Math/Finance

51 Replies

What's the connection?

I was at a graduation recently where the commencement speaker announced future plans for each of the Math graduates as they received their diplomas. As I expected, many were headed to either a job or graduate study in Math, Computer Science, Engineering, Actuary, etc. But, surprisingly to me, a (significant) number of them were going on to finance and investment banking. I didn't think there was a connection. Sure, finance and investment banking have some math, but isn't that something a business major gets as part of their routine education, why do they even need a Math major?

What am I missing?

All the good liberal arts jobs are taken?

"Investment banking" is today's buzzword for "make lots of money"...

Plus, the big math companies aren't hiring like they used to... :)

Originally posted by @J Scott:
"Investment banking" is today's buzzword for "make lots of money"...

Plus, the big math companies aren't hiring like they used to... :)

Synonymous names of large math companies would be some funny inside jokes one could use on their own holding companies. That made me chuckle.

Originally posted by @Dion DePaoli :
All the good liberal arts jobs are taken?

Or, business majors don't have a clue about math other than punching a few numbers into a predefined spreadsheet or calculator.

To speak to more of the heart of your observation and question Dave. I can't remember where I saw the data but it was pretty interesting to say the least. The general idea was that many of the science fields that had large cores of math relations have seen a drastic reduction in new graduates who seek employment in the field of study. For instance, physicists.

Many of those folks were being snatched up by large public companies and put into finance type rolls. The numbers were, like I said, pretty staggering. A little saddening too, if you have some compassion for science, which I do.

As @J Scott implies it is all about the money. Would you rather become go work in your field of study and earn $80 to $100k or would you like to work for Goldman Sachs and make 10 times that?

Originally posted by @J Scott:
"Investment banking" is today's buzzword for "make lots of money"...

Plus, the big math companies aren't hiring like they used to... :)

That is what I think. Everybody want's to go where the money is, regardless of major. There is no particular correlation between math and finance.

The only truly honest goal I heard during the whole ceremony was the guy that said simply he wanted to be "self sufficient", that actually was the one I thought was closest to reality and had a ring of a realistic goal with parents.

That is what I think. Everybody want's to go where the money is, regardless of major. There is no particular correlation between math and finance.

There absolutely is a reason for this.

Mathematicians develop computer algorithms/mathematical formulas that are used in high frequency trading (HFT).

http://en.wikipedia.org/wiki/High-frequency_trading

At the undergraduate level there is very little need for heavy math machinery. At the graduate level and beyond there is some really healthy utility for abstruse mathematical models in applied finance. A lot depends on the university, the student’s peers, the intended path after the degree, etc.

Originally posted by @Dion DePaoli :
To speak to more of the heart of your observation and question Dave. I can't remember where I saw the data but it was pretty interesting to say the least. The general idea was that many of the science fields that had large cores of math relations have seen a drastic reduction in new graduates who seek employment in the field of study. For instance, physicists.

Many of those folks were being snatched up by large public companies and put into finance type rolls. The numbers were, like I said, pretty staggering. A little saddening too, if you have some compassion for science, which I do.

As @J Scott implies it is all about the money. Would you rather become go work in your field of study and earn $80 to $100k or would you like to work for Goldman Sachs and make 10 times that?

Along the lines of science majors not getting jobs in their fields, I have always been struck by the lack of enthusiasm engineering companies have for hiring physicists. As an engineer having taken a number of physics classes, I quickly realized that engineering WAS physics, only dumbded down a little. Companies hire for the most curious reasons. I know at least one kid having graduated in physics still doesn't have a job related to his field ... what a pity.

Finance does hire tech types, I first realized this watching a FronLine episode called Money, Power and Wall Street. While it's true there are jobs in the financial sector for Math majors, I believe is is minimal...unless somebody know differently.

While it's true there are jobs in the financial sector for Math majors, I believe is is minimal...unless somebody know differently.

If you call a billion dollar plus industry minimal...

Originally posted by @Kurt K. :
While it's true there are jobs in the financial sector for Math majors, I believe is is minimal...unless somebody know differently.

If you call a billion dollar plus industry minimal...

In terms of number of people employed, a billion dollar industry could certainly be minimal.

Our "finance" industry is worth TRILLIONS, add another set of zeros.

Our US Mortgage market alone is $14.3 Trillion. Frankly a billion dollars is just a figurative drop in the bucket related to the industry as a whole.

Certainly it is relative.

Usually when one pitches a new product/idea and it has the potential to be a billion dollar industry, people listen as well.

Hence, the phrasing "if you consider", some will, some won't. Some consider employment, some revenues, some profit margins.

According to wikipedia:

"In the United States, high-frequency trading firms represent 2% of the approximately 20,000 firms operating today, but account for 73% of all equity orders volume."

You are missing a lot.

Read up on quantitative analysis , derivative and options valuation techniques, and stochastic methods. They all use "higher" math. I can recommend some books if you like, none of which are written by Michael Lewis.

Originally posted by @Steve B. :
I can recommend some books if you like, none of which are written by Michael Lewis.

HA....good stuff.

Originally posted by Account Closed:

Along the lines of science majors not getting jobs in their fields, I have always been struck by the lack of enthusiasm engineering companies have for hiring physicists.

My background is engineering, though I pretty much have a degree in math as well (3 credits shy) and I used to be a physics major (I wasn't smart enough). I've interviewed many hundreds of engineers, and even a few physics majors in my time. So, I have some related experience here...

My take is not so much that engineering and tech firms don't like physics majors -- it's that they don't like anyone who doesn't have an engineering or comp sci degree. Actually "don't like" is a bit too strong -- it's more a lack of respect for these degrees for absolutely no apparently reason other than the belief that engineering and comp sci are more related to tech than other majors.

Of course, this is often incorrect, but the basis of this belief makes sense -- engineers and comp sci majors are going to have more hands-on experience in college than students in other majors. And this I've found to be very true. I actually just hired three summer interns for a tech startup that I'm part of, and the level of hands-on experience by the engineering and comp sci majors was well above that of students majoring in other fields.

So, while I agree that in theory physics and other majors are just as -- if not more -- rigorous than engineering and comp sci, the practical application of knowledge is more stressed in these majors than in other majors. And when hiring young guys/gals, that's a big indication of whether they'll be able to hit the ground running or whether they'll need a lot of hands-on training to come up to speed.

Just my $.02...

Originally posted by @Steve B. :
You are missing a lot.
Read up on quantitative analysis , derivative and options valuation techniques, and stochastic methods. They all use "higher" math. I can recommend some books if you like, none of which are written by Michael Lewis.

I'm assuming that was directed at me. I haven't read Michael Lewis's book, but nice quip.

My example wasn't intended to be all encompassing. I just chose one, of the numerous examples of why one with a degree in math would go into finance, that I felt David C. has maybe heard of since it's recent news from said book, as this is what he asked for in his original post "What's the connection?"

No that was directed at the OP, please reread his post to understand my quip in context

Originally posted by @J Scott:
Originally posted by @David C.:
Along the lines of science majors not getting jobs in their fields, I have always been struck by the lack of enthusiasm engineering companies have for hiring physicists.

My background is engineering, though I pretty much have a degree in math as well (3 credits shy) and I used to be a physics major (I wasn't smart enough). I've interviewed many hundreds of engineers, and even a few physics majors in my time. So, I have some related experience here...

My take is not so much that engineering and tech firms don't like physics majors -- it's that they don't like anyone who doesn't have an engineering or comp sci degree. Actually "don't like" is a bit too strong -- it's more a lack of respect for these degrees for absolutely no apparently reason other than the belief that engineering and comp sci are more related to tech than other majors.

Of course, this is often incorrect, but the basis of this belief makes sense -- engineers and comp sci majors are going to have more hands-on experience in college than students in other majors. And this I've found to be very true. I actually just hired three summer interns for a tech startup that I'm part of, and the level of hands-on experience by the engineering and comp sci majors was well above that of students majoring in other fields.

So, while I agree that in theory physics and other majors are just as -- if not more -- rigorous than engineering and comp sci, the practical application of knowledge is more stressed in these majors than in other majors. And when hiring young guys/gals, that's a big indication of whether they'll be able to hit the ground running or whether they'll need a lot of hands-on training to come up to speed.

Just my $.02...

Interesting background. Coming from a similar background (although not quite as accomplished) my take is only slightly different. Somebody just out of college doesn't have much if any hands on experience, regardless of major, so whatever a job candidate is lacking in experience will quickly vanish shortly after starting work. For a new grad, it's more about innate ability and desire than hands on experience to my mind. I know companies weigh experience heavily, they are after all out to make a profit as fast as possible and experienced employees are going to get them there, nothing wrong with that. I would add that hands on experience in college depends a lot on the institution they graduate from. In CA, the UC systems produces the more theoretical types for engineering, comp sci, physics and math, while the CSU system produces the more practical hands on types, more labs, senior projects, less theory, more practical problems in class...you can get good employees from either system. Honestly, I think it's all about school snobbery and major snobbery. This is all kind of an aside.

Let me ask my question a little different since the folks responding to this thread have background directly related to where I'm trying to go with my original question.

If you were advising a new Math grad what to do next, would you direct them towards a comp sci job/degree, a finance job/degree, or direct the grad to hard money lending and trustee sale buying and forget about school and any other unrelated job. Keep in mind the new grad has a good mentee for hml and trustee sale buying. And while I truly believe real estate investing is the most rewarding and lucrative path, I'm also not so naive to think that it couldn't turn into a bone yard with over regulation or whatever, leaving one with only those options developed early in life to continue on.

Originally posted by @Steve B. :
You are missing a lot.
Read up on quantitative analysis , derivative and options valuation techniques, and stochastic methods. They all use "higher" math. I can recommend some books if you like, none of which are written by Michael Lewis.

Steve, I can see from your profile you have a blend of technical, finance and re investing background so this is right up your alley. How would you advise a new Math grad, pursue comp sci, finance, or re investing as a next step? If finance, what companies would you apply to and what kind of work would you expect to doing?

Thanks for the reading selection but it's a little to in-depth for what I'm looking for right now.

Hi David,

Yes I also started my first degree in the UC system as well. Before I answer your question I will take exception with you calling Engineering dumbed down from physics. In large we are just talking about levels of abstraction. My work in embedded system design and digital design would be between the analog design and computer science programming. Physics would just be the lowest level with no abstraction. You can't really say the guy who is good in physics vs. analog design vs digital design vs programming vs material fabrication vs mechanical production is doing something easier or harder. With modern complex systems you need engineers proficient in all these areas to produce a finished product. The physicist, while needing the strongest math background, would actually be the guy least able to produce a real product just as J. Scott indicated.

Are you asking about how you math background is employable? If your not a programer already and very proficient with two or more languages then I wouldn’t even consider it. While CS does have its math foundations with recursive functions, vectorization, data structures, and computing optimal data sorting algorithms, none of that is going to make you especially employable without practical language proficiency.

Investment finance would take advantage of math majors aka “quants” for all manors of making money trading and hedging risk. But to be competitive in this field your are talking about competing with the best of the best at places like Goldman Sachs, who hire MIT, Chinese, and Indian Ph.d's to move billions about making profits consistently off billion dollar transactions. I think this field is very well paid but you better be a great mathematician, like the best 1-2% of your graduate class to have a chance. Think Edward Thorpe type stuff.

Two areas that I think are viable for someone with some combination of engineering/programming/math backgrounds would be financial programming, basically maintaining code for financial institutions, or Big Data. If you can use your math background combined with some R,SPSS, or SAS programing I think there are tons of ways to make money in data mining, data warehousing, and statistical analysis.

Dumbed down was a bad choice of words. I meant to say engineering is based on physics. In any engineering program, before taking engineering classes, one has to complete a physics sequence, all of engineering is based on the fundamental principals of physics. A physicist therefore has the fundamental knowledge to solve engineering problems, and there are many engineering jobs that a physicist could do without in-depth training specific to engineering, imho. Let's face it, there are many "engineering" jobs that you don't have to know squat for, I've worked with many of those people over the years. I designed/coded/tested real-time embedded software for many years so I know exactly what you are talking about and don't disagree with any of it. I'm exploring this topic for a new grad, not myself.

I know a math major is employable. What I didn't know is that they could be employed in the field of finance. The new Math grad knows MatLab, Java, C, data structures and algorithms ... it was an Applied Math degree, not pure math. Were not talking about a PhD in Math here. So, what I'm hearing is that there are possibly software opportunities in the field of finance...okay.

You mentioned in your profile you have a finance degree. Let me ask you this, knowing what you know now about comp sci/engineering, finance and re investing, do you see any advantage to getting a finance degree?

Interesting you bring up Edward Thorpe, now you are talking about a whole different career ... gambling:)

What RTOS's and platforms have you worked with? You seem very accomplished.

I would think a math grad with a good handle on C and Java would have lots of job opportunities, none of which come to mind immediately but i'm sure it would be very employable, I'm just not sure at what salary but i'd assume 60-80k.

I dont regret my first degree although I do regret not being a more diligent and dedicated student when I could learn 5x faster in my youth than I can now. I definitely regret thinking I was suitable for an 9-5 office job with a suit and tie, something I wasted four years on, in an environment I was completely unsuited for. If I could repeat it I would have started in CS rather than pick it up later.

You may also be surprised how financially ignorant some great engineers are. I remember one Embedded systems engineer interrupting a conference to repeat some non-sense he heard at a get rich quick seminar which correlated stock volatility to buy and sell signals. Another time, when I worked at Sun Microsystems, I remember a Chinese Ph'd type printing reems of financial data on the company printer in order to become a successful day trader instead of doing his job. So I think having a financial background is very useful to seeing profitable opportunites and not having on is perhaps more pernicious in not recognizing folly.

Remember Thorpe did a lot of work on probability and stock arbitrage as well as gambling theory. So along with guys like Fischer Black and Myron Scholes combined their math and financial knowledge to make a lot (and lose a lot) of money. I think combinatorics and stochastic methods have huge profit potential if applied usefully.

Most recently it was VxWorks running on a PowerPC. We would develop on a Sun Workstation using a C cross compiler. I left that job 4 years ago to do re full time.

I knew Thrope was a Mathematician and the father of blackjack card counting but didn't know he also worked on financial problems, not surprising I guess.

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