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Quantitative Finance, Stanford University

22 February 2009 36 Comments

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.

Comments

comments

36 Comments »

  • Ashutosh Didwania said:

    Good one…this interview was indeed pretty informative

  • Ashutosh Didwania said:

    Good one…this interview was indeed pretty informative
    P.S. – Sorry, forgot to tell you great post!

  • Sreekanth said:

    Hi Sundar… Long time we heard from Ganesh….nice to see he is thoping in research… hope he helps us out of this crisis 🙂

    Kudos

    Cheers
    Sreekanth Kidambi

  • krishna said:

    Is there any chance of doing that course in India or any Institutes conducting this course.

  • Kumaraganesh said:

    Hi Krishna,
    From what I know this course is not offered onsite in India by any Institute. However, there is a distance learning option called “CQF” Certification in Quantitative Finance which is a London based Certification in Quant finance offered by Wilmott’s institute. Try googling it out for more details.
    IISc had planned to start an MSc in Quant Finance but I think it is still in incubation stage.
    Kumaraganesh

  • krishna said:

    Thanks kumaraganesh. I googled about that and came to know that there is 15 week course offered.

  • Vatsala said:

    Woah! Its really nice to know about Kumaraganesh and about Quantitative Finance. Earlier I never knew that such a field of work existed.
    Way to go Kumaraganesh!
    and
    Great work CWS! 🙂

  • Madhavan Pillai A said:

    Very enlightening!!!

  • neel said:

    Hi,

    How do you rate CQF program as compared to MFE program. Are they any MFE program available for distance learning?

    Thanks & Regards
    neel

  • Asha said:

    Very informative!!!

  • shakeel said:

    good post…someone has email contact for kumaraganesh…wanted to ask few more queries…thanks

  • Govardhan said:

    good post..Financial engineering seems to be “hot” option..and iam pretty sure that these programs will reach indian shores with in a couple of years.

    In simple…MFE is all about convergence of Compuatational finance,Maths& computing.

    But building that profile calls for sheer dedication towards MFE…

    Cheersss

  • Amey said:

    Hi Kumaraganesh. That was a very informative interview. Thanks for it. Can you provide me with your e mail id?

    Thanks

    Amey

  • Raja said:

    Hi,

    Good information.

    I am six sigma black belt and Statistician and using the most of the Monte Carlo, probability and prediction in software, how can i switch over to finance. Basically i am Mechanical engineer with 10 years of Quality exp.

    I am looking for your inputs.

  • Anonymous said:

    Hi Kumar,
    I just completed a PhD in Mechanics with an MS in mathematics. I am wondering about the option of jumping into quant finance,specifically quant research, maybe developing pricing models. The field is interesting and pays a lot more than the postdocs and engineering jobs that I have to slog to get. Any suggestions on where to start applying?

    I got research background and coursework in dynamical systems, ODEs, real analysis, abstract algebra and stochastic processes plus mechanics. I am good with C and matlab. I have not done extensive C++ programming, but I can pick it up quickly. I am a BTech from IITKgp.

  • killerspray said:

    Hi kumar,
    I want to pursue Msc quantitative/compuational finance / financial mathematics. I just wanted to know my chances of getting an admit.

    I must admit that I got either awful grades or did not take relevant courses ( for instance , No Probability,statistics or linear algebra).

    But now, I think I am good at most of them ( probability,calculus,PDE,Stochastic calculus,Linear algebra, decent knowledge in derivatives) – all through self

    study.

    I know top notch univs are not for me..Just that I want to know which universities in US, UK, Singapore(NUS/NTU) should I aim for?
    Also, is there anything that I should do to convey my proficiency in specified math courses as they appear shady on grade sheet?

    I know CMU,Berk kind of things are out.. How abt lse,warwick,edinburgh,caas,rutgers,cornel,nus .. or any other

    Will they just look at grade sheet or will they filter thru interviews or math tests? Will Math GRE test help?

    Can anyone throw some light on Msc.Quantitative finance at NUS & career prospects later

    My profile:
    Work exp – 7 years in high end software development – Java,C++ ( No financial exposure)

    Btech – mechanical engineering IIT madras 2003
    CGPA – 7.27 ( A = 9,B=8,C=7,D=6)
    Grades in relevant courses:
    Elements of Calculus -D
    Vectors, Matrices, Differential equations – C
    Physics 1 & 2 – B
    Engineering mechanics – A
    Fluid mechanics – B
    NUmerical analysis – C
    Special functions and PDE – B
    Complex analysis – D
    Dynamics of machinary – A
    Heat transfer, Turbomachines -B

  • SpicyDesi said:

    Hello,

    what’s the difference between

    Quant Trader and Quant Analyst in terms of day to day tasks.

    Thanks
    SpicyDesi

  • Adarsh said:

    Excellent post. It would be a lot more helpful if i can get the email id of Kumar Ganesh as i have also got dreams of making a career in quantitative finance and i have ample of time to prepare for it.

  • Mohan said:

    Great Post!! very clear , elaborate and enlightening!!

  • Himanshu said:

    Hi Ganesh

    Just went through this whole interview and was thinking, Artificial Intelligence is popping up as a great Research subject these days (probably after the arrival of power computing power cpus).

    So is there a place for Artificial Intelligence in Computation finance or Quants too?

    Regards

    Himanshu Agarwal

  • rishabh said:

    Hey a nice post indeed…

    Anyways do u have any idea any idea about universities in UK who offer similar course?

  • arman said:

    In India,IGNOU offers a full time on campus course in QF in collaboration with Madras school of economics..of what I have heard and intracted…the course structure is very mathematical and economics based.The Infrastructure and IGNOU campus are pretty good too.

  • rohit said:

    Hi,

    Can some one provide me some information on indian institutes , i am an mba from 2 tier school but working in this field and am very curious to do this course but part time.

    thanks
    rohit

  • SR said:

    Hello,

    I have two questions:

    1. What are the best substitutes for poor math grades in college? U have listed two of them: AGRE, and Project in Mathematics, is there any other?

    2. U told us what u did for Mathematics and Finance, What did u do for coding skills? How can I had something significant in my coding skills section, because I have nothing much to show right now. Are there any certifications, courses, exams to this end? What do these coding skills contain? C++, Matlab, R and Java?, any other??

    Thanks,
    SR

  • Keshav Agrawal said:

    First of all guys, did anyone get Kumaraganesh’s mail id. I would be very grateful if someone can pass it on to me.

    Hi Kumaraganesh,

    Thank you for the informative blog. I am pretty much interested in pursuing MS in Quant Fin. I come from IIT Delhi with a B.Tech in Engineering Physics. Are courses in advanced physics a substitute for Mathematics? coz I didn’t do many mathematics courses and scored C in all of them invariably. I have 2 years experience in an Investment bank Technology and have given CFA L1 and FRM part1. What do you suggest would be a correct approach??

  • VM said:

    Thanks for sharing your anecdote to all the aspiring students who are trying to make a career in Quantitative Finance or wanting to get into top tier universities .In actuality ,I find your anecdote very encouraging .

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