which one is better for the resume, job prospects, etc? It is true my quant chops are not exactly high, on the GMAT I got 84th percentile verbal vs. 28th math, and on the SAT had a V/M of 720/630. Last math I took was 6 yrs ago, calculus of a single variable, and before that, precalculus, altho I did terribly in them. But I'm willing to work to get to par. I seek IBD/PE, ratings agencies, ER.
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No multivariable calculus? Linear algebra? Calculus-based probability?
My hunch is that you should probably stick to corporate finance or IBD. You probably have excellent English written communication skills and the relationship between your English and Math skill is a better fit for IBD.
If you told me that you did not want to be a banker, I'd soften my stance. But my prescription would be more 3-4 more math classes first before pursuing the Quant Finance specialization. And I'd want to see some As or at least B+s this time. You'd be doing Integral Calculus and finally Multivariable Calculus. Furthermore, you'd want to take Calculus-based probability, linear algebra, and maybe a stats class. Get on KhanAcademy.org, take a look at some of the classes I'm referencing, and think about it.
Taking partial derivatives (multivariable derivatives) is clearly required for a more quantitative econ or finance graduate degree. We do various low-level optimizations all of the time, and maximizing some function of several variables is often required. For portfolio theory, you'll be leaning heavily on stats and linear algebra for portfolio optimizations. If you take a behavioral finance or econometrics course, you'll also need to prove that strategies statistically outperform. This will require some understanding of linear regressions and statistics. The linear algebra would be required to deal with covariance matrices, apply the delta method on occasion, and do some other stuff within econometrics. Various random (stochastic) transition models will also require matrices, and if you want to do Principal Component Analysis, that comes down to eigenvectors.
This stuff is not easy- not even for an engineer- and an MSF doesn't have to be this tough, so I don't want to scare you away from grad school. Econometrics is not an easy class and it's not part of a typical MSF degree to the best of my knowledge. And I've seen Portfolio Theory boiled down a lot for finance undergrads. But a good graduate quant finance program will be having you do stuff that requires multivariable calculus, statistics, and linear algebra almost every week. And for the record, I'm just a quant-lite. I worked as a desk strategist at a bank, and I'm heading to work for systematic strategies team at a hedge fund- where my job will be 20% stats, 30% finance, 50% coding. I don't have an Econ, Finance, Physics, or Math PhD- just a CS degree and an MFE. I think tough classes in an MSF program could get you to that level, too, but you need to understand this stuff at a certain level to work in quant finance.
If you wanted to do an MFE program rather than an MSF, you'd also have to study for the GREs again and get at least a 165Q or about 90% on the exam.
@"TNA" for his take.
IMO, if you are doing an MSF, study corp finance. Quant track will not be quant enough so you'll lose to true MFE graduates and you'll be competing with corp finance guys for banking roles.
Either go true MFE or study corporate finance.
how much more quant is MFE vs. MSF-quant track? Which is better for the job market? What's your take on Asset Management vs. corporate finance, for the IB analyst or ER analyst?
At the end of the day, while I'm going to a really good program, I'm still not from Ivy League, or a DI-lacrosse player or old money WASP.
Agree with TNA on this. That said, if I saw the proper coursework, I'd still recommend a good MSF candidate for an interview. If it helps, quants aren't as picky about degrees and stuff, as long as you know what you're doing.
To compete with the MFEs for quant-heavy jobs outside of pricing in S&T, you should:
1.) Know how to code. Know how to write stuff in R. 2.) Know what a covariance matrix is.
3.) Know what a t-stat is.
4.) Know how to run and interpret a multivariable linear regression. Know the difference between an L1 or Quantile regression and an L2 or least squares. 5.) Know what ARMA and GARCH mean. Be able to figure out if a model is stationary, assuming I give you an econ textbook. 6.) Be able to read and understand a behavioral finance paper published in the Journal of Finance. 7.) Know what a joint distribution's copula is. Talk about how the copula influences the behavior of the distribution. 8.) Know how to vet a model's assumptions. A simple QQ plot would have saved S&P a great deal of headache when it came to handing out AAA ratings on CDOs.
These 8 requirements aren't the nightmarish stuff of an MFE that everyone complains about. That's stochastic calculus, the Girsanov Theorem, Feynman-Katz, and change-of-measure stuff, which is pretty darned mind-bending even for a smarter-than-average engineer. These 8 are about as complicated as what you learn as an undergraduate engineer.
If your program teaches you this, you can compete with the quants. If your program does not teach you this, stick to a corporate finance specialization.
Any good MFE program will require you to learn the Girsanov Theorem. This is probably the most complicated theorem I've ever learned, and is probably the toughest thing you have to learn- and apply- as an MFE. I consider myself to be a pretty smart guy, I understood most of the terms on that page, but I literally sat looking at it for three days with a blank stare on my face:
http://en.wikipedia.org/wiki/Girsanov_theorem
Nobody ever told me how difficult an MFE program gets. IMHO, for an American-born person, this theorem is the toughest part of an MFE. After that, everything is downhill.
Nobody will expect you to learn this unless you are in a program specifically designed to train people to price exotic securities (an MFE or maybe a Finance/Econ PhD) or if you're doing a PhD in particle physics. Otherwise I don't see any benefit or need for math beyond what an undergraduate engineer would learn.
haha guys I get the idea, I think this would be a climb, I'd have to go back to 11th grade essentially to take pre-calc and calc, get As or Bs, and then prob take forever to complete. Tho what kind of pay/security/marketability would I have with quant finance vs. corporate finance/asset mgmt?
It's probably about the same, but quants earn the same while working less. We also have a lot of optionality in our careers that doesn't quite exist at the same level for people with traditional finance educations. We are also not required to be social animals, play politics, or play golf with people we don't like with but need business from.
I'm not going to discourage you from climbing MFE mountain, but just know that you will have to fight the two abominable snowmen- Feynman-Katz and the Girsanov Theorem- when you get to the summit. With a solid quant MSF the way I imagine it, you just have to get ~500 feet past the Tree Line; with a corporate finance MSF, you get to hang out in the valley below.
I think the MIT MFin is a good example of a program that can take you up to the tree line without taking you to the summit- and land you roles in portfolio strategy and analytics that can eventually get you into a hedge fund. You'll probably never be a PM (that would require a PhD and Journal of Finance publications), but you can still have a good life.
Illini, great posts and advice. I'm going to Bocconi for their MSc Finance program in September, and it is a bit more quantitative than a typical finance masters. Since I graduated last year and only had up to calc 2 (barely remembered anything), I started self-studying intensely a month ago. Currently self-studying calc III and linear alg concurrently, and once I start feeling comfortable i'm gonna throw in linear algebra, diff equations and finally probability theory. Do you have any advice on structuring my studying? I'm basically putting in 8-10 hours a day as it is (luckily I really enjoy this stuff) and have been making really good progress, but just wanted some wisdom/ advice on anything I should be aware of.
Was also suggested a great book called Mathematics for Economists, has been amazing in showing how all this math actually applies to econ/fin. Really interesting stuff
I have a pretty good idea what program you are talking about. I would recommend the Corp Track over the Quant track. Better diversity in your class and you'll have plenty of great finance opportunities.
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