Why Math-Minded Folks?
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
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
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
Depends on the product. Quite a few of the mathematical routines you mentioned are used in derivatives pricing.
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derivatives....of course if
derivatives....of course
if your trading eqtuiy flow, you could get away with a high-school education..imvho
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I have a feeling it's more of
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
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.)
In regard to the Sales side
In regard to the Sales side of sales and trading, I've read everything from a basic high school math proficiency needed, to high level college courses for more complex products. Can anyone comment on this?
If you are working in Sales
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.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Revsly is correct. Certain
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
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.
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econ wrote: Stupid question,
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.
I win here, I win there...
econ wrote: Stupid question,
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.
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.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock