledge I need to demonstrate that I be considered for role of pricing developer and how? I discussed my aspiration with my boss but she gave a very cryptic answer, that you need to know the Math, Finance etc. but even she admits that it is often hard for her to understand quants. What side projects can I undertake considering technology demonstrations (I did one) do not interest the management (understandably so)?
 

Keith Tan

Active Member
i don't think your boss is a pricing developer, so he/she can't tell you exactly. the best thing of course is to ask a pricing developer directly. linkedin is a good tool for such investigations.
 

Prasnth

New Member
Hi,
I'm a programmer with 3 years of experience. I have some experience writing and maintaining R scripts. I am also very proficient in OO languages like Java, C#. I am thinking of pursuing an MFE degree in the US. What are the chances of my making a career in the
  • high frequency trading space
  • quantitative developer space
 

Shweta

Member
Todd Fahey - I am new to the field of Quant Finance, so please pardon me if I have misunderstood something here. I had a few questions about your article above:-

1. In the 1st paragraph, you mention about the kind of roles that MFE graduates generally get, but I noticed that "portfolio manager" (or any variant of it) was missing from this list. Can you talk about what is the way to becoming a Quant Portfolio Manager at a buy side firm ?

2. Under "Economics & Finance", you mention


In the world of quantitative trading, economics and finance classes are not important—other than for being a well-rounded professional at a macro level. Within the world of quantitative strategists, there is a chasm.
Does this mean that economics & finance classes are required *very much* for quantitative strategists, but *not so much* for quantitative trading ?

Thanks!
 

Andy Nguyen

Member
In the 1st paragraph, you mention about the kind of roles that MFE graduates generally get, but I noticed that "portfolio manager" (or any variant of it) was missing from this list. Can you talk about what is the way to becoming a Quant Portfolio Manager at a buy side firm ?
You don't become a PM right out of school. Maybe take a dozen years working your way from the bottom up and proving your ability.
 

Shweta

Member
I agree, but I have had people from my school join as "junior PM" right out of undergrad. I dont know those guys personally, so can't comment on how they managed it. And that is why I was asking...
 

physicist

New Member
Hello,
I am a Physics PhD., and have been working for 4+ years for NASA. I am very good at programming in C++, Python, root, etc. languages. I am also very good in simulations, modeling etc., performing them routinely in my projects. As an example, for some of my projects I model the regions in the sky described by 1M+ events with 100-200 parameters, and I handle each region one by one or 100+ sky regions simultaneously. So, I am very proficient in handling large data sets, parameterizing and fitting data with well-known models. I am considering leaving academia and I was wondering if the quant jobs would be a right career path for me, or if my skills would be relevant in this area. If so, what kind of preparation I need to do before applying jobs in this field.
 

Todd Fahey

Quant Recruiter
Hello,
I am a Physics PhD., and have been working for 4+ years for NASA. I am very good at programming in C++, Python, root, etc. languages. I am also very good in simulations, modeling etc., performing them routinely in my projects. As an example, for some of my projects I model the regions in the sky described by 1M+ events with 100-200 parameters, and I handle each region one by one or 100+ sky regions simultaneously. So, I am very proficient in handling large data sets, parameterizing and fitting data with well-known models. I am considering leaving academia and I was wondering if the quant jobs would be a right career path for me, or if my skills would be relevant in this area. If so, what kind of preparation I need to do before applying jobs in this field.
Give me a call and we can discuss. Thanks.

BTW - my info is as follows:

Todd Fahey
fahey@sheffieldhaworth.com
312 283 8355 W
312 385 0344 C
 

yihong dai

New Member
Hello
I am an undergraduate student pursing computer science and Mathematics degree in UW-Madison. For my future career, I am planning on doing high frequency trading. Now I am deciding between doing master in computer science and MFE program. To prepare for a career in Financial engineering, which option do you recommend ? It seems to me that MFE program is well structured and well-rounded in its multidisciplinary curriculum. But it came to me that master in computer science is suited for doing trading in the future. It is a hard decision to make for me.
 

Siddhant Sahu

New Member
Hello Todd,

Firstly, thank you so much for the valuable information that you've bestowed upon all the current MFE students and aspirants. I am a Mechanical Engineering student and an MFE aspirant.
Being from an engineering background, how probable are my chances for getting into a good MFE program. probably in some of the good universities that you've mentioned. What are the things that I could do at under-graduate level to build up a strong profile to be a strong candidate for this program. Also, is under-graduate research work a good boost in my profile for this program, since this program is very professional and industry oriented?
 

MNRC

Member
Thank you for this informative post. I am a currently a graduate student in the M.S. in Computer Science program at NYU/Courant. After taking a few courses I realized that I enjoy mathematics more than computer science. I will be taking Linear Algebra, Numerical Analysis I & II, Probability, and other math courses to round out my electives for the degree.

At this time I am very interested in roles in quantitative trading or trading that is mathematically oriented. What kind of companies should I apply to? Would the trading desk of an investment bank be the best place to start?

Is being older (almost 40) a significant barrier to being hired?

Thanks in advance!
 
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galaind

New Member
I'm scientific computing developer with 8 years of experience, mainly in the electronic design automation industry; Cadence Design Systems. Throughout my career, I developed/maintained; differential equation solvers, circuit simulators, placers, routers Most of these modules were in the range of 1M+ line of codes mainly in C++. The technical foundation Todd Fahey listed is very similar to what we do in our daily jobs. On the education side, I have a masters degree in ECE from Carnegie Mellon with emphasis on electronic design automation and machine learning.

- How feasible is it to land a good job as a quantitative trader/quantitative strategists? Will it be in the entry level? what is the average salary for similar profiles?
- Do I need to get any other degrees to switch to financial engineering?

Regards,
kgalaind
 

pacman

New Member
I'm scientific computing developer with 8 years of experience, mainly in the electronic design automation industry; Cadence Design Systems. Throughout my career, I developed/maintained; differential equation solvers, circuit simulators, placers, routers Most of these modules were in the range of 1M+ line of codes mainly in C++. The technical foundation Todd Fahey listed is very similar to what we do in our daily jobs. On the education side, I have a masters degree in ECE from Carnegie Mellon with emphasis on electronic design automation and machine learning.

- How feasible is it to land a good job as a quantitative trader/quantitative strategists? Will it be in the entry level? what is the average salary for similar profiles?
- Do I need to get any other degrees to switch to financial engineering?

Regards,
kgalaind
With that much experience, ability and education do you really need someone to tell you that you are qualified?
 

galaind

New Member
Thanks for your replay,

I was looking for more advice on the career. Will I be considered as entry level Quant because of my lack of financial knowledge?
 

MNRC

Member
Thanks for your replay,

I was looking for more advice on the career. Will I be considered as entry level Quant because of my lack of financial knowledge?
You sound highly qualified. Why not try applying for a quant position and see? I imagine the market will tell you better than anyone here whether you'll be seen as entry-level.
 

Priti

New Member
I want to apply for MFE Program. I have done my B.Com and PGPM in Finance. In what other area i need to be strong?
 
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