Serge…I found all of the courses in econ to be very interesting. In terms of practically, definitely econometrics. Econometrics will actually get you a job if you’re good at it. However, macro and micro will provide you with the subtle skills. I would’ve taken more financial economics had I known i was going in the real world. The most useless yet most fun is problably Game Theory. the main industry that I know economist get hired frequently is the government. other then that, a finance/business/accounting degree will problably be more practical. Serge, the only advice i would strongly recommend about the CFA is “don’t believe the hype”. don’t underestimate your opponent ever but don’t let anybody intimidate you. Its just a test. I’m concerned though. Since you’re doing your masters, you should focus on that. You have the history of mankind’s intellectual endeavors to conquer. the CFA should be of trivial concern unless you’re absolutely certain that academia is not your type of fight.
apples and oranges kiddo. apples and oranges. i have already finished what you are setting out to do (MMath) about, well, a long time ago and have the CFA charter. there is no comparison between GRE/GMAT/Academia and the CFA. do the L1 and you will find out. SergeLang Wrote: ------------------------------------------------------- > Hey, > > That’s intense. The GRE is only 3 - 4 hours and > not all of the sections even matter (there is 1 > experimental section, but its not identified and > so you have to take all sections seriosully). > > Further, half of the GRE is more of a “basic > skills” (quant) and the verbal is really only > hinges on 1. Reading comprehension 2. command of > large “graduate level” vocabulary, the rest of the > verbal section is pretty easy (analogies and > antonyms) assuming you command the first two. > > I still have 1 more exam to take (next year) for > my mathematics and I’m planning on taking the GMAT > middle next year (suppodly I have heard if you do > stellar on the GRE, you will do stellar on GMAT > with some little practice). I figure I might as > well get the GMAT out of the way, even if I don’t > decide on MBA (or don’t do it at all ), the scores > will be good for 5 years. > > How is the strategy for the CFA? On the GRE, it’s > much about speed and accuracy. You have to be able > to do mental arithmetic very fast to get perfect > or close to perfect in the math section. However, > the math is very simple, and mental arithmetic is > not a problem with me. I have heard the CFA > affords one a calculator. > > On the GRE the expected speed is about 1 1/2 min > per question. Do you guys determine any optimal > speed in your practice? Is the weight per question > equivelent? Or are there certain questions > (perhaps placed earlier or later on the exam) that > are more point-heavy? > > Thanks Again! Also, just curious, whence you > recieve your CFA, where do you expect to work (if > this is not a privvate question)? > > Oh also, what are the top 10 - 15 “companies” in > this industry? Is there a list I can access > online?
Hey MC Mario! Thank you for telling me about your life experience. I find this most benedictory. In your opinion, did you find that you were happy with your decision to pursue the CFA and going private? As opposed to continuing on in academia? Hey FrankArabia! Thanks again for your input! I agree, I rarely underestimate my “opponnet” be it classmates, research assistance, or exams. In any evident, there is a wonderful feeling that arises when one figures out that he has “overprepared.” Although i’ve also “underprepared” many times and that too is an intrestsing feeling, especially adrenaline rush. Perhaps in some sense, it’s more intresting to “wing” something and then suceed. As for investment banking, I purused the chapters in Bodie about the classical theory of portfolio optimization and I find this the most intresting. I got ahold of Markowitz original paper (which ends up being a 300 page Wiley book published in the 50s). This facet of the investment process seems the msot intresting of those that I have encountered thus far. Alot of “advertising” part of the process seems sort of superflous. I do wonder though, alot of this optimizzation, and risk managment in my opinion, could probably be automated. In fact, I talked it over with my friend whose in Theoertical CS, just shooting the breeze, it seems sort of curious why alot of this industry isn’t automated. I believe most of the data is now digitial with the NASDAQ correct? (or all?) and one needn’t scale the models arbitrarily so no issue with practial computability would occur, has anyone ever attempted to use automation in the investment process? On a full scale? Oh also, do you know any names of “blue ribbon” journals in the theoretical finance field? I’d be intrested to see what is going on at the frontiere (even if I won’t be able to understand it, one can get an idea based off of the abstracts usually). Thanks!!!
If you want to know about the IB industry, then read the book “Monkey Business” by John Rolfe and Peter Troob. It paints and interesting picture.
“Wall Stree Meat” by Andy Kissler was a fun book to read too.
Serge, your question of why portfolio optimization raises a lot of good questions. I think others on here are more suited at answering this question since they actually work in that arena while I at most just study it from a theoretical point of view. Nonetheless, here is my take. Optimization cannot be just automated in the sense where you write a program and everything is taken care of for you. The reason is closely related to why economic theory breaks down in the real world and it is a weakness of economic and social theory. i can see if i can find my thesis. its essentially talks about what you’re talking aobut but its put into the Economics of Conflict setting.
Hey Everyone! Thanks for the book suggestions, I shall purchase/borrow them whenever I have time. To FrankArabia: But isn’t there already some degree of automation that occurs. I believe there is some theorem (which does hold emperically, according to Bodie) that shows that passive management of funds will yield greater like 80% of active funds? Bodie is not a very sophisticated text so he does not go into much of the theoretical underpinnings for this phenomonon and instead has alot of text to explain this. I may look into Sharpe to see if he has anything more pellucid on the subject. I am finding this subject of large funds management very intresting. After I have worked through some of the problem sets in Bodie and Sharpe, I might purchase more in-depth texts on it. Would you have any suggestions? I know Springer has a Quant. Financing Text series and some of their undergraduate mathematics texts deal with quant. financing. Also: I’ve been reading these forums and I havn’t seen too many people talk about Quant related jobs. I know that there are a few Quant positions in IB field is there not? What job titles do these people hold and how does one begin to attempt to occupy one of these positions? Thanks!
SergeLang, Having taken both the GMAT and CFA exams, I can say there really is no comparison. The GMAT is about intelligence, the CFA is about perseverance and dedication. I know lots of real smart people (ivy league grads) who didn’t make it through the CFA program b/c they simply didn’t put in the time. The problem isn’t the difficulty of material, it’s the volume. Also, if you’re looking for a quant role, I’m not sure i-banking is it. From what I gather, many i-bankers pride themselves on being generalists–they understand strategy but they’re not mgmt consultants, they understand fin stmts but they’re not accountants, they understand the relevant laws but they’re not lawyers, etc. And to move up in i-banking, you have to be really good at sales–essentially convincing CEOs to hire your firm. But nothing gives you credibility like being a former i-banker, so if you can get in, it’s most likely worth it. But you might also think about a buyside quant shop like BGI, DE Shaw, or Farallon. Also, a great, non-sensational book about i-banking is The Accidental Investment Banker. Super good. The author has a stanford mba and yale law degree.
Hey Naturallight!!! Thanks for your book reccomendations! I love reading and I have a relatively light load this semseter (I’m sure i’ll crush my finals) so I’m going to take you guys up on reading some of these books. Thanks for the advice on occupational choices. To me, this may seem odd to you guys, but many of these words are sort of neo-logisms. It is still turbid (to me) what a I-Banker is or what “Quant” is or what “Back Room Operations etc.’” are. I suspect, once I get a hold of the parlance, I"ll be able to be more cognizent in my planning. As it is now, I’m not sure what I want to do, I"m just enjoying my classes and doing some research. Just curious, if I was lucky/good enough to get some nontrivial research in Mathematics (Blue-Ribbon Publication material) would that help in this sort of industry ?(Quant, IB etc.) Or are such things not very valued? I have heard of DE Shaw, I know some Putnam fellows are working there as well as a fields medalist. Very impressive staff. As for the CFA, yes, 260 problems is certainly formidable. However, I have slugged it out before, the night before my GRE exam, I was so nervous that I couldn’t sleep, I had the exam at 12:30 that afternoon, I went in there with no sleep for 34 hours, I pulled off a perfect quant (which is pretty normal for sciences people) and 690 verbal. I was a bit dissapointed wiith my verbal, I believe I have a pretty decent vocabulary and in offical ETS powerprep practice I had recieved 720 and 730 respectively on both tries. But I was happy that I got that much in my state (concentrating on reading passages while your half dead is a very stressful task :-)) That experience was good and bad for me. Bad cause I felt I could have done better, although the score I did recieve is not bad, but good cause I really no longer fear standardized exams. If I do pursue the CFA, I will certainly give it the attention it deserves. I like learning new things so I figure that the motivation will be there. But just your opinion naturallight: If i were to complete all 3 exams at the end of my masters, would it even look good on my app? (assuming I did choose industry at that point?) Cause i know you don’t get the CFA designation without 4 years of relevent work, so I would not be a “CFA” yet. Do you have any opinions on this? Also, do you believe I should try to get some summer internships while I’m in masters? Oh and for next semseter, my department is offering Options Theory and Stochastic Calculus, I haven’t read the descrpitions and prereqs for these courses yet, but would it be advisable to take these two couses (and is it wise to take them simultaneously? I’m hoping that they may be able to "double count for my finance and math… but if not whatever) Thanks!
Randall - Serge Lang was a famous iconoclastic mathematician who taught at Yale for years. He became famous throughout academia when he opposed the nomination of some “mathematical” anthropologist to the National Academy. Serge - Take it easy. There are lots of exciting things to do in life and planning your career like this is just a way to be unhappy. On the happiness in life scale, IB’ers aren’t really very high up; they just make lots of money. As for the automation of portfolio and risk management: The first thing is that if you can make a $59 computer program that can beat Grandmasters playing on a $1200 computer, the limits of “automation” are very far out there. But by automating risk management, I suppose you mean market risk management which is a smaller part of risk management than is usually supposed. Some points: 1) Risk management and portfolio management ought to be automated. I think any decent shop should have some overall automated way of looking at their portfolio that should be flexible and be associated with some trusted brand name (e.g., RiskMetrics, SunGard, Algorithmics, etc). The more plain vanilla the portfolio, the better this works. Note that there is just not anything more plain vanilla than an S&P futures contract and these have moved 22 sigma (or whatever) in a day. 2) Modelling securities is never as clean as anybody supposes until they try it. For example, take a generic convertible bond which is really pretty plain vanilla. Your mission is to measure its sensitivity to S&P changes. You can: a) Take historical prices of the bond and regress them on the S&P b) Start with prices for similar moneyness options and value the warrant in the convert. Then the sensitivity to S&P is something like delta*beta. c) Start with CDS spread, value the bond and take out the warrant value from that end. d) Try to decompose movements of the price of the convertible bond directly into vol/equity/credit factors using some statistical technique (noting that these are far from orthogonal). and probably any number of other things. Think they give you the same answers even for a plain vanilla convert? 3) Factor decomposition is one of the world’s unsolved problems. A really good goal of risk management is to know what factors impact your portfolio (and then maybe you can do something about controlling their impact). Unless you are willing to heap on constraints that aren’t true (see that Markowitz book which is quite dated btw), this problem is impossible to solve in the general case. Automation doesn’t really help this unless the person doing the analysis is so unskilled that general automation is better than that person doing the analysis (I can’t tell you how much social science reesarch is silly but at least readable because of things like Varimax factor rotation). 4) Securities are non-stationary and have more complex distributions than is usually assumed If you believed that security prices were just some multidimensional Ito process or something and then you can estimate covariances, etc. this stuff would be pretty easy. They aren’t but the math is nice and you should know it. I’ve been looking at this stuff for years and the longer I look at it the less clear I get. Among other things, I don’t know if I believe that S&P vol is finite and I don’t know how to price a European S&P call option. Most undergrads I have taught are pretty sure about those two things. 5) The world of portfolio and risk management is comprised of meta-theorems that aren’t true. In mathematics, we start with assumptions and then develop theorems that are exactly consistent. Since the assumptions aren’t true (and nobody smart believes they are true), then when you use these theorems you rely on some meta-theorem that says If the assumptions are more or less true, the conclusions are more or less true. Meta-theorems are a really good way of thinking, even in mathematics (e.g., Littlewood’s 3 principles have helped me greatly), but they can take you down in a ball of flame too. and a bunch more stuff I’m too lazy to write now.
naturallight Wrote: ------------------------------------------------------- > SergeLang, > Having taken both the GMAT and CFA exams, I can > say there really is no comparison. The GMAT is > about intelligence, the CFA is about perseverance > and dedication. I know lots of real smart people > (ivy league grads) who didn’t make it through the > CFA program b/c they simply didn’t put in the > time. The problem isn’t the difficulty of > material, it’s the volume. > > Also, if you’re looking for a quant role, I’m not > sure i-banking is it. From what I gather, many > i-bankers pride themselves on being > generalists–they understand strategy but they’re > not mgmt consultants, they understand fin stmts > but they’re not accountants, they understand the > relevant laws but they’re not lawyers, etc. And to > move up in i-banking, you have to be really good > at sales–essentially convincing CEOs to hire your > firm. > > But nothing gives you credibility like being a > former i-banker, so if you can get in, it’s most > likely worth it. But you might also think about a > buyside quant shop like BGI, DE Shaw, or Farallon. > > > Also, a great, non-sensational book about > i-banking is The Accidental Investment Banker. > Super good. The author has a stanford mba and yale > law degree. “Accidental Investment Banker”, still have few chapters left, great read!! Fun, fun, fun!!
>Thanks for the advice on occupational choices. To me, this may seem odd to you guys, but many >of these words are sort of neo-logisms. It is still turbid (to me) what a I-Banker is or what >“Quant” is or what “Back Room Operations etc.’” are. I suspect, once I get a hold of the parlance, >I"ll be able to be more cognizent in my planning. To better get a sense of various careers, try looking at the career club webpages of various MBA programs. Most schools have a finance club, investment club, etc. (I think NYU even has a S&T club). MBA programs are filled with career changers, so these clubs usually give some pretty basic, yet detailed info about what it’s like to work in a particular field.
Hey Joey DVivre! Thanks for your input! One quick note, Serge Lang didn’t prevent a “Mathematical Anthropologist” out of the NAS, he prevented the pseudo scientists monkey, Samuel Huntington from getting in the NAS (of “Clash of Civilizations” fame), and rightfully so. About your comment about IBs, were you an IB? Did you find it intresting? Are you still in private industry? Also did you study mathematics? If the the former statements are true, what type of mathematics would you say is the most useful in the industry. I myself, have had an education that was highly focused in the foundations and Algebra (my department had a heavy bias in these fields and it (unfortunatly?) reflected in the undergraduate curriculum. I did take a year of Analysis, and I’m taking the first year graduate analysis this year. I like Algebra the best, but it seems the subject has not been utilized at all in the real world, except a little group theory in chem. I havn’t started my financing curriculm yet, but do you thikn I suld take Options Theory and the Stochastic Calculus class? How is financial mathematics? Is it similiar to pure math with the structure of the courses (definition/theorem/proof)? On your comment about planning my career, how would you recommend I go about planning it? With regard to your comment about measuring the bond’s “sensitivity” w.r.t the S&P 500, does the theory address the various metrics? Is there any argument if any of these metrics are degenerate ? Or if any of them are the most optimal? Again I know next to nothing about the theories so far, so I’m just trying to get a grasp of the theoretical situation so far. The factors decomposition issue, again I’m totally ignorant about the theories at discussion but is the problem with this issue emperical ? is this a major open problem? Are there any books that deal with it and that presents the issue formally ? (Could you point me to such publications or articles? Thanks!) I havn’t heard of the term meta-theroms in any of my classes, is this similiar to formal fuzzy logic? I have heard of these, they were mentioend in passing in my first mathematical logic course by the prof after he discussed deductive calculis, but I got the feeling that no one int he field took them seriously. Are there books that you can point to that deal with meta theorems? Your post, is certainly the most insightful thus far (as well as everyone else too!) but I do appreciate and can tell that you have dealt with these issues in some profunditude. So in your opinion, what is the major issue with Quantitative Finance w.r.t. “fitting” it with empericals? In Economics, we assume the neoclassical axioms (which seem to be just built upon basic notions of posets) and of course the “marginal” ideas which sort of form the basic utility theory. However, although i never felt that they 'modeled" reality very well, they do form bounds of behavior. Since many of the results deals with optimals. We might not be able to say that someone will indeed behave in this or that manner, but we can say that they will not be able to reap the “full” benefits competetively if they dont and thus in the long run, that sort of behavior wll be driven out (the Evoltuionary hypothesis). A friend of mine who took a class under a well-known researcher in Game Theory, states that many of the ‘big-shots’ currently believe that behavior of individuals cannot change in the long term and that what happens is that certain individual types are merely weeded out. They have rejected thee notion of learning and adaption within individuals (which sort of corresponds with genetic evolution’s notion of non-individual adaption ). Are the issues that plague Q. Finance similiar to the neo-classical theory? In a sort of analogy they are providing “bounds” but the bounds are “loose?” Thanks again for your input!! To Naturallight! Thanks for your input again. I shall hunt down my schools career club and sit in in a meeting. Just curious, are you currently a IBanker? Or a Financial Analyst? Are those two the same thing? Thanks!
Nah, I’m an MBA student. There’s constantly i-banking workshops and presentations here, and although I’ve gone to a few of them, I’m targeting a buyside equity research position.
natural if i may ask. what school do you go to? top 20? is it easy to get ibanking jobs out of MBA programs? i’m asking because i’m interested in maybe attending an MBA in a few years time as well.
yeah, I don’t want to say the school name, but it’s pretty decently ranked. We’re not as finance-oriented as some other schools, but there’s still a ton of ibanking recruiting. It’s hard to say, though, if it’s *easy* to get into ibanking. Areas like VC, PE, HF, and tech (Google and Apple) are super hot right now, so that helps reduce some competition. And the banks usually recruit pretty regularly, so there’s usually a decent number of positions (compared to the buyside, where even big shops like Fidelity don’t hire that many people each year). But it’s still tough, you have to have a good blend of geeky finance and smooth salesmanship. ibanking is all about prestige, so obviously it helps if you can go H/S/W.
Serge, this should give you a good overview of different jobs in finance http://www.efinancialcareers.com/images/fuseads/inhouse/cifm_us.pdf
This publication is a gem volkovv, thank you very much!!