How much math is required for a career in S&T?
I recently spoke to a trader at BB regarding this question. He told me that being good at mental arithmetic was the only thing necessary for trading and areas like calculus isn't needed (also laughed when I mentioned it). Whats your take on this?
Depends on what type of trader you want to be. I have a friend who is joining SIG in the next couple of months and they all get taught extra maths and basically only hire based on your mathematical abilities! They trade options etc. and look for market mispricing so it could be different from what you want to get into.
Yeah at the moment Im pretty interested in trading FX or equities
Uhhh you want to trade cash equities at a bulge bracket? Do you plan on having a very short career?
Basic arithmetic will suffice in the overwhelming majority of areas.
Frankly, you probably need more math skills to make it through the interview process than you will ever need on the Job.
You don't need maths like an F1 driver doesn't need to be a mechanic BUT there may be a time when being a mechanic as an F1 driver can be helpful. I think with the way things are going it is definitely advantageous to have as many skills as possible.
Calculus isn't required, but having the knowledge wouldn't hurt. Mental math is by far the most important skill to have. If you can divide quickly and multiply, you're half way there. Also, knowing the relationship between supply & demand, retention values, and overall market variables affecting your commodity are also important. Opportunity costs are very important to understand, especially on the physical side of trading.
I don't work for a BB, but as a day trader I do none. I don't see how math would help day traders either. Granted, every successful strategy is based on playing probabilities, but I just don't think about it while I trade. What I have is good numbers sense.
If you're doing cash equities, very little.. If you're on some exotics desk, then a lot more. It depends. I'd imagine someone in trading/structuring would probably require more math than someone in sales as well. It definitely can't hurt to know the theory behind bond/derivative pricing though (if that's what you're gunning for), and to explore some math on your own, if only for the sake of the interview.
it depends what you trade as everyone said. What I find annoying is when people say that you just need mental arithmetic, more or less everywhere you will use the BS model to price something, you'd better understand it or things can go badly wrong. (I'm not talking of very flow traders)
I think the goal should be optionality. In fixed income, a good working knowledge of mathematics is key. People talk a lot about mental math, but I'm almost certain that mental math techniques won't be a part of my training program. That really comes with experience. A good rule of thumb is, "the more the math, the better." A rates trader told me that he uses concepts from calculus, linear algebra, and differential equations. I don't know how important math is if you're trading other products, but I assume it's similar across FICC. You obviously don't want to be limited in any way as trading jobs are scarce and have always been in high demand. Learn how to reason quantitatively (Real Analysis is good for this one).
The more the better I think, statistics, programming is also important.
People in this site tend to tremendously overstate mathematical requirements, specially for trading. If you are in a quant desk then yes, but very few trading desks require a very high math level, and I'd say no sales desk does. Obviously "high" is subjective, but you can access most jobs on the floor with a major in anything, there's no need to be a physicist or a math grad or anything unless you want to be in a complex structuring group, a quant/modeling group or trade exotics, and even then, the important thing is that you study and learn fast on your own and on the job. The firm will teach you everything you need to know. I know an exotics trader who did law in university and he's an MD doing just fine with high school math as a base...
I agree that you don't necessarily need a degree in mathematics or a related field, but understanding how to reason quantitatively is a must. By whatever means you garner it is your prerogative, but if you think traders get by not knowing math your seriously mistaken
I think you misunderstood me or I didn't explain myself properly (very likely since I have a huge hangover) and we might be saying the same thing.
My point is that in order to be a trader in most desks on the floor you don't need differential equations, advanced calculus and algebra. You don't need to know how to derive BS like someone above suggested. You are absolutely right in that you need to be able to reason quantitatively but that is very different from knowing math. What I'm trying to say is that you have a spreadsheet built by your quants that does all the math for you. You need to know what everything means, but not necessarily how to calculate it. If you trade govies you need to understand concepts like duration or convexity, but you don't need to know differential equations and taylor series to trade them. The math HELPS a lot with understanding SOME concepts, because if you are very comfortable with derivatives and integration you will instantly understand the greeks for example. But you can also understand them with a good brain on your shoulders and a Medieval History major. Like you said, you need to understand the reasoning and the concepts, and if you don't know math and want to be on a more complex desk it will be harder and involve a lot of self study, but if you think all the products in the floor are like that you are seriously mistaken. Vanilla option theory is not that hard to understand (not calculate) and there aren't that many trading desks with complexities above vanilla option difficulty, so unless you want to work in those, basic math (add, substract, divide, multiply and %) is more than enough for a very high percentage of desks on the floor.
i am in the business, have been succesful, and i have never been particularly good at math. In fact i think being more a qualitative/non-linear thinker is actually an advantage for me b/c the market is filled with math savants. You need as much math as it takes to get past the interviews, thats it.
What he said.
PS: I'm also a trader.
unless ur a quant i dont think that much. u need a sense for how things are affected by changes in variables, probability, maybe interpreting data. obviously math is full of these concepts but u dont have to be a math major to get them.
I had to withdraw from more than a few math classes and I regularly use a calculator to multiple two 2 digit numbers together.
I also am a trader.
Math helps in building your problem solving skills. I am very good at mental math and studied university math. That said I have used my calculator at times to double check when I am multiplying #s or write something out. The days of using speed only to beat the market is over.
Great info here, I also have somewhat been lead down the road mentally that to be successful at all in trading (and by that I mean actually getting a job, not necessarily generating decent PnL), you need to have your doctorate in differential equations. Exaggerating a bit, and if you're a quant you definitely need some higher level skills, but it's good to hear that you don't have to be Einstein, literally, to make it.
How much math is involved? (Originally Posted: 12/15/2006)
I've been browsing through the Traders Train forum and it seems like everyone agrees that you need a solid background in maths to work in fixed income trading.
I was wondering how much math is involved and what kind of math level you need to have in order to land a job in FI trading (assuming you have a finance degree).
Also, if someone is working in this field, I would be interested in having a couple examples of how you actually use those maths in FI (I'm not talking about basic maths for duration and stuff like that).
Is there as much math involved in market making?
Thanks a lot for the info!
It depends on what product. Can you add well and quickly and in eighths? That'd be useful. They higher level math is useful for the theoretical underpinnings but i'm not doing calculus all day. when I read a paper on some new modelling method, I do need to understand the math though. if you can follow the math in the Hull book, you're fine.
Is it feasible to break into FICC S&T without a math related undergrad? (Originally Posted: 03/07/2014)
From what I've heard from people, FICC can get math intensive... As someone who hasn't taken any math outside of freshman year, is breaking in a reasonable possibility or would I have a better chance in other groups...
yes, but coming from a target becomes more important
Depends on the desk as well, some are way more quantitative with heavy math
Which desks are perhaps lighter on the quant side? Find this area a lot more interesting then equities... and unfortunately kind of regret not doing a hard math undergrad instead. Been trying to reach out to a few guys, but I want to try and waste time connecting with groups that I won't be able to compete in.
Appreciate the responses by the way.
100%. maybe not something like rates vol, but you'll be fine at most desks. It would definitely help to at least be good at/understand math or have taken some quantitative courses though. For example I know someone who was a history major and is now a 1st yr analyst on a bond trading desk and he says he sometimes feels a bit insecure about his lack of math skills, but he's still doing fine. Also, many of the more senior people on FICC trading desks don't have quantitative backgrounds and they've been doing fine for decades.
I have yet to meet anyone on a rates, credit or derivatives desk who has a math degree. Only the most quant roles will require one -- algo trading, volatility, stat arb, etc...
So I'm not sure who you heard that from, but you should stop listening to them.
The whole quantitative skills needed for anything flow trading or even light structuring is the stupidest thing I've ever heard. They need to stop telling people this. If you feel you are not mathematically inclined enough to trade, you're just saying you're stupid. It's not quantitative at all. It requires basic elementary math skills, logic, and attention to detail.
It's a sad state of the world when it's acceptable that people say "I'm not good at math/math is not my thing." I mean holy shit, imagine if people said that about reading. You're considered illiterate and uneducated.
i want to believe you
Its true
Lack Of Math Skills in S&T? (Originally Posted: 02/08/2010)
Is not having a superb quant background, especially coming from a non-target, a huge problem when it comes to breaking into S&T? I've heard some people say that quant skills are slightly overrated in that the "quants" will be involved with more research roles and there is still room for those that aren't math/engineering majors, but others say that quant skills help a lot and that I'll be at a huge disadvantage, especially from a non-target. What do you guys think?
i think that what you've heard is correct
What you've heard is correct. Thos more quant kids coming in will likely be placed on desks where higher level math is required day to day, and you will be at a disadvantage initially not having a strong math background. But by no means will you be alone in your lack of math skills, and most of what you need you'll learn in traning. Don't sweat it unless you are totally ignorant with numbers.
Phd quants go to work for desks that specifically are quant focused. more traditional desks hire MBA candidates and target business school undergrads that are top top of their class.
By the way, target has nothing to do with understanding math. If you are weak in your quant skills just take some higher level math and make sure you understand it.
BCbanker not sure i agree with you, i work on a flow derivatives desk and at my prior firm that was true, at my current firm our most jr traders are a PhD and an MFE, both of these guys are for all intents and purposes quants but they trade. for a jr spot on our desk you have to know VBA at a minimum.
Quant skills seem to be less important in equities for, say, market-making, but when it comes to fixed income and derivatives, you've gotta be really comfortable with numbers. For fixed income, competence in Calc II, Linear Algebra, and Stats/Probability are pretty important. For quant strategies and exotics, you've probably gotta go as far as real analysis and stochastic calculus. In algorithmic trading, numerical methods, discrete math, and complexity reduction strategies are extremely important in addition to the basic prereqs for fixed income.
Based on the responses you're getting, you can probably tell who does what. If you're hearing that you need to do stochastic calculus, well, you're talking to a financial engineer who probably works in exotics or develops/works with more quantitative trading strategies. If you're hearing it doesn't matter, there's a good chance you're talking with a market-maker in a less complicated market. If you're hearing you need to do numerical methods or know how to optimize code for fast execution like nobody's business, you're probably talking with someone who's involved in program trading.
If you're strong in Calculus, linear algebra, and probability, you'll be qualified for about 50-60% of the seats on most trading floors. About 30-40% of the seats also require the quantitative background a financial engineering MS or PhD would have (stochastic calculus, real analysis, statistical modeling) and about 10% of the seats also require the quantitative background a Computer Science or Electrical/Computer Engineering MS or PhD would have (algorithmic complexity reduction strategies, discrete math, graph theory, language-specific code optimization, numerical methods).
Agree. In fact, you don't see too many MBAs on the trading floor- most of them wind up in investment management, research, or investment banking.Most traders in derivatives and fixed income have strong quantitative backgrounds. Not everyone I've met is a Math, Physics, or Fin. Eng MS or PhD (I've met a few psych majors, even), but for anything that involves understanding a curve (be it yield curve, vol curve, or curves associated with futures), you've gotta have a firm grasp of calculus and linear algebra, and it never hurts to have a strong understanding of probability, too.
son just do sales ...
You have to be really confident/aggressive to get a job in sales at a BB straight out of school. I think ibankingreject underrates himself in a number of areas, but I'm not sure if confidence is his strong suit.
you'd be correct.
However, I'm still confused about what "sales" is in the S&T department. Hell, to be honest, I'm not totally sure what traders do either.
Sales are the guys who try to get more flow to the market-makers. Their job is to schmooze with the people on the buy side and get them to trade. Some would call it the pinnacle of sales- you have to be both a smart investor, extremely skilled at managing client relationships, and be very aggressive all at the same time.
Formal quant background in non-cash S&T - is it really a must? (Originally Posted: 11/07/2010)
Hello everyone,
reposting this from another thread that went unnoticed. Here is my question. For structuring and trading desks in fixed income derivatives (FX, rates) is formal quant background (math, engineering) a must in order to be successful? Alternatively, can you be a good trader/structurer in this area if you don't have the above background but you do have strong abstract reasoning abilities? i.e. you are simply good at absorbing and applying complex concepts? I am at the cross roads at the moment, networking with people and may have a shot at getting onto one of the those desks. However, I am just hesitant if I should bother - perhaps I should consider areas like distressed trading instead (i am an econ/business major). Any input will be appreciated.
If you are in an econ program worth a damn you should be fairly adept at math. How poor is your math background? You don't have to be a math major by any means, but I am often suspect of people who are super worried about this (and on this board it has often turned out that the person never took a real math class post high school).
Thanks for your input.
S&T for non-quant grads? (Originally Posted: 09/04/2007)
Hi,
I'm very interested in sales & trading (particularly sales) but i dont have a particularly quant background. Reading on here there seems a move towards sales getting a lot more involved in structuring etc.
What areas besides cash equities would you recommend to someone in this situation?
I would like to get involved in commodities if thaat's any help.
Commodities is one of the most quant desks out there, especially in sales. The least quant sales desks would be high yield, emerging markets, credit--but again, only if you focus on flow trading. Also, hedge fund sales tends to be less quant than coporate sales.
Either way, don't sweat it. You can land a job in S&T without a quant background as long as you can show that you have to ability to learn the quant stuff. The bottom line is that while this career field is quant-focused, it's not like we're engineering weapons systems or anything like that. So you can learn it. Just prove that you're smart and that people will be able to sit next to you for 12 hours a day without wanting to kill you, and you can land a job.....
Thanks skins1,
So (vanilla?) credit products, emerging markets (equities?) and high yield bonds. Anything else worth looking at/reading up on?
How is S&T getting more Quant? (Originally Posted: 10/02/2010)
I'm always reading things about how playing the financial markets, be it on the sell-side as a flow or prop trader, or on the buy-side as a portfolio manager, is getting more and more quantitative.
I'm just wondering, considering most traders don't even leave their desks for lunch, when exactly do they have time to do linear algebra? I'm not talking about quants working on automated trading machines or risk probability models, I mean actual traders.
I don't buy that "quants are taking over" because most of their work seems to be focused more around execution and arbitrage, essentially replacing what used to be agency traders. Oh and that whole LTCM thing....
So how exactly is S&T or PM getting more quantitative? How do they apply math in their daily routines and jobs in general?
This isn't an attack on math or quants. Rather I am completely clueless and would like some help understanding how math is applied by traders, PMs, etc. I also realise that different products, strategies, etc. all require different levels of math.
Essentially, I am looking for help in understanding why and HOW is playing the markets is getting more and more math-oriented going forward.
"I don't buy that "quants are taking over" because most of their work seems to be focused more around execution and arbitrage, essentially replacing what used to be agency traders. Oh and that whole LTCM thing...."
Looks like you have your own understanding, lawl....
Having a quantitative mindset is more important than it used to be, even if you are not necessarily doing linear algebra or stochastic calc on a daily basis. The markets are a lot different than they used to be and things aren't a pure printing press anymore. A lot of spot markets have essentially been handed over to computers to a great extent as well.
Crap Mathematics - what next? (Originally Posted: 11/21/2010)
Right, so I've done barely any Mathematics since High school and even then it was pretty basic.
Where should one interested in doing trading go from here?
trading.
Yeah, but everywhere I look Maths is so important. How can I become a trader without Maths?
Take a few courses?
jus put your mind to it. had horrible grades in math in hs but absolutely murdered all of my math classes in uni.
haha i can relate exact same fucking thing now i'm a math/cs major lol
We don't get to choose classes outside of my course (British University).
Trade cash equities
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