What level math is required in a finance career

How much quantitative education is necessary in a finance career? I am a rising junior finance econ major and my school only requires one calc course that is beyond easy to graduate with those degrees and the math is beyond easy in my major classes as well. Is level 1 calc really all one needs for a finance career? I am under the impression that I will never be a quant in my career but at this point the level of math intellect necessary to graduate seems far to easy.

 
<span class=keyword_link><a href=http://tinyurl.com/3zap9yh target=_blank rel=nofollow>John Rolfe</a></span>:
Can you solve x+3=4? If yes, your math skills are good enough.

Is the answer 1? Someone please confirm; I have an interview next week! :p

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 
<span class=keyword_link><a href=http://tinyurl.com/3zap9yh target=_blank rel=nofollow>John Rolfe</a></span>:
Can you solve x+3=4? If yes, your math skills are good enough.
Dood, you can't plus letters with numbers. The answer is: Does not exist.
 

Algebraic geometry should just about cover you.

“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” - Schopenhauer
 
Best Response

Looking back I would have taken a probabilities/combinatorics class - will help you kick butt on brainteasers and think about risk if you are interested in a hedge fund career in the future. Also just think it is a rather interesting topic.

If you know PERMDAS, you can do the math required for entry level IB (non-quant).

The way you can add WAY more value is if you take some Visual Basic/macros/advanced Excel training, and maybe C++ or some other useful programming languages (I'm sure other WSOers can recommend some good programmes). Personally I'm thinking I'll be starting CFA training to sit the test in December.

if you like it then you shoulda put a banana on it
 

Investment banking requires only the most basic math, which is why BBs will pretty much accept people from any major (as long as they did well in whatever they studied). In fact, based on my observation, non-quants tend to be preferred on the IBD side.

S&T is a different story as some products and functions require a lot of quantitative muscle while others don't. If you're planning to go to a quant area (like equity or fixed income derivatives trading), you will generally be much better suited with a background in applied math as opposed to pure math. From what I've seen, pure math is really more of a signaling mechanism (i.e., if you've excelled in pure math at a reputable place, you are perceived as very smart) than a major that will actually serve you well on Wall St. So, if you're struggling with algebra, I would suggest you take more statistics and applied math courses instead.

As far as graduate economics is concerned, you don't need that much pure math at even the best places. This link pretty much sums it up:

http://gregmankiw.blogspot.com/2006/05/which-math-courses.html.

Feel free to PM me.

 

For S&T, if you plan on pricing options, you probably want to be able to handle a measure-theoretic approach to probability, and stochastic processes. Although these are "applied" (i.e. stats/probability), measure theory (i.e. lebesgue theory) is very abstract. Otherwise, math required is very minimal at most everywhere.

 

Hello Remember that kid in elementary school who always had a pencil and calculator nearby, and while the rest of us drew pictures, read comic books or played cards, that kid was happily crunching numbers -- for fun. Fast forward 20 years or so, and it turns out that kid probably has one of best careers around today, according to an exclusive new study of the nation's best and worst jobs. Compiling research on 200 different positions, this year's JobsRated.com report ranks mathematician as the country's best job, followed by actuary and statistician -- three jobs for which a calculator and solitude are prerequisites. On the opposite end of the spectrum, the Monty Python troupe made famous the song, "I'm a lumberjack and I'm OK." Unfortunately, our study finds that lumberjacks have the nation's worst job, followed by dairy farmers and taxi drivers, which seems to bear out the old grade-school adage that "it's better to earn a living with your head rather than with your hands." Of course, it doesn't take much effort to determine that mathematician is a more attractive job to most people than lumberjack. But ranking 200 jobs from best to worst is no easy feat. To compile this year's report, researchers relied on five criteria to compare jobs as different as librarian and sheet metal worker. Those criteria: stress, physical demands, hiring outlook, compensation and work environment (for more info on scoring, visit http://www.careercast.com/jobs/content/JobsRated_Methodology ). If advanced equations aren't your strong suit, however, there are plenty of other jobs that score well, too. After the top three math-oriented careers, the rest of the top 10 read like a who's who of well-educated professions: 1. Mathematician Applies mathematical theories and formulas to teach or solve problems in a business, educational, or industrial climate. 2. Actuary Interprets statistics to determine probabilities of accidents, sickness, and death, and loss of property from theft and natural disasters. 3. Statistician Tabulates, analyzes, and interprets the numeric results of experiments and surveys.

Hope this Helps Thanks http://www.fintel.us/

 

Before someone else says it, don't bother planning 2+ years into the future, especially as a junior in college. Your experience and relationships at the BB will be more important.

Also, you mentioned 2 large quant shops. You may not fit their culture, so don't be discouraged from entering the buyside.

 
bnkrtrdr:
Before someone else says it, don't bother planning 2+ years into the future, especially as a junior in college. Your experience and relationships at the BB will be more important.

Also, you mentioned 2 large quant shops. You may not fit their culture, so don't be discouraged from entering the buyside.

I'm a senior who will be starting full time this summer. Sorry, I should have been clearer.

A lot of analysts I have spoken to are entering buyside, but that doesn't really interest me all that much. Plus, I hear the private equity market may blow up soon. I've always been more interested in trading equity and so I feel like I will be unhappy doing buyside.

My worry is that my quantitative side isn't sufficient for Hedge Funds. I've read online that there are non-quant hedge funds. How do those work and what level of math do you need for those?

 

I'm sorry, I have been under the impression that private equity was pure buyside while Hedge Funds were more trading oriented. Is trading equity regarded as "buyside"? Or do Hedge Funds do more than just trading equity? Do they act like private equity shops on some instances and control management?

I know what private equity firms do, but I am fuzzy on what Hedge Funds do. I have always thought they were just "high risk" mutual fund traders. So they day-traded with other people's money. Is this incorrect?

I guess this is what happens when you are pre-law until a few months ago.

To the other individual- what level would a post-analyst enter at a Mutual Fund and how is compensation?

Sorry, but I would really appreciate your help.

 

as mentioned you're talking about two pretty quant places. most hedge funds require a solid analytical background which is not the same as math ability. if you're comfortable with basic algebra you should be fine in most places. there are a fair number of phds in this biz (Actually more likely physics than math) but its not a pre-req.

equity hedge fund analysts do a lot of stock analysis. sort of like supercharged equity research

 

...hedge funds are buyside just like PE. Hedge funds are investment partnerships that manage money but do not have the same regulatory burder as mutual funds because they only take money from "qualified" (rich) investors. Some day-trade, some take long-term views...all trading strategies are represented within the world of hedge funds...what makes PE funds different is that their strategy is to buy controlling interests in public companies and try to alter the business to increase the equity value, often levering up the company (taking on debt) to do so.

 

This is an interesting thread...I graduated in 05 with a liberal arts degree and currently work in PE. After 16 months I have found that while I am not the most quanitatively adept person in the world I have been able to pick up complex financial modeling (LBO)through arduous labor. Your ability to excel in a lot of these industries is contingent upon your work ethic, inlcination to learn new things, and your ability to interact well with others. Wall Street math really isnt that complex...

 

the math knowledge required really depends on the strategy -- if you work hard, you can pick it up though (it's not rocket science).

as Bondarb mentioned, HFs are involved in various strategies -- some are multi-strategy funds and others are solely focused on one thing. example strategies include: risk arbitrage/event driven, high yield, bank debt, convertible arbitrage, high grade, cds...and the list goes on. some hedge funds also do PE or more asset-based investing (i.e. infrastructure funds).

 

What ebrandonj days is true; the required math can probably be picked up.

But that's not to say you should plan on picking it up after getting the job. In all likelihood, you won't get the job without demonstrating the necessary skills in your interviews, so you'll want to learn the math beforehand.

 

Why would you even bother going through the addition and counting videos?

I'm almost done with the calc and linear algebra courses. His videos are of little use if you're taking a proof based course.

I win here, I win there...
 
<span class=keyword_link><a href=/resources/skills/trading-investing/arbitrage target=_blank>ArbitRAGE</a></span>.:
Why would you even bother going through the addition and counting videos?

I'm almost done with the calc and linear algebra courses. His videos are of little use if you're taking a proof based course.

if its something like a series, i have to feel like i've done something from the very start till the very finish otherwise it just doesn't feel right

 

Fantastic, I didn't know about this site, SB for you. I happen to be decent when it comes to math, but I won't have the opportunity to take any math-specific classes in college (well, technically they count as math classes, but they're econ classes with a math focus).

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 
Pipsharkee:
Hello everyone,

In my research, many very successful traders have made millions without being particularly good at math. Speculation has so many flavors - fundamental, technical, quant, pit, etc. Surely there's a way I can pitch myself so that I'm not required to be a math genius - after all, how many pit traders know how to solve differential equations? Any ideas on how I can best position myself for a career here? I love trading and I want to do it no matter what, even if it means I have to learn about laplace transforms. Hopefully not :)

Thanks for all the input in advance...

True, but most of the guys you're referencing did it in the old days. i.e pre black box algo dominance. The pit is dying and as soon as they figure out a way to get options "upstairs" the pits will die completely. You're a fool if you think pitching yourself someway will fool the pros. Most prop shops and trading arms look at guys with math, engineering and programming backgrounds. Being a "business guy" today is more harm then help.

The best way you can position yourself for a career in trading is to learn some math. You don't need an MS, but beware that many of your job competition will have PhDs and next to that an MBA is paltry, regardless of name brand.

If you're a liberal arts guy and not going to a Top5 MBA you'll have to network your ass off. But if you don't have at least some solid math skills it will be VERY VERY DIFFICULT.

I am glad you have confidence and don't doubt you will succeed at trading. Balls were and always will be the key. No amount of stats can create an appetite for risk, you either have it or you don't. Just remember that I told you NOW, so you're not kicking yourself LATER...taking a few classes in Time Series, Differential Equations, Stochastic Processes, Brownian Motion, Real Analysis, etc...or at least getting some exposure to them would help a lot.

Consider an MSF and think about what I wrote long and hard. The important thing is flexibility. It's very hard to break into trading without math and will only get harder. DEFINITELY open an account and show you can generate Alpha, this will be key for you so you can back your claims that a math background is not necessary.

Good luck. Just remember, you'll be sitting behind a screen (almost definitely) so many of the interpersonal skills and instincts you read about will be useless. Hope this helps.

 
Midas Mulligan Magoo:
Just remember that I told you NOW, so you're not kicking yourself LATER...taking a few classes in Time Series, Differential Equations, Stochastic Processes, Brownian Motion, Real Analysis, etc...or at least getting some exposure to them would help a lot.

Ugh, not the answer I was hoping to get, lol. Personally I've heard of enough stories of guys who to this day can make big bucks trading retail without knowing any math outside the four functions, but it seems that the big money is very algo oriented as you said, and this is the chess board the big boys play with, so it pays to know it.

One other option someone suggested to me is to break into trading from the sales side. At some banks sales people can apparently even execute small orders on their own. I think that my soft skills, if worked on, could make me a sales person faster than if I disappeared into quant land, though I think I share the same aversion to cold calling as everyone else does...

Also, what size of an account would be considered proper if I am to show profitability? Is anyone going to care if I have a mere $5000 that I'm working with?

Thanks for your thorough and helpful reply...

 
Midas Mulligan Magoo:

I am glad you have confidence and don't doubt you will succeed at trading. Balls were and always will be the key. No amount of stats can create an appetite for risk, you either have it or you don't. Just remember that I told you NOW, so you're not kicking yourself LATER...taking a few classes in Time Series, Differential Equations, Stochastic Processes, Brownian Motion, Real Analysis, etc...or at least getting some exposure to them would help a lot.

As a math and econ major, I'll definitely strive to take those math courses. However, doesn't Time-Series, ODE, Stochastic Process, and Brownian Motion belong to the realm of a Statistics major? In that sense, would you be far more effective to undertake a stats major?

I win here, I win there...
 

$5K is fine. The size of the account doesn't matter It's about showing you have a strategy, can manage risk, know your market's volatility, can actually speak to an interviewer and make sense about what you are trying to do out there.

At this point (with all due respect) you seem a little bit like a dreamer, who is enamored with the idea of the big paycheck associated with being a trader. If you've done the research as you say you have, then you know math is unavoidable. If you want to be a sales guy that's cool too. But if you say you want it, you gotta do what's necessary, math is necessary. Again, I'm not trying to insult you...just get you to think.

Anyone who wants to trade for the long haul has to have nerves of steel and lots of determination. Essentially, you gotta laugh in the face of adversity and be able to take a good punch to the jaw from time to time. Being that we live in volatile times, you might have to develop a great chin.

The point is, get good at it. No class, no internship, no soft skills are going to make up for rolling up your sleeves and getting dirty. So keep doing what you have been, read, learn...but trade...especially with your own cash. Run a search on the subject, this site's got some nice posts on the subject. Some people might tell you to keep doing demos, my opinion is that only your own money at risk, will teach you how to manage it.

Last and most important. Trading opinions are like assholes. Everybody's got one. Figure out what works for you. Again, good luck.

 

OP, You need to learn some math. I would suggest calc and stats. Maybe beef it up. Math is not your strong suit so you are not going to be doing anything exotic. Focus on equities or commodities or something like that. Not everyone who trades is some math wizard. I think some of the people on this board think you need PhD level math or you cannot work in finance. Total bullshit. Yes, there is a lot of algo and black box crap going on and you know what, they hire very high end math and programming types. You want to be a trader, not a programmer. Focus on that.

I think all this obsession with math is a foreign thing. Not saying you do not need to know math, but the level of math being advocated on this board is ridiculous.

 

Thanks again to all for your insights...

My research has told me that there are different ways of developing a trading edge, and quant is just one part of the picture. It seems to me that many banks have various exotic instruments they are packaging and selling, on top of increased program trading, which is probably why the demand for quant and programming skills has increased. That said, I guess it is always a good idea to have the best skill set possible when entering the job market.

My problem seems related to time management:,how much of a percent of my time should I devote to studying advanced math, versus getting screen time and learning to become a profitable trader, versus becoming proficient at the fundamentals, versus working on my sales skills so I can get in from the other side of the desk, etc. That is what is bothering me a little. I have time right now, so I need to know how to best budget it.

My guess is if you go to work or intern for a bank, you can't request specific desks because they make you rotate in the beginning. That would mean they expect you to know enough math to do derivatives even if you want to end up in foreign exchange, like I do.

 
soitwouldseem:
Differential geometry is an absolute must

I found Complex Analysis to be particularly useful.

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
 

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