Just HOW MUCH MATH does a trader need?
Hey everyone,
So, I want to become a derivatives trader; I major in Economics at a top 5 school, interned at Goldman (FICC division) last summer and will intern at JPM (Credit Derivates Marketing for Germany) this summer. My question to you is: Just how quantitatively able does one have to be to become a derivatives trader?
I have very high SAT Math Scores (790), and straight As in all quantitative econ courses, but I am certainly not a math genius or anything approaching that. Do you just have to have a good feeling for numbers, or what? In all my interviews, I was asked brainteaser questions which, although they were tricky, could be solved with easy mathematical methods taught in high school. So if they are using these sorts of questions in interviews, then does that mean that you don't actually have to be Albert Einstein?
People use to tell me that derivatives traders are "hardcore quants who breathe mathematics". So, how true is this statement??
the more comfortable you are the better it will be, but your background is fine.
what brainteasers?
I know nothing about derivative trading, though I know several derivatives traders who do quite well, who have a background similar to yours.
If you're looking to trade quantitative products at a bank, I'd highly recommend a solid, calculus-based probability course before graduation. Though I don't work specifically with derivatives, I do quant work at a hedge fund, and I feel that probability is the single most important course to my everyday work.
If you want more input on your original question, I'd highly recommend posting it at www.wilmott.com. This is an excellent message board; many of the posters will either be option traders themselves, or will interact with options traders every day. Highly recommended place to visit, if this is the business you're interested in.
"People use to tell me that derivatives traders are "hardcore quants who breathe mathematics". So, how true is this statement??"
Depends on the desk strategy. If you want to work in a quant arb. fund, then you will need to know how to program and live and breathe math.
other than that, as long as you are good with college math, you will be fine.
When trading, your models do not necessarily have to be "right" (unless you are doing stat arb trading). Your products will be priced according to the models that the market uses.
you just need to understand the underlying assumptions of the models and learn to nitpick what's generally right/wrong.
so if you want to get into deriv trading, you don't have to be a PHD but a good science background will def. help.
...unless u are a quant what is important is just that you have a familiarity with numbers...ie u can quickly add, subtract, and multiply in your head. it is helpful especially in the bond market to be able to quickly do things like convert ticks to basis points etc. That said, when i graduated from college i was horrible at things like that and became good at it with practice...i actually created a spreadsheet that randomly generated two decimal place numbers and i used to practice adding/subtracting a list of them as quickly as possible for ten minutes each night. But i am a bit insane.
did you create this topic to brag about you abilities? you should have no problem in a quant role. take a finance class in options and u should have a base for everythihng you need to know starting out.
These days, derivative and other exotic product areas are employing more and more PhD / MS in Financial Eng. types than ever. People in this subset will be very well tooled mathematically, and to some extent, this will represent your competition in the business. In this circumstance, there's nothing wrong with asking just how strong a background it takes to succeed.
Apparently not much math is needed. I have an extremely strong math (and financial math) background and can't even get an internship interview for S&T.
Wow. You are the WOAT.
from what i have heard and as was already said quick math and basic option theory is all you really need
My maths is ok, I can score well on GMAT andsimilar tests, but my degree was not in a very mathematical subject. Most of the traders my company seems to be hiring have strong backgrounds and was told this is the way it will be going for the future.
Soo maybe I should do something about it now, I am working on the desk as an analyst and will be a trader soon, but will my life soan be short if i dont have a stronger maths background. Do I need to go and gain a depper understanding, if so to what level. As many of the structured products I hear require a good mathematical understanding, is this the case for the traders or just the structurers
even more so for the traders as they actually manage the positions underlying the structured product.
structuring has a sales element to it, whereas trading (in exotics) is mostly risk management (greeks) and dealing with models and systems.
Traders vs. Quants - Too much math? (Originally Posted: 02/07/2008)
When you apply for S&T as an undergrad, how do the banks decide whether to interview for a trading role or a quant role?
From what I understand, quants do programming/modelling are highly advanced in math (usually PhDs), whereas traders simply need to be quick with basic math and probability.
So is there a point where appearing "too quant" (i.e. taking too many advanced math/programming/modelling classes) would relegate someone to a quant role? I hope it isn't confusing. Basically, how much math is too much, and when does it start to work against you?
That said, would undergrad financial engineering be "too quant" for actual trading? The math goes up to Calc 3, Linear Algebra and ODE. There's a shitload of stochastics/simulation/forecasting/programming classes, almost too much for my liking. Some stuff on swaps, derivs, arb, FX, pricing, which sounds interesting. This is Columbia by the way.
I'd appreciate any input you might have. Feel free to PM too. Thanks.
"So is there a point where appearing "too quant" (i.e. taking too many advanced math/programming/modelling classes) would relegate someone to a quant role? "
no. not at the undergrad level.
Gush,
You may have inadvertently answered your own question..."usually PHDs" Your undergrad background in math will serve you well and in now way pigeon-hole you into one particular career or position. In fact, it will do just the opposite.
Thanks for the replies. I asked because the Penn career placement website shows math majors becoming actuaries/technicians and engineering majors becoming technology analysts (which I assume is some kind of IT support role at a bank.)
The real banking jobs went to int relations, polisci, econ, philosophy and history majors. (Granted, many of them had double degrees with Wharton.) I thought maybe majoring in something liberal artsy and taking a few math classes might be better than doing a full-blown quant major.
What's the highest level of math you guys have found useful as traders? Differential Eqs?
One of the reasons people with those majors end up with the 'real banking jobs' as you put it is because they for obvious reasons were able to get higher GPA's. Don't forgot your GPA is the most important factor especially when looking for 1st round interviews.
If I'm not mistaken, you need single-multi var calculus and maybe 2 probability/stat courses. I think that should put you on track.
OK, thanks eecs.
On another note, I read on somewhere on this forum about a well rounded education being important (I think this refers to liberal arts, though I can't imagine how that would apply to trading.) Thoughts on that? If I had to transfer into the 'CAS' I'd be a math/econ joint major with a stats concentration. How does that compare to financial engineering for trading?
I was a math major, took graduate math classes in numerical analysis, real analysis, pde. You can interview for whatever you are interested in. I interviewed for "quant" positions because I thought they would be interesting. Too much math does not work against you though, especially as an undergraduate. I realized I was much more interested in derivative trading than on the quant side, and am now on a prop desk.
agree with structure. and it doesn't get alot more quant then grad numerical analysis and PDEs.
I'm a math major too, but I'm not very good...
u go to fucking upenn...stop bitching...you're gonna make money regardless...
Type/level of math for credit trading (Originally Posted: 03/30/2008)
What type of maths is used by credit/currency traders? I see non scientific calculators are frequently relied upon, so I don't imagine it can get that complex?
Just curious to know what I am getting myself into as I have an internship within EM credit trading but no solid maths background. Nevertheless, def. willing to do the neccessary prep. before I get there, if required.
Appreciate your replies
addition, multiplication, division, subtraction
Damn, I knew should have done a math minor...
are there any upper division math courses that could have made things any easier for you guys?
thanks
Math Courses for trading (Originally Posted: 11/11/2009)
Does anyone know (or has taken) classes ONLINE for Calc II,III,multivariate calc I and II, Linear Algebra, stochastic processes.... etc? I have already graduated with a degree and finance and looking to sharpen my math skills. Specifically I am looking for any resources that are helpful in teaching one-self these topics.
Any help would be appreciated.
Check this site out if you're interested in game theory, http://www.gametheory.net/lectures/level.pl
That would be one intense online class if there was one for Calc III. Just a word to the wise; having done 5 out of those 6 classes, you should have blown through Calc I np if your going to try to teach yourself Calc III & the multivariable courses. Easily the hardest class I took in college. Diff equations would be good also, but that's paired with linear algebra most of the time.
Check out University of Illinois continuing education. They have a self paced sequenced based in Mathematica thats pretty good for understanding how these functions work
http://mathworld.wolfram.com www.wikipedia.org www.wolframalpha.com www.google.com
Not exactly an online course but it's what I turn to whenever I'm lost with my math classes
http://netmath.uiuc.edu/courses
That Netmath at UIUC seems pretty legit. Does anyone know anyone who's done that program?
Math and Trading (Originally Posted: 04/17/2010)
So you hear about a select group of elite traders that make millions and even billions in a year, what kind of math ability is needed to produce those types of results?
Yes.
It's said that such traders can do mathematics for a Singularity and divide Fractals down to one dimension.
^ If you don't get that joke, you don't have the math skills.
On a more realistic note, not every hot shot trader has great math skills, it's more about the ability to do math on the spot, simple stuff like probabilities, adding multiplying and subtracting decimals and fractions....that kind of stuff.
Think good poker players who can calculate pot odds/implied odds in their head; not Albert Einstein math on a chalk board.
If you're talking about certain kinds of "Quant" trading at HF and prop shops, it's a bit of a different story, but by no means do Quant desks make more than your average desk. Those jobs are more go to the chalk board and develop algorithms using mathematical principles. They aren't the type of traders you think of when you think of trading either, it's a different kind of job.
What is quant trading?
Mathematical ability is so massively overrated by college grads. The most baller prop trader I know at a BB (brings in massive PnL for the firm) told me to "stop fucking around over useless crap" when I asked him whether stochastic calculus was any use for his job. Yes, having an intrinsic intuition for probability/quick numerical calculation is useful, but every single parameter you need to know (e.g. Greeks, correlations etc) are all programmed in to software, and all you really need to understand is how the stuff moves around, NOT the equations. Some traders definitely prefer to know the structure of the equations to get their head around it, some won't even touch that stuff - it all depends on your own style. Even for the most exotic trading desk, knowing anything more than high school probability/stats/calculus/differential equations is not really required - anything else can be learned on the job. Also, remember that most of the models/maths written in finance books is either completely irrelevant or just fundamentally wrong (it IS written by academics, at the end of the day).
Unless you intend on going into algo/quant trading (Where you will actually be involved in model building), I would say don't get caught up in trying to learn too much sophisticated mathematics.
I agree in general but
"Even for the most exotic trading desk, knowing anything more than high school probability/stats/calculus/differential equations is not really required"
this is not true, especially if you ever aspire to run one of these desks. Differential equations is not high school math, btw.
Wow this is a stupid ass question
Diff eqns are high school in UK system if you take certain a-levels. OK, I'll conceed that on the exotics you probably need more, but honestly as long as you can understand (not solve, particularly) PDEs, stochastics, bit of probabiility theory, you'll be fine (that's straight from the mouth of a future colleague who is the head of an exotics desk).
"but honestly as long as you can understand (not solve, particularly) PDEs, stochastics, bit of probabiility theory, you'll be fine (that's straight from the mouth of a future colleague who is the head of an exotics desk)."
Sure, but this is above high school math. In terms of the exotics desk heads that I know, about half have phd's in some sort of hard science, and the rest still get it. either way, more than high school math is req'd in certain gigs.
in other roles though, if you can add quickly in eighths you'll be good to go.
level of math required for trading career (Originally Posted: 08/01/2010)
Hello, i'm currently at Wharton for undergrad. I've talked to a lot of the dual degree students doing finance and math as their degrees. I really want to know the level of math that would be the best for a career in trading.
my current degree layout is finance+statistics+math minor
courses involved in my track are
finance: investment management, financial derivatives, fixed income
statistics: I've decided on taking: stochastic processes, financial time series, and financial math.
the math minor really doesn't go into too much depth. It covers multivariate, differential equations, and linear algebra.
What i would like to know is:
thanks so much for your responses.
depends on what desk. In most desks, basic algebra is all you need. In Interest rate & exotic options desk, you might need to know Stochastic Calculus very well.
awesome, thanks a lot! One more question. How much computer science is required? I know a few of my friends trading in hedge funds in hong kong have been using C++, but is really advanced computer science language required? thanks so much!
C++ is considered "really advanced computer science language" now? aha
You should pick up some some C/++, java, and visual basic just for the hell of it if you're dead-set on going into programming. Would definitely help you in the long run
C++/Java will be next to useless in the trading floor.. unless you wanna be a full blown quant (in which case you'll need a PhD or MFE) Excel/VBA will be more important..
re your original qn. it depends on what you wanna trade.. if you're doing derivatives take real/de/stoch in that order. linear is fun too. if you wanna do prop/quant strategies time-series econometrics is more important. and of course if you wanna do macro switch to economics and forget the (advanced) math.
and be warned its likely you will never use any of these on the job..
THIS! Simply cannot emphasize this enough. Everything else in these 'quant-dick riding' threads is just noise.
I heard C# is very popular among trading floors. Can anyone chime in on that?
I talked to one of my friends who was trading in hk. He told me that all he used was vba excel. My friends working at hedge funds in china were using c++ for trading algorithms. Now they are undergraduate interns, so i don't know what kind of programming is used higher up in the firms.
thanks everyone for your replies.
hmm bump here, just wondering up to what classes I should take in college for math
For the sellside, for most trading desks basic Excel/VBA and stats are sufficient to trade the product. When you get to exotics/hybrids and structuring the math becomes more important.
If it means anything talking to head traders at many BB's they all say they have gotten dumber on the floor due to the lack of use of math skills
Hey MF7791,
I'm a recent graduate of the college at Penn (guess when I graduated) and am on a trading desk at bb now. I was an econ and psci major, and I can tell you that in general, the math you need is pretty minimal. As long as you've taken up to math 104 (which Im pretty sure you need to at Wharton), you should be fine. More math can always be helpful, but the desks that require much higher level math are almost always exclusively for quants, mainly because those of us not in M&T or just engineering/their equivalents at other schools aren't smart enough for the desks, no matter how many math classes we've taken. Like everyone else said, being good at excel and knowing VBA can be helpful, but also not necessary (especially if know the record macro function). Just concentrate in finance and some other bullshit concentration in wharton, network really well, get good grades, and you'll be as well off as anyone in your class. PM me if you have more questions.
Math Major Wants to be Trader (Originally Posted: 09/20/2010)
I am a math major at a top PUBLIC school. It is a recruiting school for one BB, and their business school is recruited by everyone. Im looking on some advice on how to break into Trading. Should i minor in finance (its not too late), and due to certain scheduling issues I have to graduate in the summer, meaning no summer internship. Any advice? thanks a bunch
bone up on stats, forget BB and trading, find a top prop shop, search function upper right hand corner.
If you're already a senior, I would almost say its too late. Recruiting is either happening right now for some firms, or has already finished up for other firms. And overall, getting onto a trading desk is going to be brutal this year. If I were you, I would try to either land a job somewhere that is somewhat market-focused, or look at applying to grad schools. Prop shops are also another possibility, but they are extremely competitive to get into as well (at least the legitimate ones)
Finance major = complete irrelevance for basically anything trading. Even what is useful will prob be better learned on the job.
Wait are you a junior or senior?
Basically im graduating this summer (aug 2011), but i have to be in school during the summer so no summer internship for me. But there is a Meryl Lynch by my school? maybe i should try there? thanks
Don't worry about minoring in finance. You can pick up a book or google something, and it would be worth about the same coming out of college into a trading environment. Take note, the Volker rule is disseminating all trading at BBs sooner rather than later, so you'll need to step your networking game up and get to it if you plan to get into a prop shop. That will be the only place where you'll be able to find any possibility of being a trader. However, you might want to consider research or sales as an alternative if you aren't sure about trading 100% but just want to be on the street. Good luck. NETWORK!!!
So you are graduating early?
Do yourself a favor, delay graduation until December, so that you can participate in SA recruiting in the winter and get a summer internship. Those are you only chances.
Spend a little extra money today and increase your job prospects by 100x.
Really appreciate your help, its not that im graduating early, its that i have a 2 semester sequence that has to be taken consecutively, so its either spring/summer or fall/spring, and I dont really want to spend another year in college. If i land an internship during the school year at a local branch could that help? or are there any internships in the fall? thanks a ot
Would you rather spend another year in college and at least have a shot of getting on a trading desk? Or graduate on time and have virtually no shot? Not saying that there is a right or wrong answer here, but you need to figure out what is most important to you. All I can tell you that is that it will be extremely difficult to get on a trading desk if you graduate this summer, with or without the Merrill branch office internship. However, if you can land a part-time gig during school, and you start networking hard asap, you may actually have a pretty good shot to land a decent internship for next summer.
There is no trading at local ML offices. If you go that route in hopes of trading, you are doomed. You'd have a better chance being a full time clerk at a prop (there are people who never went to college that are full time clerks @ props) and then try to move up from there, than doing some shitty local PWM in hopes of moving towards trading.
Read John Hull's book, futures, options and other derivatives...then send your resume somewhere and try to snag an interview
Pursuing trading with average math skills (Originally Posted: 10/26/2010)
Major: Econ/Finance Got an A in 1st - 2nd university calculus. B+ in stats. Will be taking econometrics next semester.
I looked at some math brain teasers that are asked on interviews and I'm ok with math for school but those questions are way over my head. I'm bad with problem solving questions in general. From what I read Econ/Fin major + average to low math is very hard to get into trading. Any advice would be appreciated.. Any good books to practice math would be great. GTFO you are too stupid to get in is accepted too. Thanks.
Forgetting any of the formal math stuff, t is going to be hard to be a trader if you are bad at problem solving...
go into sales. problem solved.
This...assuming you are personable.
Succeed in Trading without being Mathematically gifted? (Originally Posted: 11/27/2010)
Hey guys,
I am currently a Sophomore at a top target (top 5 business school/ivy) and I have always been interested in the field of business. I was never sure what exact niche I was going to become a part of so I have researched extensively since 10th grade.
For a while I was set on investment banking but it seems that now, i really do not want to complete excel spreadsheets for 100 hours a week. The hours are not a problem and that is why I am interested in trading. I have been managing my own accounts (both real and paper ) for over a year and have been fairly successful.
My question is:
Can I get a job in trading and be successful even if I am not overwhelmingly good at math. I can do the math in my economics classes and have taken and done well in calculus but any math after that seems like it would be extremely difficult for me.
Any input would be appreciated
"The hours are not a problem and that is why I am interested in trading."
This doesn't make sense.
it means that the hours involved with working in investment banking are not the problem and i know that traders also work many hours per week so that i am still interested in trading despite the hours
I would say....yes.
More so than doing complex math, you just have to be keen, sharp and think on your feet with your numbers.
yes
Yes, you can. Many on this board think trading means doing calculus with an abacus whilst sitting at NASA mission control. While those positions do exist, that is just a small fraction of trading. I have worked as a trader on both the sell and buy side and do not consider myself particularly adept at math.
Read some of Bondarb's threads.
You do not need hardcore math to trade most products, that said you need to be able to think quick on your feet and have very strong analytical skills.
Been doing some research into this issue as I have a similar problem, and from what I've found Mathematics is not the be all, end all of Trading. You need to be good with numbers, but that's about it.
i just read an interview about a quant trader (who at the time was trading for a BB bank) who said that even for him, it took a year to become profitable. and i believe he was doing complex stat arb algo trading which requires a high level of math.
i've done countless hours of reading on discretionary trading with a lot of different technical indicators, even tried pure price action and i am skeptical of average joes claiming to make a living trading in those ways. they claim to have the edge or a profitable system but i am skeptical of them.
i'm sure there are the lucky few who have succeeded but i believe that most of the truly profitable traders are trading for or have traded for institutions and reputable/prestigious prop firms and i believe they are looking for people highly competent in math.
this is just based on my observations and is pure speculation.
Math is important but not to the extent the books will have you think. Firstly, trading is a very broad field where a multitude of strategies can give you an edge. Trading profits are generated by exploiting inefficiencies. If everyone in the market took a pure quant approach, then the non-quant guys would be raking in dough as they would exploit opportunities the quant guys don't see. Its important for markets to have heterogeneous participants.
Secondly, the instruments traded by many BB desks require completely different approaches. If you join a high frequency equities trading desk, you bet you will need comp sci/stat/math skills. However, if you join the distressed desk, you will not be doing math beyond stuff you learned in high school.
Thirdly, you might look at the financial tomes and get scared by the pricing models on there. While a trader needs to be very familiar with them and understand what drives a product's pricing, it is not your job to code or maintain models. You have dedicated quant guys on the desks whose job is to provide you with those tools so you can do your job which is to manage risks, make markets, generate client flow, and extract profits from inefficiencies presented day-to-day.
Hope that helped.
Maths for Trading...experience in IBD (Originally Posted: 08/06/2011)
I'm going into my penultimate year at university and I'm currently in an internship in the corporate finance division of an accountancy firm. I've done all sorts of ***** work and a little modelling; I'm bored.
Now that I've done a 6 week placement already it'll for next year...but I've known for a while that I'd prefer trading, preferably FICC (despite all the lacking half-year results in FICC this year), but I'm just a university student who doesn't take Maths/Physics.
Will that hold me back? Is it not even worth applying since having a very quantitative background is now the normal for maths, even though I am good at analyzing theoretically due to the nature of my degree (Economics)
Most BB trading roles do not require more maths than what an economics degree covers. There are tons of traders who have arts backgrounds.
Would you say that most derivative traders have arts backgrounds?..In my opinion, most traders with arts backgrounds cannot value option or don´t know much about Black Scholes formula etc.
I doubt that most traders with arts backgronds can be good commodities traders or derivative traders.
englishes for forum
lol trading isn't about numbers it's all about the future(can you predict movements based on world events )
Limited Maths, but want to be a Trader.... (Originally Posted: 07/06/2013)
Hi there,
As the title says, I am not a particulary quantitive person, didn't study maths at High school, although my degree does has some element of maths, such as econometrics, quant methods, ARCH/GARCH etc. and general financial maths, however my maths doesn't go much further than passing the online tests… I have interned on s&t desks, but as someone shadowing/helping it was limited as to what I could do + added to the fact I worked in cash equities...which requires zero maths.
My interests are within FICC, esp. Rates/Credit/CDS... I suppose I am more of a 'qualitative' thinker with regards to the market and was wondering if this would would hold me back when applying for trading positions.
Thanks for any help/advice.
learn how to sequence numbers in your head
know statistics in your head
get job @ prop firm
I mean you said it yourself. There are many products (especially on sell side S&T) that don't require strong math skills as opposed to strong qualitative skills. Cash equities is one. Others include more vanilla fixed income products such as treasuries and corporate bonds. Also salestrading most products is pretty non-quantitative.
Thanks for the reply Peyo, I suppose this is the issue I hold..the products I find interesting are perhaps slighly further up the quantatitive scale, I don't have any challenges with stats as ppl have said on here, nor have I had any difficulties with regards to the financial and derivative math that I have covered in my degree. It's just I've seen these french guys who come from the ecoles doing engineering/maths etc.. taking up the equity derivs trading positions etc... It has just made me question my strengths etc.. I am more of a macro person, and want to trade EM Rates/CDS...so will see....
Cheers
Stats seems to be more important unless you're a quantitative trader.
Does anyone have any adivce on how to improve mental maths in interviews. Do interviews for trading positions usually consist of mental maths/teasers etc.?
http://tradertest.org/
See math and sequence tests (both types of questions appear on interviews). Time yourself and the questions get hard enough that you can always improve.
Thank you v. much for your help.
I've had ones that were very much math based and others that were totally fit based. It's tough to say for sure, depends on the shop and the traders that interview you.
Mental Math for Trading (Originally Posted: 01/17/2014)
Hi, I'm applying for an internship at a trading firm. They are asking me to take a mental math test where I'll have to do a lot of math problems in a short amount of time and no calculator is allowed. Does anyone have experience with this? How should I prep for it? Thanks!
Experience - not really. But I read a discussion on the matter few months ago, as becoming a trader is a goal of mine, and I can give you a few insights. Assuming the test is something similar to what I read about, you should check tradertest.org to have a peek at some tests of that type. Mind you, the content there was recommended for people who are taking the test at Optiver, because they seem to be old-fashioned and filter out candidates with Three (?) tests before an interview. A good read on the matter could be anything regarding the Trachtenberg System but that is up to how much time you have. I have a whole book and am willing to share, so feel free to hit me up (it is a .pdf). Other than that, you do not have to be a mathematics genius to pass it - it is more of a trial for your concentration under pressure and limited amount of time.
Best math classes to take for prop trading or quantitative hedge funds (Originally Posted: 01/28/2014)
I realize these are two separate career tracks, but I've become increasingly interested in quantitative finance in the context of statistical arbitrage type trading/quant investing.
Background: Applied math major, and have managed to secure a full-time quant analyst position with a top Asset Management firm. I realize that I'm already I'm on track for my career, but I'm wondering what classes down the line will give me the greatest skill-set/mileage in terms of excelling my industry?
I've already taken a number of analysis/stats/differential equation courses but was wondering which of these would be best. Thanks!
If you're interested in research, measure theory is needed for stoch calc.
best class i've ever taken was on monte carlo simulation, try to take that if offered
Optimization
Among the three you mentioned, optimization and stochastic processes would be helpful. Taking a Data Mining/ Machine Learning, Computational Statistics or Time Series class would help though they would likely be offered by your schools CS or Stats depts.
Are all successful traders math experts (Originally Posted: 12/01/2014)
Are all the million dollar rockstar traders experts at calculus and statistics and such? Are there traders that make bank just based on knowledge of the market? (I know that traders have great math skills but not sure if all are math majors and take all the math courses and what not)
options traders need to know basic calculus concepts. statistics and probability is helpful for understanding the role of luck and how to size bets. lots of math is no guarantee of success, there are thousands of phds hunting for miniscule signals using the same techniques...
No, and for most traders "great math skills" doesn't mean more than doing some basic arithmetic in your head reasonably quickly and accurately.
However, being a successful trader does require a degree of common sense and initiative, of which you clearly have none since there are dozens of posts on this site about this same topic.
Well said mrb87... Well said.
No, math geeks are prevalent when you're talking about stat-arb programs that calculate fair value, up/down volume, etc. It's just basically complex reversion to the mean trading but they like to hire PhDs that don't know how to trade to crunch numbers so that they can average in when the odds favor a reversion trade. Picking up pennies in front of bulldozers is all it is.
Who would have expected such an intelligent question from such a ridiculous username. Why yes, Mr prospective gordon gekko, all traders are in fact math prodigies.
i was supposed to be prospectful albert einstein but opted for a more stereotypical username. thanks for the input everyone.
OP, are you looking forward to prom?
Growing this discussion though (hopefully redeem it a touch); I WOULD like to ask a question in regards to say Option traders...
It's been covered ad nausium that math is needed, but thinking about it a touch more deeply, how much familiarity with calculus is required (as opposed to 'knowledge' per se). What I mean is calculus is a very broad and deep topic, what EXACTLY does the trader require for day to day success? I mean I understand the role of the Greeks etc, but most must (if you're in a BB at least) use a pricing model that is externally auditable as per compliance reqs (and most likely not developed by the trader) so they're more of a plug and player and if you're given a model you can just tweak your understanding of the topic to the actual behaviour of the pricing model. I get the trader needs to cross-check the model with their own understanding so they are comfortable with taking the risk, but largely speaking you'd be learning that as a newbie from your team...
options traders obviously don't use pen and paper calculus to rederive the black scholes model and greeks
but understanding derivatives of functions (sensitivity to change in inputs). or if you know taylor series you instantly get how positive gamma can make dynamic hedging profitable.
@prospectfulgordongekko: Seeing some of these questions is a testament to how much people think that traders in certain areas are geniuses. Seek out an internship and you will see that the real world isn't nearly as academic as people think on campuses.
Only went up to Calc II myself and trying to teach myself Linear Algebra. You don't need to be excellent at math, but it certainly doesn't hurt. What you really need is discipline and a sound trading strategy.
Look up Sir Isaac Newton and the South Sea Company.
This question is like saying - "Are athletes great pitchers?" ....sure...the ones that are great pitchers.
OP, do some research. There's all kinds of trading. Everything from what your buddy does in his Scottrade account after he gets an "idea" while reading a Yahoo article (pure speculation) all the way up to the genius-level quant strategies used at firms like AQR, RenTec, DE Shaw, & PDT.
How much math you need depends on where you fall in this spectrum.
Non-Quant Trading (Originally Posted: 08/08/2007)
It seems as if every trading desk is getting more "quant" by the minute. Every desk I sit with, everyone on it is either a math or comp sci major and knows vba really well. Are there still desks out there that trade without all the complex models. if so, which ones?
look for event-driven trading.
if you are interested in trading at a prop or hf...
you could look for global macro shops...
global macro is a fancy way of saying..."I can trade what I want, how I want, when I want"
what are some desks within a BB that isnt quant?
*waves at Jimbo
Some people say that most desks aren't at all quant for the most you would do is punch numbers into a calc; other people say that you need VBA, stoc calc, and prob. One wonders...
Completely non-quant. Be prepared to pour through tons of legal papers. THe reward could be huge if you are profitable.
Tepper?
Trading, no maths A level, Finance degree (Originally Posted: 05/17/2012)
I'm a student in the UK and I chose not to take Maths A level because, at the time of choosing, I had plans to go into nothing necessarily mathematical. I've been looking at degrees as I will have to be choosing very soon, as the application process will be commencing in only a few months time. I have found a few degrees at semi-target institutions that look extremely relevant and interesting. These degrees include: 'Business Finance' at Durham, 'Finance, Accounting & Management' at Nottingham, 'Accounting & Finance' at Edinburgh and so on... None of them require Maths at A level, and I am more than certain I want to apply for them. Obviously, a lot of traders at BB will have degrees with mathematical elements, but if I was to a degree out of the ones I mentioned above (which do have a quantitative aspect to them), despite my lack of Maths A level, would I still have a shot at getting into S&T as a trader? Thank you in advance :)
Bump
there is 0 need to bump 23 minutes after posting
Sorry
You will struggle to get into S&T, let alone at a BB, from those universities.
The UK's stance on recruitment is vastly different to the States.
Source?
Thanks for the update, I am from the UK, went to LSE and am in finance.
In this market he will struggle to get a job in S&T from those universities. If anything I would say it is more rigid in the UK; in the US people can ostensibly go to a less reputed university for a number of non academic reasons (fees, location etc.), in the UK if you go to a lower tier university then generally speaking, people will assume it is because you couldn't get in anywhere better.
The vast majority of people from LSE/oxbridge won't get jobs in S&T at the moment. Its not 2007 anymore, if the guy wants to work in S&T at a BB he should really consider going somewhere better, or doing a better degree (e.g. Durham Maths, although he can't do this). Oxbridge history would be better than Nottingham finance.
I stand by what I said, it will be a struggle for him to get a job at a BB in S&T from those universities.
I would agree with you. From my time in the industry, I have clearly noticed that FO is dominated by Oxbridge, LSE, UCL and increasingly Warwick. From being an applicant, etc, I noticed that a 'few' people from Nottingham/Durham at ACs however the majority seemed to have faded away when the selection took place. So I think its more to do with the calibre of students being concentrated in the top 5/6 unviersities, rather than the university itself.
I would agree about the degree. I've said before, that he should really going for the most quantitative degree possibly. S&T is probably the hardest role to break into. Something like Government at LSE or PPE at Oxford would be far better for the inital screening stages.
I personally don't think Nottingham or Durham will detract much from a candidate who is good enough, when in reality, only Oxbridge/LSE/Imperial have daylight between themselves and the rest of the chasing pack. Its perfectly possible to make it into the industry from Durham if you're good enough. The drop in 'prestige' in the UK after Oxbridge is far larger than in the US after HYSP. In the UK, after Oxbridge, there is a considerable margin before you reach LSE, Imperial, UCL and Warwick, etc, which is why unless you're at Oxbridge, your university doesn't not have much weight in the UK (within reason)
Alimbo- You need to consider how you're going to signal to banks, that you're able to cope with trading if your highest attainment in anything remotely mathematical stops at GCSE level.
.
Source:
Durham:
http://www.dur.ac.uk/resources/careers-advice/students/2010_FD_Leavers_…
Go to page 10.
Durham is toward the higher end of his list.
It's not necessarily, I just had the impression that the overall reputation of Durham was very high as a university and that it would give me a good shot. I, personally, would rather go to Nottingham (for reasons such as social life, proximity to home etc.), but I guess maybe it would be hard. I suppose getting into IBD would be a little easierl, I have been looking at that too.
S & T is harcer to break into from Durham, in comparison to if you were at (Oxbridge, LSE, UCL, Imperial, or Warwick) but if you're good enough your university will not hold you back which is something people often forget. At my firm, there is a few people from Durham, and on my internships/spring weeks in the past, there has always been 1 or 2 from Durham, so if you're good you'll make it. A masters really isn't neccessary, unless you're coming from a university far down the table, Durham is only slightly below LSE. Just focus on nailing the tests and assessment centres/interviews.
@Jeremy
I was referring more to the context of the OPs course, I think maths/physics at Durham would be fine.
I'd say that something like 90% of the people I've met in BB S&T who studied in the UK went to Oxbridge, LSE, UCL, Imperial or Warwick. Various degrees, but mainly finance, economics, PPT, physics and engineering. I didn't go to uni in the UK so I don't know all the programs well, but I'm inclined to think that you'll be at a serious disadvantage if you don't go to any of these unis. However if you're good, get good internships and network well you can probably get in (I'm assuming those programs are not rubbish, like I said I don't really know all the unis). But if you can choose, go for one of the top 6 because there clearly is a huge step between those and the rest.
Do you reckon I should just do an MSc in something like Mathematical Trading & Finance (CASS) afterwards?
Why Math-Minded Folks? (Originally Posted: 04/18/2010)
I've noticed that many traders have quantitative backgrounds, such as undergrad or grad degrees in math, physics, etc. I'm just curious why math skills are more helpful in trading than other areas of finance? My guess is, traders aren't taking derivatives, finding determinants, inverting matrices, proving fixed point theorems, or using homotopies. So why do employees like math-minded traders? I suspect some people will answer, "because math teaches you how to think." While I agree with that statement, it doesn't help me understand why math backgrounds are more helpful for trading, since if it was just about learning how to think, one should imagine that plenty of IBs, VCs, etc would also love math people; but it seems that it's much more helpful in trading than other areas of finance.
Many traders that have these sort of math/quant backgrounds end up on desks where those skills are needed such as exotics, high freq trading, etc.
I think the math requirement is more about quick (not necessarily difficult) problem solving abilities that involve a lot of numbers all at once. Mathematical minds have a much better ability of remembering sequences and series which is particularly useful when putting through multiple trades or making a market in different securities.
Depends on the product. Quite a few of the mathematical routines you mentioned are used in derivatives pricing.
derivatives....of course
if your trading eqtuiy flow, you could get away with a high-school education..imvho
x
I have a feeling it's more of a way for traders to set some kind of formal barrier to entry and make themselves look more like a big deal than it is useful for practical purposes.
Not that math won't be useful to some desks, but the fact that even more vanilla desks won't even consider anybody without a quantish background is the biggest farce they have going, and they know it.
People from all walks of life have the skills to be great traders, whether or not they took advanced calculus.
First, if you're not a trader, pls refrain from commenting.
Second, being good at math reflects a general level of intelligence and analysis that has a positive correlation with trading ability. It's not a perfect correlation. So there are people good at math who can't trade, and people bad at math who can trade, but it helps. It is very hard to test for "good at trading" in an interview process. It is hard (but doable) to test for "good at math". That's how interviews work in general, they isolate variables which are correlated with future success and test for them.
Third, if there were that many gems out there, someone (in an efficient market) will take them and dominate, esp in trading which is very Darwinian. Trading has always been more meritocratic and it is harder for inefficient practices to take hold (compared to IB or consulting).
Interested in rebuttals.
(as a trader myself, it helps. It helps if I don't have to explain something to a junior more than once. It helps if someone doesn't make the same mistake twice. And it helps if you don't overfit or engage in falacious thinking.)
If you are working in Sales of more Structured products you might actually be doing some derivatives pricing yourself, in which case the more mathematical background can help show your analytical capability.
Revsly is correct. Certain sales desks involve structuring/creating products which requires higher level math skills - similar quantitative level to the traders who hedge the market risk of the products you create
Stupid question, but what exactly is sales in this context? Who do you work for? Who are you selling to? What are you selling? Etc. I periodically hear people mention sales, but I don't really know what sales is like in this industry.
This.
Who do you work for? A bank (dealer).
Who are you selling to? Could be a wide range of clients. Usually its either Real Money (Pension Funds, etc), Corporates, Hedge Funds or Central Banks.
What are you selling? Huge range of products, you'd have to be more specific.
I suck at numbers.....could trading still be a career for me? (Originally Posted: 05/29/2008)
Yea, so basically... last year I had superdays for s&t at bear and ubs...the bear superday went fine, a few simple math questions....square this / that..so I was fine...but my UBS interview was crazy (since im not good with numbers)
They made me do a math scantron exam, and then during the interviews I was asked a series of probability/more complex math problems....needless to say, I didn't get the UBS offer..
my question/issue at this point is....i know math definitely isn't my strength at all....should I even pursue trading?
Is trading the kind of profession that is so deeply entrenched with numbers, that someone with a poor skill set in math would have a very frustrating experience? ...thanks
Why would you want to do trading if you're not good at math? Surely you're better off career-wise playing to your strengths than something which involves 6 screens of numbers. Plenty of other areas within ther front office with limited numerical content vs trading.
Mind telling us what kind of math questions were asked?
Thanks!
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