Thanks to Orkut! I got in touch with my childhood friend – Kumara Ganesh!! We were really close friends in school.. He joined IIT subsequently and I went to REC.. We completely lost contacts.. (Remember.. those were the days of no mobile & no orkut :-) ) We recently got in touch! Kumara Ganesh is now studying at Stanford doing his Quantitative Finance. We have compiled this short interview to give an introduction to this “rarely” pursued option – Quantitative Finance. Thanks a lot Kumar for your time..

Coffee With Kumar Ganesh

* Brief Intro about yourself..

Hi All, I am Kumaraganesh. I am currently pursuing my Masters in Quantitative Finance at Stanford University. Prior to joining Stanford, I worked for two years with Goldman Sachs in Technology. I completed my B.Tech in Energy Engineering from Indian Institute of Technology, Kharagpur. I also have a minor in Computer Science.

* What is Quantitative Finance..
The textbook definition is — Quantitative Finance broadly is about the Mathematical aspects of Finance. It is a study of the mathematical theories that are used to price and structure the various sophisticated financial instruments used by banks and hedge funds. Basically it is about using the principles of Stochastic Calculus, Probability distributions, Linear Algebra and monte carlo methods to model derivative trades. You can find out more about it at www.wilmott.com

* Err…that sounds like research.. so what are the job prospects for this field
There are four or five possible career paths. One is hard core quantitative research (called “quants” ) more like the R&D division of intel types, these guys are typically employed for fat salaries at investment banking firms to conduct research to evolve new mathematical models/methodologies. This is the typical career path for PhD guys. Masters students find it hard to break in to this path as this requires research experience.

Trading -> Typically they can be either quantitative /algorithmic traders or structurers in Sales and Trading divisions of banks. Just to back up a bit, a quantitative/algorithmic trader develops trading strategies that exploit the inefficiencies in the market to create wealth. A structurer typically builds the computational tools to model these trades. You can wiki/google to learn more about these specific career paths :-) . Salary and bonus wise trader gets more than structurer, but he also takes all the risk and is most likely to be fired first in case of a turmoil.

Quantitative Development–> This is basically a glorified programmer role.These guys basically develop robust and scalable implementations for the quantitative models that are created by the research guys. People with an IT background /strong coding skills find it easier to break in to this field. These types of jobs are more prevelant at Hedge Funds.

Portfolio Analytics and risk management –> These are opportunities in buy side(asset management)  firms Basically they can be the guys who design the mathematical tools to construct optimal portfolios / manage their risks.

*Wow.. Math and money, sounds cool but how do I know if this is the one for me
This is very important. While the upsides of becoming a quant are arguably pretty good, the fact is that this is a very niche field and can pigeonhole you. By this I mean pursuing an MS in QF is not like doing an MBA , where you can switch from finance to marketing after joining the course. So one needs to be sure as to this is what they like to do. The best way to test the waters is by actually jumping in to it. So you can get started with reading “options , Futures and Other Derivatives – John C Hull” . This book is like the bible of derivatives and is not too math heavy. It costs roughly 300 bucks and it is fairly a light read. Read it and find out if you like what you are reading. If you already have a bit of fin knowledge then you might find the first 4 or 5 chapters boring, so go straight to the 8th chapter and start from there. Ofcourse you could interact with a lot of people working in the industry and people who aim to (like me :-p) about this field and find out more. One word of caution/advice though, dont be too swayed by the monetary benefits, if you like what you do then the money will automatically follow. So it is very important that you actually have a bit of passion in this area.

Another common thing I come across is that most people think of this degree as an easy substitute for an MBA. The line of reasoning goes something like — a Foreign MBA is typically two years and costs a hell lot of money, while an MS in QF can be completed in 15 months.And both get to work side by side in the same trading desk. But the difference is that MBA caters to a much more diverse set of career paths than an MS in QF. Also, dont look for an immediate $150000 job upon graduation, especially in this current economic situation . MS in QF is a career choice and try to think of long term growth. In the long term you will make tons of money, but in order to do so you must really like this field. So yeah my basic advice is “DO YOUR HOMEWORK”

* Ok Ok..grandpa…so what do I need to get in to this field

Typically most programs stress on the following criterion:-
1) Relevant mathematical training i.e strong grades in Probability , Calculus, Differential Equations and Linear Algebra courses. If you come from an engineering background , then you are most likely to have done these courses in your first and second years
2) Coding skills –> It is almost impossible to get in to this field without some programming experience either in terms of coursework or work experience. C++ is the preferred language.
3) Financial Experience –> The MS in Quant Finance is a fairly niche professional program that caters to a specific kind of jobs. So most universities would want to find out if this is the career path that you wanna follow
4) Ofcourse stuff like GPA , GRE etc ..the higher the better :-p

* Hmm…sounds like I need to know a lot of stuff… but you were an average Indian IT guy.. how did you build your profile

Good question. I got started with the process pretty early, almost too early. I guess it was in October 2006 when I decided to app in quant finance. Just to give a bit more about my background. I had a GPA of 8.4 at IIT and A’s in all the required math courses and my B Tech project was related to probabilistic modeling. My GRE general test score was 1480(680 + 800)  and TOEFL was 110. So , in essence my profile was decent without being spectacular especially considering the fact that I would be competing with French applied math majors who have done stochastics since LKG (well ..almost). So, I felt giving the Math GRE could boost up my profile.Since the exam is held only once (in November) in India , I booked a centre at Nepal to give the exam on April 2007. I started preparing for the test simultaneosly while working fulltime. Meanwhile, I also felt some relevant research experience could further boost my profile.Thus, I spoke to a professor in IISc and started working on a project related to quantitative finance. My job was to implement one of the theory papers the prof was working on.

The Math GRE subject test is a pretty tough exam, especially for non-math majors, because it includes stuff like point set topology, group theory etc which are not taught to traditional engg grads. Also , it is a high scoring exam, out of 66 marks. You need score 60+ if you want to get above 90%ile. But for MS programs for non-math majors a score around the 75%ile is considered respectable. I got 77%ile in the test but felt very uncomfortable with my score , because I felt it would not boost what I already have in my profile. So I didnt send my scores to any universities other than the 4 you pick at the test time. (Stanford was one of them :-p).

Now that the math was taken care of, I wanted to prove my finance credentials. CFA Level 1 is a very good way to boost your profile this way, as CFA is very highly regarded in the US. But the exam requires a lot of preparation and I really had to take the date in June if I wanted to impress with a high score , as December will be too late. So in essence, I didnt take the exam. But I would highly recommend it to future quant aspirants. Even FRM is also pretty good.
Relevant websites http://www.cfainstitute.org/ and http://www.garp.com/frmexam/.

Instead, I took the NSE’s certification in Financial Markets(NCFM)-Derivatives module. This is a pretty easy exam , you can take it multiple times and it costs only 1000 bucks. It does look good on the resume, in the sense you can add it as another bullet point :-) Then came the usual stuff like SOP , Recos etc. Since Goldman was my main selling point, I took 2 reccos from my managers and one from my B Tech guide. I was ready with my applications by October end, so I had the opportunity to apply real early to all the schools. It helps, because most schools have rolling admits. And I had been thinking about my apps for too long, so I just wanted to get done with it as soon as possible.

* What are the best programs in this field

Thankfully in quant finance one does not really have to choose ones univs as there are only 10 – 11 good programs in the US. None of the programs offers any aid and on an average most programs cost around $50,000 (roughly 23 lakhs ) . So one must have this in mind. Also, since MS in QF is a professional program , there are limited opportunities to get RA /TA after coming here. Part time work is something one could think of , but really there is not much point wasting 20 hours a week to get $1000 a month, when the biggest expenses is the 9000 dollar tuition that you shell out every qtr.

In general the following univs offer the best MFE programs (note this is not a ranking)
University of California Berkley
New York University
Stanford University
Carengie Mellon University
Columbia University
Cornell
U Chicago
Princeton
U Michigan

You could go through www.global-derivatives.com to find out more about apping in quantitative finance and univ selection etc.

Specifically, in terms of job prospects programs offered by the B School are pretty good so in that category comes

MS in Computational Finance at CMU
Master of Financial Engg at UCB

Brand Name is also very important in wall Street
MS in Financial Maths at Stanford
MS in Mathematical Finance at NYU
MS in Financial Engg at Columbia
MS in OR (Financial Engg track) at Cornell

Locational advantage also helps to search for jobs in terms of that East coast schools are better.

Thanks a lot kumar for this detailed information.

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