Quick question about "Risk Management"!

[JohnnyL]

Hello, undergrad kid here!

My major is a Statistics and I'm planning to apply to the MFE program.
Lately, I got an interest in terms of what the role of 'Risk Management' is in finance companies.
So, I'm just looking for people who can advise me about that...

let me ask you a couple of questions!

1. Are there differences between Risk management and Quantitative risk analyst?
2. Is MFE degree enough for the Risk management? Or would I need a Ph.D.? I'm wondering if Ph.D. would be a waste of my time.
3. Is the work still growing up? I mean I'm just wondering whether Risk management is still a good job, or is in danger of disappearing by AI.
4. Which software should I get used to for Risk management? I want to know the software used in the real situation.

Thank you for your time!

 

[Ken Abbott]

Hello, undergrad kid here!

My major is a Statistics and I'm planning to apply to the MFE program.
Lately, I got an interest in terms of what the role of 'Risk Management' is in finance companies.
So, I'm just looking for people who can advise me about that...

let me ask you a couple of questions!

1. Are there differences between Risk management and Quantitative risk analyst?
2. Is MFE degree enough for the Risk management? Or would I need a Ph.D.? I'm wondering if Ph.D. would be a waste of my time.
3. Is the work still growing up? I mean I'm just wondering whether Risk management is still a good job, or is in danger of disappearing by AI.
4. Which software should I get used to for Risk management? I want to know the software used in the real situation.

Thank you for your time!

1. "Risk Management" is a term that can be used generally, but in this case means desk coverage - the risk people that interact with the traders and trading managers. Quant Risk Analysts build or validate models.
2. A quant finance degree is plenty. (Notice I didn't use the term MFE. Engineers build bridges and design circuit boards. I don't believe there is such a thing as a "financial engineer.")
3. Everything is at risk from AI, but risk teams are still growing.
4. People code in whatever is the flavor-of-the-month. This month it's R and Python, I think. (I haven't written code in over 20 years.) People also use spreadsheets extensively.

 

[Daniel Duffy]

2. Do "financial engineers" build something? Has the term ever been defined at some stage? There seems to be a myriad of definitions.

 

[danielfang]

May I know whether it is a practical career path to start as a model validation quant or a research quant, then switch to front office in two/three years? I am applying to the MFE programs 2019 intake.

 

[Ken Abbott]

May I know whether it is a practical career path to start as a model validation quant or a research quant, then switch to front office in two/three years? I am applying to the MFE programs 2019 intake.

People do switch.

Your concern is premature, though. You need to get an entry-level position and a) figure out whether you like finance and b) assuming you do, which aspects of it interest you most. I changed my mind several times over my career. I started out wanting to be an investment banker. When I worked on investment banking deals, I discovered i didn't like them very much. I much preferred the fast pace of sales and trading.

 

[danielfang]

People do switch.

You're concern is premature, though. You need to get an entry-level position and a) figure out whether you like finance and b) assuming you do, which aspects of it interest you most. I changed my mind several times over my career. I started out wanting to be an investment banker. When I worked on investment banking deals, I discovered i didn't like them very much. I much preferred the fast pace of sales and trading.

Hi Ken,

Thanks for the reply. I agree with you that we tend to find out whether we really love the job after we have started doing it. That's why I want to switch the career from an engineer to a quant after I have been working for a while. The concern is more related to the job market. I desire to be a desk quant, but I heard that hitting the market to be a desk quant as an MFE graduate is very competitive. When I talked to a program manager last week, she told me that 80% of the students wanted to become traders when they enrolled. But 1.5 years later, they ended up with a variety of roles in the industry. Therefore, I was thinking that if I cannot become a desk quant when I graduate, maybe starting somewhere in the middle office, picking up the necessary skill sets and then switching to the front office is an alternative way. More importantly, in my opinion, to get a job first and earn the tuition back.

 

[Archidamus]

You need to get an entry-level position and a) figure out whether you like finance and b) assuming you do, which aspects of it interest you most. I changed my mind several times over my career. I started out wanting to be an investment banker. When I worked on investment banking deals, I discovered i didn't like them very much. I much preferred the fast pace of sales and trading.

Ken, I'm half way through my MS Stats, and wanted to see if you had any thoughts on how marketable that degree is these days with all the MFEs. I work in a totally different field currently, so I get that I need to land my first job in the industry before worrying about my career path. I know you were a stats guy and successful, but have things changed so much that only MFEs are looked at? Thanks.

 

[Ken Abbott]

I think there are generally two types of people in finance - the numerate and the innumerate. Whether it’s in math or stats or physics or materials science, an advanced degree of some sort allows you to appreciate (if not solve) the many types of quantitative problems that face finance professionals.

Of course there’s a distinction between hardcore quants and people who are quant-lite (like myself) in terms of what functions they can perform. But ANY kind of technical degree will leave you with the ability to categorize, and ultimately solve (or at least attempt to solve) most problems. At a bare minimum, you’ll know when to bring in an expert.

 

[Archidamus]

But ANY kind of technical degree will leave you with the ability to categorize, and ultimately solve (or at least attempt to solve) most problems.

That's a good point. Many of my fellow undergrad engineering majors don't work in engineering roles, they got hired elsewhere for their problem solving abilities. Thanks for insight.

 

[Ken Abbott]

That's a good point. Many of my fellow undergrad engineering majors don't work in engineering roles, they got hired elsewhere for their problem solving abilities. Thanks for insight.

No charge.