Actuary transitioning into Quant Finance

[actuarial_applicant]

Hi Guys,

Just hoping to get your 2 cents on career switching to quant finance. I'm currently an actuary based in Singapore with 3 years of life insurance experience. Over my actuarial career, I've worked in the area of pricing and data analytics, and qualified as an actuary within the quant finance and investments track. I enjoy providing strategic advice from an analytics point of view, but find the culture in insurance to be rather slow and traditional. I have been contemplating a move to quant finance and was hoping to get perspectives through this forum.

1. What is the culture like in for quants in large investment banks? Do you have to be the smartest guy in the room and could have otherwise worked at google? Or can a reasonably smart person without a theoretical physics background survive in such an environment?

2. How useful is an MFE? My conversations with grads from Imperial seem to indicate to me that MFEs are not competitive when applying for a quant role. It seems that you'd have to do a PhD to break into the field now.

3. What are the prospects for quant finance in the next 5/10 years? I understand that much of the research in quant finance has already been done. Does this mean that quant roles will eventually dry out?

 

[KillingField]

1. Everyone says they only hire the best. I don't this is true for Google or for Goldman Sachs: The operations of such firms are massive and people come and go even when they are in high demand internally. Traders often don't have very quantitative backgrounds, at least not to the extent of a PhD, yet the desk heads are some of the sharpest people I've met at a bank (and some of them are, frankly, stupid). It's just a regular workplace with a lot of people running around: as a quant you will also deal with people from other groups a lot, and some of them may have little to no technical background.

2. MFE will certainly open doors and should get you interviews at banks. It may be less useful for the buy side. Imperial being in London, a typical hire in a quant team is still probably someone who went through DEA El Karoui (French speakers are overrepresented in London). I understand that as part of their schooling they'll usually do half a year as an intern, and after graduating, too, it is typical to first get an internship which one'd hope to convert to a full time position.

3. The math is not the hard part. Implementing it all in a consistent way in code and in operations is a huge amount of work, and quants often coordinate and themselves do a lot of it. There are subtle changes to the markets all the time, requiring new models and/or overhauls of the operational setup (sometimes larger like FVA a few years back), and with increased regulatory pressure to document more and more of the models, the work is not about to dry up. Though one might argue that a big chunk of it will become a bit boring. Some of it will however be probably more interesting as more things go electronic and quants in a sense start to do more of what has typically been the traders' job.

Now I didn't even touch on buy side as you asked about investment banks, but even inside banks there are many roles that need people with quantitative backgrounds, some in quant land like the traditional desk quant and the risk/XVA/middle office quant, some in other places like in quant trading, model validation, valuation, research, machine learning etc. A lot of these are often organizationally not part of quants, depending on the bank, but can have a quant-like workload. Like model validation who read the documents FO quants submit for review and independently go through the math and to some extent implement the models.

 

[Ken Abbott]

1. What is the culture like in for quants in large investment banks? Do you have to be the smartest guy in the room and could have otherwise worked at google? Or can a reasonably smart person without a theoretical physics background survive in such an environment?

2. How useful is an MFE? My conversations with grads from Imperial seem to indicate to me that MFEs are not competitive when applying for a quant role. It seems that you'd have to do a PhD to break into the field now.

3. What are the prospects for quant finance in the next 5/10 years? I understand that much of the research in quant finance has already been done. Does this mean that quant roles will eventually dry out?

1. Culture varies widely from area to area. If you're a quant developing a new approach to AML in compliance, you're on virgin snow and likely working alone. If you're an interest rate modeler or PDE person working on option pricing, you're essentially a commodity. Smart is necessary but not sufficient. Adequate with good communication skills trumps brilliant and inarticulate every time.

2. MFE (better stated: Quant finance. Engineers build bridges and design circuit boards. They don't price swaps.) provides institutional background. Without a firm understanding of the applications, your learning curve will be steep and painful. I see more and more people with masters degrees and fewer with PhDs.

3. Still growth in regulatory and fintech areas. To suggest that "most of the research has been done" sounds like the time the US patent office thought about closing in the late 19th century because everything that could be invented had been.

 

[PepeQuant]

1. Everyone says they only hire the best. I don't this is true for Google or for Goldman Sachs: The operations of such firms are massive and people come and go even when they are in high demand internally. Traders often don't have very quantitative backgrounds, at least not to the extent of a PhD, yet the desk heads are some of the sharpest people I've met at a bank (and some of them are, frankly, stupid). It's just a regular workplace with a lot of people running around: as a quant you will also deal with people from other groups a lot, and some of them may have little to no technical background.

2. MFE will certainly open doors and should get you interviews at banks. It may be less useful for the buy side. Imperial being in London, a typical hire in a quant team is still probably someone who went through DEA El Karoui (French speakers are overrepresented in London). I understand that as part of their schooling they'll usually do half a year as an intern, and after graduating, too, it is typical to first get an internship which one'd hope to convert to a full time position.

3. The math is not the hard part. Implementing it all in a consistent way in code and in operations is a huge amount of work, and quants often coordinate and themselves do a lot of it. There are subtle changes to the markets all the time, requiring new models and/or overhauls of the operational setup (sometimes larger like FVA a few years back), and with increased regulatory pressure to document more and more of the models, the work is not about to dry up. Though one might argue that a big chunk of it will become a bit boring. Some of it will however be probably more interesting as more things go electronic and quants in a sense start to do more of what has typically been the traders' job.

Now I didn't even touch on buy side as you asked about investment banks, but even inside banks there are many roles that need people with quantitative backgrounds, some in quant land like the traditional desk quant and the risk/XVA/middle office quant, some in other places like in quant trading, model validation, valuation, research, machine learning etc. A lot of these are often organizationally not part of quants, depending on the bank, but can have a quant-like workload. Like model validation who read the documents FO quants submit for review and independently go through the math and to some extent implement the models.

This is so far the most accurate description of Quant I have seen nowadays on this board.

To OP, I was studying your major and able to make a switch to FO quant. If you would like to do the SAME (either derivatives pricing or algo analytic), the most essential skill is ability to code (very well). Since Quant Finance is broad, if you are interested in other areas then it may not apply.

 

[Mathchismo]

1. Culture varies widely from area to area. If you're a quant developing a new approach to AML in compliance, you're on virgin snow and likely working alone. If you're an interest rate modeler or PDE person working on option pricing, you're essentially a commodity. Smart is necessary but not sufficient. Adequate with good communication skills trumps brilliant and inarticulate every time.

2. MFE (better stated: Quant finance. Engineers build bridges and design circuit boards. They don't price swaps.) provides institutional background. Without a firm understanding of the applications, your learning curve will be steep and painful. I see more and more people with masters degrees and fewer with PhDs.

3. Still growth in regulatory and fintech areas. To suggest that "most of the research has been done" sounds like the time the US patent office thought about closing in the late 19th century because everything that could be invented had been.

Another excellent post from Mr Abbott. Thanks again!

 

[Ken Abbott]

Another excellent post from Mr Abbott. Thanks again!

No charge.