Which carreer is better ? actuary or FE ?
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DominiConnor
Quant Headhunter
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To a significant degree the two directions are merging, certainly there are people of both types in both camps.
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Do you think they are paid the same ? Some say actuaries are better paid and can evoluate steadily and certainly..
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Going into a career solely by its pay is potentially a costly mistake. I have encountered a few people in MFE program from actuary background. The common theme I heard is that they found it boring, tedious or not challenging. Is it their way to say they want more money, I don't know.
My suggestion would be to find out exactly each career entails. Financial Engineering is board and you can be anyone from risk manager to trader, portfolio manager, quant, developer. Each role definitely has its own excitement, challenges and salary potential.
My suggestion would be to find out exactly each career entails. Financial Engineering is board and you can be anyone from risk manager to trader, portfolio manager, quant, developer. Each role definitely has its own excitement, challenges and salary potential.
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the problem is that you can't always hope to find a job in portfolio manager field just with an MFE degree. I think they seek PhDs in finance for this kind of jobs.I can understand why people from actuary background don't find a lot of motivation in FE, maybe they didn't expect to find themself coding C++ programms all the day, maybe more than doing anything else
Quants vs. actuaries
Soapbox: Paul Wilmott: Actuaries versus quants
Paul Wilmott says quantitative egotists could learn much from actuaries
1 Oct 2008
Those working in the fields of actuarial science and quantitative finance have not always been totally appreciative of each others' skills. Actuaries have been dealing with randomness and risk in finance for centuries. Quants are the relative newcomers, with all their fancy stochastic mathematics. Rather annoyingly for actuaries, quants came along late in the game and thanks to one piece of insight in the early 1970s completely changed the face of the valuation of risk.
The insight I refer to is the concept of dynamic hedging, first published by Black, Scholes and Merton in 1973. Before 1973, derivatives were being valued using the 'actuarial method', in a sense relying, as actuaries always have, on the Central Limit Theorem. Since 1973 all that has been made redundant. Quants have ruled the financial roost. However, this might just be the time for actuaries to fight back.
Stopped working
I am putting the finishing touches to this article a few days after the first anniversary of the 'day that quant died'. In early August 2007, a number of high-profile and previously successful quantitative hedge funds suffered large losses. People said that their models "just stopped working". The year since has seen a lot of soul searching by quants — how could this happen when they've got such incredible models?
In my view, the main reason why quantitative finance is in a mess is because of complexity and obscurity. Quants are making their models increasingly complicated, in the belief they are making improvements. This is not the case. More often than not each 'improvement' is a step backwards. If this were a proper hard science then there would be a reason for trying to perfect models. But finance is not a hard science, one in which you can conduct experiments for which the results are repeatable. Finance, thanks to it being underpinned by human beings and their wonderfully irrational behaviour, is forever changing. It is, therefore, much better to focus attention on making the models robust and transparent rather than ever more intricate.
As I mentioned in a recent blog, there is a maths sweet spot in quant finance. The models should not be too elementary so as to make it impossible to invent new structured products, but nor should they be so abstract as to be easily misunderstood by all except their inventor (and sometimes even by them), with the obvious and financially dangerous consequences. Our goal is to make quant finance practical, understandable and, above all, safe.
When banks sell a contract they do so assuming it is going to make a profit. They use complex models, with sophisticated numerical solutions, to come up with the perfect value. Having gone to all that effort they then throw it into the same pot as all the others and risk-manage en masse. The funny thing is they never know whether each individual contract has "washed its own face". Sure they know whether the pot has made money, their bonus is tied to it. But each contract? It makes good sense to risk-manage all contracts together but not to go into such obsessive detail in valuation when ultimately it's the portfolio that makes money, especially if the basic models are so dodgy. The theory of quant finance and the practice diverge. Money is made by portfolios, not by individual contracts.
A respect for risk
In other words, quants make money from the Central Limit Theorem, just like actuaries, it's just that quants are loath to admit it! Ironic.
It's about time that actuaries got more involved in quantitative finance and brought some common sense back into this field. We need models people can understand and a greater respect for risk. Actuaries and quants have complementary skill sets. What high finance needs now are precisely the skills that actuaries have, a deep understanding of statistics, an historical perspective, and a willingness to work with data.
Soapbox: Paul Wilmott: Actuaries versus quants
Paul Wilmott says quantitative egotists could learn much from actuaries
1 Oct 2008
Those working in the fields of actuarial science and quantitative finance have not always been totally appreciative of each others' skills. Actuaries have been dealing with randomness and risk in finance for centuries. Quants are the relative newcomers, with all their fancy stochastic mathematics. Rather annoyingly for actuaries, quants came along late in the game and thanks to one piece of insight in the early 1970s completely changed the face of the valuation of risk.
The insight I refer to is the concept of dynamic hedging, first published by Black, Scholes and Merton in 1973. Before 1973, derivatives were being valued using the 'actuarial method', in a sense relying, as actuaries always have, on the Central Limit Theorem. Since 1973 all that has been made redundant. Quants have ruled the financial roost. However, this might just be the time for actuaries to fight back.
Stopped working
I am putting the finishing touches to this article a few days after the first anniversary of the 'day that quant died'. In early August 2007, a number of high-profile and previously successful quantitative hedge funds suffered large losses. People said that their models "just stopped working". The year since has seen a lot of soul searching by quants — how could this happen when they've got such incredible models?
In my view, the main reason why quantitative finance is in a mess is because of complexity and obscurity. Quants are making their models increasingly complicated, in the belief they are making improvements. This is not the case. More often than not each 'improvement' is a step backwards. If this were a proper hard science then there would be a reason for trying to perfect models. But finance is not a hard science, one in which you can conduct experiments for which the results are repeatable. Finance, thanks to it being underpinned by human beings and their wonderfully irrational behaviour, is forever changing. It is, therefore, much better to focus attention on making the models robust and transparent rather than ever more intricate.
As I mentioned in a recent blog, there is a maths sweet spot in quant finance. The models should not be too elementary so as to make it impossible to invent new structured products, but nor should they be so abstract as to be easily misunderstood by all except their inventor (and sometimes even by them), with the obvious and financially dangerous consequences. Our goal is to make quant finance practical, understandable and, above all, safe.
When banks sell a contract they do so assuming it is going to make a profit. They use complex models, with sophisticated numerical solutions, to come up with the perfect value. Having gone to all that effort they then throw it into the same pot as all the others and risk-manage en masse. The funny thing is they never know whether each individual contract has "washed its own face". Sure they know whether the pot has made money, their bonus is tied to it. But each contract? It makes good sense to risk-manage all contracts together but not to go into such obsessive detail in valuation when ultimately it's the portfolio that makes money, especially if the basic models are so dodgy. The theory of quant finance and the practice diverge. Money is made by portfolios, not by individual contracts.
A respect for risk
In other words, quants make money from the Central Limit Theorem, just like actuaries, it's just that quants are loath to admit it! Ironic.
It's about time that actuaries got more involved in quantitative finance and brought some common sense back into this field. We need models people can understand and a greater respect for risk. Actuaries and quants have complementary skill sets. What high finance needs now are precisely the skills that actuaries have, a deep understanding of statistics, an historical perspective, and a willingness to work with data.
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Hello,
I have been considering taking the actuary exams while I obtain work experience and then move off into the MFE program. I am not sure if this is a good idea. Also if I go down this path I am not sure if I should pursue FCAS (property and casualty) or FSA (life and health) - both model risk but from a different perspective.
I would like to get some feedback - considering the recent crisis. The article mentions "It's about time that actuaries got more involved in quantitative finance and brought some common sense back into this field." Also on the SOA website they have been trying to create A Partnership Between the Academic Community and the Actuarial Profession.
So considering recent events, would pursuing risk from an Actuary perspective and then obtaining the MFE be of value? :-k
I have been considering taking the actuary exams while I obtain work experience and then move off into the MFE program. I am not sure if this is a good idea. Also if I go down this path I am not sure if I should pursue FCAS (property and casualty) or FSA (life and health) - both model risk but from a different perspective.
I would like to get some feedback - considering the recent crisis. The article mentions "It's about time that actuaries got more involved in quantitative finance and brought some common sense back into this field." Also on the SOA website they have been trying to create A Partnership Between the Academic Community and the Actuarial Profession.
So considering recent events, would pursuing risk from an Actuary perspective and then obtaining the MFE be of value? :-k
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Yes - anywhere from 4-6 yrs, mainly because of the study time and on avg 2 exams a yr if you don't fail any and things go smoothly - 8 total exams for CAS Fellowship.
alain
Older and Wiser
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Isn't Actuarial Science a very well paid field in itself?
I can see the value on passing all the exams but I'm not so sure if it is worthy if what you want to do is an MFE. However, if you are looking to explore that field and then try to break in Quant Finance, more power to you since you are going to be very well prepared.
I can see the value on passing all the exams but I'm not so sure if it is worthy if what you want to do is an MFE. However, if you are looking to explore that field and then try to break in Quant Finance, more power to you since you are going to be very well prepared.
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That is what I was thinking. I have had a very tough time finding direct related work experience in Miami. So I figured while I am stuck here I might as well refresh my financial background and improve on math and probability. Plus the 3rd exam (MFE) is related to derivatives and the math behind it. ---- I really love those topics.
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Balderdash. The math has already been done.
My manager put it bluntly during my internship (which is why I have no regrets wanting to become a quant):
The quantitative exams (read: until you get your ACAS or ASA) are literally hoops to jump through, now. All the math has long been done and programmed into excel macros.
Therefore the real exams are the ones that have you doing the actual actuarial work--coming up with pension plans for people who still see money as something that buys stuff rather than as a way to keep score, insurance plans with different nooks and crannies for those who get sick so often that a co-pay is a massive issue, etc...
So if you're entertained by watching water boil, well...all the more power to you.
At least you get a relatively secure and healthy paycheck, so the rat race you'll be running will at least be in a bigger wheel.
Unfortunately, I have bigger aspirations, and would probably go nuts if I ever had to give up my numbers for a pure business profession.
My manager put it bluntly during my internship (which is why I have no regrets wanting to become a quant):
The quantitative exams (read: until you get your ACAS or ASA) are literally hoops to jump through, now. All the math has long been done and programmed into excel macros.
Therefore the real exams are the ones that have you doing the actual actuarial work--coming up with pension plans for people who still see money as something that buys stuff rather than as a way to keep score, insurance plans with different nooks and crannies for those who get sick so often that a co-pay is a massive issue, etc...
So if you're entertained by watching water boil, well...all the more power to you.
At least you get a relatively secure and healthy paycheck, so the rat race you'll be running will at least be in a bigger wheel.
Unfortunately, I have bigger aspirations, and would probably go nuts if I ever had to give up my numbers for a pure business profession.
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I read on this forum actuaries get paid better long term. Regardless it's not about that. My goal / target is the MFE but standing at a point with lack of direct work experience I figured I would do something in the mean time to keep my fresh. How much of the MFE material over laps with the actuary material? Or maybe the better question - what will I learn from the actuary exams that I can apply while in the MFE program?
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Maybe. It's also a more established profession, and hence more secure. It's also a more well-defined profession.
Are you sure examinations are the best way to do this (over say revising some book and getting your hands dirty with some raw coding)? And if yes, have you considered the possibility of other examinations?
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As my manager said, and from what I saw in my actuarial experience:
There are NO derivatives in the workplace. All of these probability/financial topics you see on the first several exams are all NEVER EVER used.
CAVEAT EMPTOR.
Trust me, I loved that stuff, too.
And then saw that it was completely gone from the working field.
Quants get paid MUCH better than actuaries, if you can actually find a quant job. For instance, the Renaissance Quants, I calculated, got paid $10m on average, even if you factored out the big guy (Simons).
There are NO derivatives in the workplace. All of these probability/financial topics you see on the first several exams are all NEVER EVER used.
CAVEAT EMPTOR.
Trust me, I loved that stuff, too.
And then saw that it was completely gone from the working field.
Quants get paid MUCH better than actuaries, if you can actually find a quant job. For instance, the Renaissance Quants, I calculated, got paid $10m on average, even if you factored out the big guy (Simons).
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