This powerpoint discusses opportunities for PHDs in Quantitative Finance

1. Opportunities in Finance for PhD’s
by Peter Carr, PhD
Principal, Banc of America Securities

2. Introduction
Please ask questions at any time
Here are some questions I’ll be answering:
Who are the players?
What is finance?
When should you decide?
Where would you work?
Why go into finance?

3. Some Terminology
Quants
Wall Street
Commercial vs Investment Banking
Hedge Funds
Derivatives

4. Who Hires PhD’s?
Banks hire quants to develop models and to check them.
Banks and hedge funds hire PhD’s to develop quantitative
trading strategies.
Government agencies such as the Fed, FNMA, Freddie
Mac, CFTC and the SEC hire PhD’s to do research and to
audit models.
Software firms hire PhD’s to specify models.

5. Who are the Players?
Quants
Traders
Structurers/Marketers
Developers
Risk Managers
Middle Office/Back Office
I bankers
Analysts
Strategists

6. Job Titles
Assistant/Associate
Vice President
Principal/Senior Vice President
Managing Director/Partner
?

7. Why Go into Finance?
Challenging multi-disciplinary problems.
Fast-paced competitive environment.
Enjoy interacting with people and computers.
As a new field, there is a lot of low hanging fruit.
Compensation is good, but hours are long and
frustrations can be enormous.
You don’t have to wear a suit or skirt.

8. Where Would You Work?
New York, London, and Tokyo are the largest
financial centers.
In the USA, PhD’s also work in Chicago, LA, Atlanta,
Charlotte, SF, Tulsa, and Houston.
Internationally, PhD’s ply their trade in Toronto,
Paris, Frankfurt, Hong Kong, Singapore, and Sydney.
Travel is usually a small part of the job.

9. When Should You Decide?
Forward contracting is rare for PhD’s. Companies
usually have no need (no head count) or just one.
The interview process takes a few months and
usually involves multiple visits.
If you have a strong locational preference for NY,
London or Tokyo, you might consider moving there
first.
Send your resume and cover letter 1-3 months before
graduating.

10. Get a Job
The qualities most in demand are:
communication skills
analytical skills
computational skills.
cradle to grave capability.
Most firms believe that the finance can be learned on the
job. However, risk management is probably the largest
growth area and likes financial/empirical skills.

11. Interviewing Skills
Take charge
Bring your resume
Remember names
Brain teasers
Don’t discuss comp, hours, vacations and
other perks until you have an offer.

12. Communication Skills
Black Scholes is the language of options
A picture is worth a thousand words
Walk the walk and talk the talk
Tolerate ambiguity in others; don’t tolerate it
in yourself.

13. Analytical Skills
Probability Theory
PDE’s
Mathematical Maturity
Financial Maturity

14. Computational Skills
(Quasi) Monte Carlo
Finite Differences/Trees
Root Finding
Splines
Fourier Methods
C/C++/Java, not Fortran,Pascal
Unix and NT are most widely used OS’s

15. Some Financial Instruments
Bonds, Stocks, Commodities, FX
Forwards, Futures, Swaps
Vanilla Options
Exotic Options
Convertibles/Structured Notes
Credit Derivatives

16. Learning Derivatives Pricing
Hull is usually too easy for PhD’s, yet too hard for
most MBA’s - for non-quant Wall Streeters, it is just
right.
I recommend reading the classics - Black Scholes 73,
Merton 73, Black 76, Cox Ross Rubinstein 79, Heath
Jarrow Morton 88, Dupire 94.
There are now many excellent books presenting the
martingale approach to pricing.
The PDE approach is emphasized in Wilmott’s books.

17. A Quant’s Career Path
First job is often computer intensive
With experience, quants often
head quant groups
trade
structure
manage risk.
With even more experience, some quants
start hedge funds
manage departments.
The fastest way to move up is to get dollars attached to
your name.

18. Some Good Things to Know
Wall Street research is not academic
research.
All theories are wrong.
Uneducated does not mean dumb.
Location, location, location.
Buy low; sell high.