Top 10 Things Practitioners Really Want from Financial Engineers

[QuantNet]

By TERI GESKE

Without a doubt, the financial crisis has rocked the foundations of the financial sector and its impact on the job market lingers. But despite the dire predictions that “things will never be the same”, and the accusations being leveled at “models that failed”, this may well be a Golden Era for financial engineers (for the sake of brevity, “quants” ). Sell-side and buy-side firms’ models are being examined and re-examined; asset managers are searching for new sources of alpha in almost any possible nook or cranny; the growth in high frequency trading makes data analysis skills even more valuable, and as any seasoned practitioner knows, while new regulations can be tedious they can also lead to great innovation and creativity. So, new ideas from smart people with good math skills are as valuable now as they have ever been. To top it all off, the availability of Internet-based forums where quants can discuss ideas, ask questions and find relevant research (not to mention job postings) can make a quant career more collaborative and more intellectually satisfying than ever before.

This is all good news if you are pursuing a degree in financial engineering. Of course, while there are great opportunities for quants going forward, you will have a lot of competition for desirable jobs. If you are wondering how you can stand out when interviewing, here is a practitioner’s perspective on the Top 10 things firms really want from a quant.

• Strong math and technical skills. That’s a given.
• Creativity in problem-solving. As an experienced practitioner you can expect me to have knowledge of the markets and the asset classes our firm or desk handles, and a firm understanding of our clients’ needs, but I probably do not have the arsenal of quantitative tools you posses to tackle the problem, the opportunity or the challenge that I have come to you to discuss – that’s why you’re here. I don’t want to tell you how to approach a problem (and probably couldn’t if I wanted to) – I need you, as a quant, to use your skills and knowledge of mathematical modeling, statistics, engineering concepts, etc., to suggest relevant, useful, practical ways of approaching the problem and evaluating the solution.[prbreak][/prbreak]
• Passion. Genuine interest in, and excitement about, the markets. I want to hear your original ideas, not just have you work on ideas I bring to the table. I need you to brainstorm with me. Tell me about research you’ve read that generated an idea that you can’t wait to investigate, to help our firm develop a new product, improve a model we’re using, or show our clients that we are thought-leaders in a particular area.
• Willingness to work with (instead of butt heads with) business realities. Sometimes we cannot do things the way an academically pure approach would dictate – it might not be consistent with risk tolerances or clients’ preferences, or the cost might be too high, or it might take too long to implement. I need you to suggest ways to modify your “ideal” approach when business needs specify that your ideal isn’t feasible. I know it might not be perfect, but we may need to make compromises – then I need you to tell me at what point the proposed modifications make your original idea unworkable.
• Ability to communicate complex concepts in non-quant lingo. Practitioners have varying levels of quant skills themselves, some quite substantial, but in presenting an idea, or research results, focus on explaining what, why and how, in “plain speak”. Don’t cover your Powerpoint slides with equations – you should be able to explain and defend your ideas without them. Also, remember that a quant that I can bring to client meetings because he or she is able to explain things to the client at the “right” level while still appearing smart and “quant-ish”, is extremely valuable to me.
• Strong convictions, but not stubbornness. It is important that you believe in yourself and your abilities – I need to trust that you will defend your ideas and your results because you believe in them! However, no one wants to work with a quant who tries to intimidate others and needs to be right all the time. I assume that you want to work with other highly intelligent people – that means being open-minded. We don’t want to see a Battle of the Quant Egos at our firm.
• Ability to apply your knowledge and interpret your results. You have taken quantitative courses, and I assume your financial engineering program taught you about derivatives, equilibrium term structure models and the like, but can you put it all together? Can you apply these concepts to the markets and interpret the results you obtain? The ability to synthesize information rather than just applying formulas is critical.
• Knowing when to back away and try another tack – In your financial engineering studies, when your professors taught you about data analysis techniques or model fitting, did you also learn that financial time series data is often poorly behaved and incomplete? What if your data simply doesn’t fit the model the way you thought it would or should? How do you cope with this? I need to know I can rely on you to admit to yourself that your original idea isn’t working as planned, consult with your quant colleagues, figure out another approach and move forward.
• Confidence. You can’t possibly know about every different type of asset, or term structure model, or portfolio strategy and I don’t expect you to, but I want to see you are confident in your ability to tackle a wide variety of problem, that you haven’t pigeon-holed yourself. It is a cliché, but I want to see that “can do” attitude.
• Non-defensiveness, with a commitment to the best outcome. This is so important, I cannot overemphasize it. Be willing to open your work to scrutiny because you truly want the best model, the best analysis, and the best implementation to be chosen, whether that turns out to be your version or not. Practice a bit of Buddhist detachment when presenting your ideas – cooperation and the supportive sharing and review of ideas are critical to any firm’s success.

A career in quantitative finance can be exciting, creative, intellectually challenging and financially rewarding. It is up to you to turn that potential into a reality. Good luck!

Author’s note: Thank you to the UCLA Anderson MFE Industry Advisory Board members for their input.
About the author: Teri Geske joined the UCLA Anderson MFE Program in 2009 as a Lecturer and Executive in Residence. She oversees the MFE Applied Finance Project, the capstone of the MFE program. In addition, she applies her financial industry expertise in advising prospective and current students in their career development strategy. Prior to joining the MFE Program, Ms. Geske worked for 20+ years in the financial services industry.

 

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Good Topic. Thank you