QuantNetwork

Risk versus Portfolio Management

Tue, 09 Mar 2010 04:20:41 +0000

Aaron Brown is risk manager at AQR Capital Management and author of The Poker Face of Wall Street and A World of Chance (with Reuven and Gabrielle Brenner). He also is a columnist for Wilmott Magazine, and writes for a lot of finance and poker periodicals; as well as teaches classes and speaks at conferences. Mr. Brown serves on the Editorial Board of GARP and is a member of the National Book Critics Circle.

Unlike most fields, modern financial risk management can be traced back to a specific time and place, and a relatively small group of people. Some quants in New York City, between 1987 and 1993, codified knowledge from a variety of fields, thrashed out disagreements and created the basic foundations of risk management which remain valid to this day. Of course, much of the intellectual heavy lifting had been done before 1987, but it was not organized systematically nor known to any one person. And there has been much progress since 1993, but no shift in fundamental principles.

What’s in a name?

During the years of development, we discussed what to call the field. We wanted to distinguish it from fields like portfolio management and physical risk control that tried to minimize risk. We also wanted to exclude voodoo risk experts. In primitive societies, these witch doctors took credit for any good thing that happened (“the gods were pleased by your donation”) and selected victims to sacrifice after every bad thing (“that one, the one who gave nothing to the temple, has angered the gods”). They always urge conservatism, but if an innovation works out, are quick to explain they supported it all along. In modern times the words have changed, but the basic technique is the same. These descendants of shamans still vastly outnumber the people with serious and useful quantitative knowledge about risk.

In the 1980s, financial institutions did not have Chief Risk Officers or risk managers. They had controllers and compliance officers and committees to set trading limits or approve credit exposures. These people made risk decisions but from the standpoint of minimizing risk subject to constraints, or the inverse problem of limiting risk and letting everyone maximize profit subject to that constraint. The one area in which professionals were actively carving out a role for managing risk was insurance. Non-financial organizations hired quantitative experts to decide what level of physical and legal risk was appropriate and which risks should be mitigated directly, which should be self-insured and which should be subject to purchased insurance policies. These experts were known as “risk managers,” emphasizing their task of optimizing rather than minimizing. Since no one was using the term in finance, we adopted it as the best simple description of what we did.

Unfortunately, confusion began immediately. Too many academics ignored the professional field, and responded to the demand for papers and courses on risk management with traditional portfolio management topics. There are entire “Risk Management” textbooks out there without a word of risk management inside. Professionally, a lot of voodoo practitioners jumped on the bandwagon and adopted the title risk manager. These are the ones who stand around looking worried about everything, who discourage every risk, take credit for every success, and point fingers for every failure. They spend all their energies attempting to predict and prevent disaster.

You can easily identify a real risk manager. She is cheerful and usually advises more risk. She looks for the danger in every success, and makes sure to mine the silver lining of every failure. She thinks people who predict are her enemies, they’re the ones who say, “Build the wall on the north side of town, that’s where we expect the attack.” She says instead, “I don’t care what you expect, if you leave any gap in the walls, that’s where they’ll come. Risk management is about preparing for anything that might happen, not guessing what will happen.” And she has no interest in preventing failure, which can only be done by eliminating risk. She is happiest when people fail fast, and when the organization is robust enough to survive many failures. These are the conditions that encourage the creativity and innovation required for evolutionary success, not just surviving each day.

Review of Princeton’s Master in Finance program

QuantNetwork — Sat, 06 Mar 2010 00:51:13 +0000

_Gene_/Flickr

Princeton University Campus

This review was submitted on 3/2/2010 at 15:41:38 by a student who studied full-time in the program from 9/2008-5/2010*

Can you tell us a bit about your background?
12 years of work experience in private equity and venture capital.

Did you get admitted to other programs?
Columbia
MIT

Why did you choose this program (over others, if applicable)?
Quality of professors.
Course options.
Past career placement success.

Tell us about the application process at this program
Reasonable application process. Interview required for final part of application.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
10

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
Yes. Math boot camp. Particularly useful for me as I had been away from school for so long.

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
9

Tell us about the courses selection in this program. Any special courses you like?
Fixed income (very rigorous)
Risk management
Financial crises
Behavioral finance
Stochastic calculus

On a scale of 1-10, how would you grade the flexibility of the curriculum?
9

Tell us about the quality of teaching
Fantastic professors. Excellent TA’s (very helpful with homework).

On a scale of 1-10, how would you grade the quality of teaching?
10

Materials used in the program
A few textbooks. Mostly faculty notes and academic papers.

On a scale of 1-10, how would you grade the practicality of the curriculum?
9

Programming component of the program
C++
R
Matlab
Mathematica
Programming requirements vary based upon curriculum choices.

Projects
Both individual and group projects.
Option of conducting independent research with a professor for 1 or 2 terms.

Career service
Dedicated career service staff.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
9

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
Group very international (<20% from U.S.) Strong representation from Europe, Asia and South America.

What do you like about the program?
Small class so very personalized service from the faculty and staff.

On a scale of 1-10, how would you grade the value of the program for the price tag?
10

What DON’T you like about the program?
More course flexibility in the first year.

Suggestions for the program to make it better
With small class size, could probably offer more scholarships for tuition.

On a scale of 1-10, how would you grade your experience in the program?
10

What are your current job status? What are you looking for?
Asset and Portfolio Management
Offer pending.

On a scale of 1-10, would you recommend this program to others?
10

Click here to submit a review of your program

Jim Gatheral leaves Merrill Lynch to join Baruch MFE program

QuantNetwork — Fri, 05 Mar 2010 22:58:08 +0000

Jim Gatheral, Managing Director of Merrill Lynch, joins the Baruch MFE program

Nobody could blame Jim Gatheral if he would have spent more time than usual in his Merrill Lynch’s office yesterday. It was his last day at the firm where he has been Managing Director for the last 17 years.

Jim Gatheral, one of the top quants in the world and author of the best selling book “The Volatility Surface: A Practitioner’s Guide” is joining the Baruch MFE program as a full-time tenured professor in the Math Department in Aug, the program announced via email and on Twitter yesterday.

The latest hiring caps off several recent high-profile faculty additions by the Baruch MFE program. In January, the program announced on its Twitter’s page the hiring of Ken Abbott, Managing Director of Market Risk at Morgan Stanley who is teaching Risk Management in the program this semester. The program’s website also lists Attilio Meucci among its latest faculty. Mr. Meucci, researcher at Bloomberg LLP., is headlining the 2010 Advanced Risk and Portfolio Management bootcamp (ARPM) at Baruch College, following the successful event last year.

When reached by email for comment, Dan Stefanica, Director of the Baruch MFE program confirmed the hiring of Jim Gatheral. According to Stefanica, Gatheral will teach two courses in the program; The Volatility Surface (in the Fall semester) and Mathematical Market Microstructure (in the Spring semester). “Dr. Gatheral will be teaching courses regularly in our program, on topics which are of interest to him, such as volatility surface modeling and market microstructure.” – said Dan Stefanica.

According to Jim Gatheral’s Wikipedia entry, his work has moved in the direction of Market Microstructure, especially as applied to Algorithmic Trading. This lead Quant Network to speculate about a future course offering in Algorithmic Trading at Baruch MFE. However, at this point, this has not been confirmed by the program.

In an email to Quant Network, Dan Stefanica explains the benefit of having Jim Gatheral in the program. “Being able to learn from a top practitioner who worked both on the trading side and on the modeling side represent a unique opportunity for our current and future students, as well as for our alumni who regularly take courses in our program.” – said Stefanica.

He also gave hints about more changes coming to the program. “Equally important, our faculty is looking forward to working with Dr. Gatheral on various research projects, as well as on further developing the curriculum of the MFE Program.” – the email continued.

When asked about Gatheral’s immediate involvement with the Baruch MFE program, Dan Stefanica confirmed that Jim will spend the next few months attending conferences and working at Baruch as a visiting professor. He will officially become a full-time tenured professor in August.

Many of the new faculties who join Baruch MFE recently also taught at NYU Mathematics in Finance program. Ken Abbott teaches courses at Baruch MFE, NYU and Rutgers programs. Jim Gatheral and Attilio Meucci have taught at NYU until recently.

Jim Gatheral is not available for comment on this article.

Review of MIT Sloan Master in Finance program

QuantNetwork — Fri, 05 Mar 2010 01:59:49 +0000

Wagner T. Cassimiro Aranha/Flickr

Massachusetts Institute of Technology

This review was submitted on 3/4/2010 at 16:12:03 by a student who studied full-time in the program from 7/2009 – 6/2010*

Can you tell us a bit about your background?
Undergraduate degree in Economics
Various finance summer internships

Did you get admitted to other programs?
Columbia QMSS
Yale IDE
Duke Economics
UCL Economics
Warwick Finance & Economics
Among others…

Why did you choose this program (over others, if applicable)?
I chose this program because of flexibility of the curriculum, the strength of the faculty and I knew that my fellow students would be some of the best and brightest. I was particularly excited about taking the first-year Finance PhD courses.

Tell us about the application process at this program
The application process is relatively straightforward. I think a few things have changed since I applied; I think an interview may now be required.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
9

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
We had a “refresher” course. This involved a one week prep, covering financial economics and then the Finance Theory course which covers investments and corporate finance. The vast majority of the students found the class to be extremely engaging and a lot of information to help them jump start the program. This was particularly important, as job recruiting would begin in the fall.

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
8

Tell us about the courses selection in this program. Any special courses you like?
The course selection is divided between required courses, restricted electives and unrestricted electives. Restricted electives tend to be the typical finance courses. Required classes are the finance theory, a proseminar (which involves helping a company with either a financial engineering problem or a financial management problem.)

Almost any graduate level course at MIT can count as a unrestricted elective. I pursued a financial economics pathway. I took the first 2 classes (1 each semester) of the Finance PhD track, which included Financial Economics with Stephen Ross. This was probably my favorite course.

Other students took courses in mathematics, statistics, computer science, english/literature, game theory, negotiation.

You can actually take many elective courses, if you have the time.

On a scale of 1-10, how would you grade the flexibility of the curriculum?
10

Tell us about the quality of teaching
The quality of teachers varies. All of the full professors are top researchers who all have published in the leading economics and finance journals. Many of them run their own hedge funds or are advisers and have a unique professional and academic insight.

Despite this, some professor are better at teaching than others.

The practitioner professors are more often teaching project based classes, such as Proseminar or Practice of Finance seminars.

On a scale of 1-10, how would you grade the quality of teaching?
9

Materials used in the program
Required courses:
Usual stuff, BKM, BMA, Hull, etc
Cochrane, “Asset Pricing”
Campbell, Lo, McKinlay, “Econometrics of Finance Markets”

Electives: Tons of books, a sample
Leroy, “Principles of Financial Economics”
Ingersoll, “Theory of Financial Decision Making”
Sterman, “Business Dynamics”
Duffie, “Dynamic Asset Pricing Theory”
Oksendal, “Stochastic Differential Equations”
Grinold & Kahm, “Active Portfolio Management”
…

And many more. And of course, these vary depending on your choices.

Note: Below on the practicality, I chose a more theoretical courseload than most.

On a scale of 1-10, how would you grade the practicality of the curriculum?
7

Programming component of the program
We are free to use whatever language and tools we want to help us. And we are expected to either know this already or learn this ourselves. While here, I have used stat/math packages such as R, MatLab and EViews.

Projects
I have done two main projects (among countless smaller ones). One involved designing better optimization algorithms for factor portfolios for a large asset manager. The other involved designing a new investment product.

Career service
There is a dedicated career adviser within MIT Sloan’s career services center that works purely with M.Fin. students. Furthermore, as students at Sloan, we have access to both the career services, interviews and job postings at both regular MIT and Sloan.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
9

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
This dynamic may change next year; but we were a very small and tight knit group, regardless of nationality, etc.

What do you like about the program?
The flexibility is what drew me to the program and that’s still what I find best.

On a scale of 1-10, how would you grade the value of the program for the price tag?
9

What DON’T you like about the program?
There are so many things to do/see/take advantage of at MIT (guest lectures, classes, conferences, events) and I don’t particularly have the time to do these things.

The MIT Sloan facilities, in a physical sense, ie number of classrooms, study spaces, etc is somewhat limited and old. However, a new building should be finished this fall, just in time for my class not to be able to use it.

Suggestions for the program to make it better
I would consider rearranging the order that the students take some of the required courses. I would also help employers understand the nature of the program. It is a Masters of Finance degree; not necessarily an MFE degree, albeit a student could tailor it to a quantitative finance degree.

On a scale of 1-10, how would you grade your experience in the program?
10

What are your current job status? What are you looking for?
I have accepted a job offer to work in a bank in NY.

On a scale of 1-10, would you recommend this program to others?
10

Other comments
Being in Boston is good for those looking to get into asset management.

Click here to submit a review of your program

Pricing ABX index for Newbies

Andy — Wed, 03 Mar 2010 01:59:31 +0000

Got asked this from one of my friends today. I found a bit of info here and there via google but no “ABX.HE for dummies”. I thought I would put this article together for future reference in case someone (or myself) may get asked this during an interview with some of the credit rating agency or hedge fund working with mortgage portfolio.

All data reference is from MarkIt website since it’s readily available and I’ve worked with their dataset before.

What is ABX.HE index?

When Markit Group Ltd. started indexes of the subprime-mortgage market in 2006, there was no fanfare. They were called the ABX.HE indexes, and for many months, most investors had no idea of the market measures with the wonky name.
Now, the indexes are some of the most closely watched barometers on Wall Street. They are a focal point for trading in the U.S. subprime-debt markets — which lately have come to dominate attention on Wall Street because of problems at two big Bear Stearns Cos. hedge funds.

How does MarkIt collect ABX.HE index data?

From offices in London, Markit collects credit-default-swap pricing data from about 80 credit-market dealers. Markit’s computers then compile and clean those data and distribute them early the next morning to clients

How does MarkIt publish ABX.HE index data?

Any given ABX.HE index comprises just 20 names, all of which are mortgage-backed securities with the same credit rating, and all of which were issued within six months of each other. Each name carries a 5% weight in the index.
The level of the index reflects not the price at which those names are trading, but rather the price at which credit default swaps on those names are trading. (The MBSs themselves barely trade.)

How does ABX.HE index data look like?

Source: abx page
If you click on each index name, it will show the constituents (20 mortgage-backed assets).

What does each column mean?

Here’s the definition of the various columns:

Index. This is ABX-HE, the index for mortgage loan insurance derivatives.
Series. This incorporates two subfields:
Tranch. The values are: AAA, AA, A, BBB, BBB- . These are the investment grades. “AAA” is the highest investment grade, representing loans to the most creditworthy corporations. “A” is the investment grade for standard prime mortgages (the old fashioned kind, where you put down a 20-30% down payment, and then make monthly payments based on a fixed interest rate). “BBB” and “BBB-” are the investment grades for the riskiest subprime mortgage loans, with “BBB-” being the riskiest.
Version. The values are: 06-1, 06-2, 07-1, 07-2. 06-1 refers to loans made prior to the first half of 2006 (H1 2006 or 1H2006). 06-2 refers to loans made prior to the second half of 2006 (2H2006). 07-1 refers to loans made prior to the first half of 2007 (1H2007). 07-2 refers to loans made prior to the second half of 2007 (2H2007). The launch date for the index is determined by the Version: 06-1 was launched on January 19, 2006; 06-2 was launched on July 19, 2006; 07-1 was launched on January 19, 2007; 07-2 was launched on July 19, 2007;
Coupon. This is the annual payment. When you purchase this insurance, you have to pay this percent of the amount being insured at the beginning of each year.
RED ID. This is the index code identifier.
Price. This is the current index value, and it represents an additional premium price above the Coupon percentage. This price index is always 100 on the day that the index is launched. As investor confidence changes, this value increases as confidence increases, and decreases as confidence decreases. This is the value that analysts are watching, because it’s been dropping like a stone.
High and Low. These are the high and low daily values of the index price since the index was launched.
Factor. The portion of principal currently outstanding is expressed as a Current Factor, which is initially 1.

How ABX is priced?

The ABX.HE indices trade based on price rather than spread, with a pre-determined fixed coupon (i.e., Fixed Rate) unlike the indices of corporate CDS, such as the DJ CDX and the iTraxx, with the exception of EM and HY. The fixed coupon is determined before the launch of the new series. If the quoted price of an index is different from par, the seller and the buyer of protection settle the difference when they enter into a transaction.
If the quoted price is below par, the protection buyer makes a payment to the protection seller. Over the life of a contract, the protection buyer pays the Fixed Rate Amount14 to the protection seller, based on the current notional amount of the index. As in the cash bond market, a market price above par means that the market spread is tighter than the fixed rate, and vice versa.
As in a single-name ABS CDS, the notional amount of an index is adjusted as any of the reference ABS (1) amortizes or prepays, (2) is written down, (3) defaults, or as (4) previous floating amount events are “reversed” (i.e., reimbursements occur). Unlike the single-name case, however, the index notional reflects change in the notional amount of all reference ABS in the index portfolio, which are initially equally weighted.

Now, let’s take an example. Let’s suppose that you’re a bank, and you have $10 million in high-grade “AAA” mortgage loans on your books, and another $10 million in “BBB-” subprime mortgage loans. You’re afraid that some of your borrowers won’t be able to pay, and you want some insurance.
If you buy that insurance on the day that the index is launched, July 19, 2007, then you pay only the coupon price. In the case of the highest rated “AAA” loans, the coupon value is “76″, and so you pay (0.76% x $10 million x Factor), or $76,000 for $10 million in “AAA” loans.
The rest of your loans are “BBB-” quality, and there the Coupon value is “500″, and so you pay (5% x $10 million x Factor), or $500,000 for the same kind of insurance on your “BBB-” loans. Quite a difference.
That’s what happens on the first day (July 19, 2007), because the Price index is always 100.

But now let’s suppose that you waiting until today, Dec 2, 2008, to buy the insurance. (These are still loans that were granted in the second half of 2007, and so the “07-2″ version is still what we want.)

On Tues, Dec 2, the price index for ABX-HE-AAA 07-2 (from the MarkIt table above) was 30.34. You still have to pay the $76,000 coupon price, but you also have to pay an additional ((100% – 30.34%) x $10 million x Factor) = $6,966,000. So, if you bought the insurance on Friday, you would pay a total of ($76,000 + $696,600) = $7,042,000.

LOOK AT THE DIFFERENCE YOU HAVE TO PAY TODAY VERSUS OVER A YEAR AGO. THIS SPEAKS VOLUME FOR THE QUALITY OF MORTGAGE SECURITIES.

Let do the same thing for our BBB- tranche.
On Tues, Dec 2, the price index for ABX-HE-BBB- 07-2 (from the table above) was 3.65. You still have to pay the $500,000 coupon price, but you also have to pay an additional ((100% – 3.65%) x $10 million * 0.861757612) = $8,303,034. So, if you bought the insurance on today, you would pay a total of ($500,000 + $8,303,034) = $8,803,034.

Here’s a summary of all four computations:

Date           Index          Coupon  Price   Total payment computation
---------  ------------------ ------ -------- ------------------------------
19-Jul-07  ABX-HE-AAA 07-2     76    100.00   $10M x (0.76%)= $76,000
19-Jul-07  ABX-HE-BBB- 07-2    500   100.00   $10M x (5%) =   $500,000

02-Dec-08  ABX-HE-AAA 07-2     76    30.34    $10M x (0.76% + (100%- 30.34%)*1) = $7,042,000
02-Dec-08  ABX-HE-BBB- 07-2    500   3.65     $10M x (5% + (100%- 3.65%)*0.861757612) = $8,803,034

Conclusion

Now, armed with this newly found knowledge, let try to understand mortgage lingo talks in serious financial publication like Bloomberg.
During my google search on this instrument, I found a few people commenting that they couldn’t understand the calculation found in this piece on Bloomberg published Feb 21, 2007.
http://www.bloomberg.com/apps/news?p…d=avEt.7ldbFGM

Prices for credit-default swaps linked to 20 securities rated BBB-, the lowest investment grade, and created in the second half of 2006 fell 3.9 percent to 78.59 today, and are down 19 percent since being introduced Jan. 18, according to Markit Group Ltd. The drop in the ABX-HE-BBB- 07-1 index means an investor would pay more than $1.1 million a year to protect $10 million of bonds against default, up from $389,000 last month.

Here is the calculation:
To buy protection for $10M of ABX-HE-BBB- 07-1 tranche in Jan 19, 2007, you would have to pay $10M * 3.89%= $389,000 using the data from the Markit table above.

Review of Georgia Tech QCF program

QuantNetwork — Tue, 02 Mar 2010 06:39:10 +0000

hectorir/Flickr

Georgia Tech Tower

This review was submitted on 2/20/2010 at 13:42:25 by Wanfeng Chen (contact him via gmail at wanfengc) who studied full-time in the program from 8/2008-12/2009*

Can you tell us a bit about your background?
B.E. Computer Science, Shanghai Jiao Tong University;
Internship: Machine Learning Group in Microsoft Research Aisa; Derivatives Dpt. in Haitong Securities; AXA HK.

Did you get admitted to other programs?
Minnesota MFE

Why did you choose this program (over others, if applicable)?
GaTech QCF is strong in its computational skills training and engineering math, due to the support form ISyE school, ranking #1 worldwide. They have a bunch of “real world” projects provided during the 1.5 years. Almost anyone interested in are able to contribute, which is very useful in job hunting. Furthermore, QCF has a large funding, so 1/3 students can get full scholarship during the 3 semesters.

Tell us about the application process at this program
Every thing went well.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
7

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
No

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
0

Tell us about the courses selection in this program. Any special courses you like?
1/3 courses are of selection from a pool

On a scale of 1-10, how would you grade the flexibility of the curriculum?
5

Tell us about the quality of teaching
Average

On a scale of 1-10, how would you grade the quality of teaching?
8

Materials used in the program
Generally texts are recommended reading. The professors prefer to use their own materials.

On a scale of 1-10, how would you grade the practicality of the curriculum?
9

Programming component of the program
C++, Matlab, SAS, R. Half of the homework are using simple programming.

Projects
Both

Career service
The director will send the resume book to the industry connection.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
6

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
N/A

What do you like about the program?
Real world projects

On a scale of 1-10, how would you grade the value of the program for the price tag?
8

What DON’T you like about the program?
Finance part is not strong

Suggestions for the program to make it better
N/A

On a scale of 1-10, how would you grade your experience in the program?
8

What are your current job status? What are you looking for?
Joined RiskMetrics.

On a scale of 1-10, would you recommend this program to others?
8

Click here to submit a review of your program

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Review of Claremont Graduate University’s Financial Engineering program

QuantNetwork — Mon, 01 Mar 2010 05:07:14 +0000

Burkle building on CGU campus which houses the Drucker school.

This review was submitted on 1/1/2010 at 21:47:28 by Kevin Zhang who studied full-time in the program from 9/2007-08/2009*

Can you tell us a bit about your background?
PhD student in Economics, SUNY-Albany 09/2005-05/2007
M.A. in Economics, Wuhan University, China 09/2002-05/2005
Equity Analyst, CITICS in Wuhan, China 08/2001-08/2002

Did you get admitted to other programs?
No.

Why did you choose this program (over others, if applicable)?
. It has a flexible course arrangement and a better balance between Mathematics and Management.
. A 40% tuition cut is affordable
. Southern Calif. is a better place to live.

Tell us about the application process at this program
1) Deadline is Feb 1.
2) Applied
3) Receive ad and fellowship 6 weeks later.
4) about 400 deposit.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
8

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
Yes if the probability and statistics is. I think it’s useful for those person who stayed out of campus for several years.

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
9

Tell us about the courses selection in this program. Any special courses you like?
Management Part:
Financial Accounting
Corporate Finance
Asset Management Practium (An excellent project with a real money Fund)
Financial derivatives (a professor with experience in practical market)

Math Part:
Stochastic Process
Math Finance
Numerical Method for Finance
Credit risk
Financial Time Series
Asymptotic Method
Simulation
Math Clinic (A applied math project with industry)

On a scale of 1-10, how would you grade the flexibility of the curriculum?
9

Tell us about the quality of teaching
Several Lab classes were arranged in each course, including math course. And homework is plentiful but acceptable.

On a scale of 1-10, how would you grade the quality of teaching?
8

Materials used in the program
. Hull
. Derivative Markets by Mcdonald
. Stochastic Calculus (I&II) by Steven E. Shreve
. Portfolio Construction, Management, &Protection by Strong
. An introduction to credit risk modeling by Christian Bluhm

On a scale of 1-10, how would you grade the practicality of the curriculum?
8

Programming component of the program
VBA/R/Matlab/C++

Projects
Group projects were there in every course. And there is a special project in Asset Management that a real &300,000 fund was conducted by the this course students. You can test your strategies in the real market. Awesome.

Career service
Career center really work hard to help you, but seems it doesn’t work well in the bad market. Before 2008, many students had chance to do Intern or full time job in TCW and Countrywide. But it was difficult now.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
3

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
Most India students got their jobs with the help of their social network.

What do you like about the program?
flexible courses and high quality professors.

On a scale of 1-10, how would you grade the value of the program for the price tag?
5

What DON’T you like about the program?
. no special course or seminar for programming. And there was just a discussion group by students.
. placement is not good.

Suggestions for the program to make it better
. more programming seminar because most students were not come from computer science major.
. construct a better alumni network.

On a scale of 1-10, how would you grade your experience in the program?
6

What are your current job status? What are you looking for?
I graduated on Aug. 2009 and am looking for a job in New York City now.
I really hope that I can work in the quantitative field. Not easy. I am trying.

On a scale of 1-10, would you recommend this program to others?
8

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Review of Certificate in Quantitative Finance (CQF) program

QuantNetwork — Thu, 25 Feb 2010 05:26:17 +0000

This review was submitted on 1/24/2010 10:09:13 by a student who studied in the certificate program from 6/2008-1/2009*

Can you tell us a bit about your background?
BA Economics & History – University of Toronto
MBA – Richard Ivey School of Business
Owner / operator of business 15 years
Consultant – 6 years – M&A, Business Development
Investment Advisor / Insurance Representative – 3 years

Did you get admitted to other programs?
Did not consider others

Why did you choose this program (over others, if applicable)?
As an investment advisor, did not receive adequate / complete information about the different programs that were being offered, especially in the area of hedge funds, guaranteed investment vehicles, managed programs, non-traditional investments. Questions asked were responded to with “speak to the quant guys” or “too complicated to understand by most”. I wanted to better understand the offerings, the rationale behind them, and to determine for myself whether these approaches were suitable for retail investors.
Additionally, I also wanted to pursue equity research / analysis and wanted to broaden my skill set in order to pursue this.

Tell us about the application process at this program
The application process was straight-forward. A resume was sent, a math qualification test was completed. Responses to email, phone calls were timely and people were helpful. The application process was easy and should not present a problem to people interested in the program.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
8

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
The CQF offers a math primer. It was helpful but for people that have not use math in a very long time or those with a limited math background, it should probably be longer / slower. The material exposes you to concepts that will be used but if your math experience is limited, the exposure is probably too brief for someone to thoroughly understand and be comfortable. Having this said, it is up to the student to self-study and get up to speed on concepts they are unfamiliar / uncomfortable with.

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
10

Tell us about the courses selection in this program. Any special courses you like?
No course options. All the subject matter is applied. The material offered is selected to provide a practical understanding of quantitative finance. Theory is introduced but the focus is on how the math is applied in a work environment. Theory and practice are both questioned so as to make students consider the implications of what they are doing from a risk and exposure standpoint. There are regular reminders that the math must be considered from a business point of view. For example, the upside of a particular strategy using a certain type of math is this – what are the risks and potential impacts of implementation of executing this strategy? Is such a strategy worth it from a risk / reward perspective.

On a scale of 1-10, how would you grade the flexibility of the curriculum?
1

Tell us about the quality of teaching
One thing that was very attractive about course is that all the instructors have worked in the field. They are strong academically but they are not purely academics. The instructors can all relate something about a business area that has to do with quantitative finance ranging from subjects matter. Topics such as the use of quantitative finance and interactions between groups are discussed. For example, options trading is discussed with respect to formulae and how quant developers, programmers and traders work together, negotiate (argue) on different things. Such insights would not be so forthcoming from people with a purely academic bent.

On a scale of 1-10, how would you grade the quality of teaching?
10

Materials used in the program
The lecture notes are good and the texts are good. Additionally, additional lectures are added as part of the lifelong learning component of the program. There are no additional fees associated with these (at the moment) and they are accessible online. Every student should also make it a point to go beyond the supplied materials to learn more about specific subject matter.

On a scale of 1-10, how would you grade the practicality of the curriculum?
10

Programming component of the program
VBA and Excel were addressed directly when I took the course. I understand that a C++ module has now been added to the curriculum. Excel and VBA were used in some of the homework assignments. C++ was not focused on directly although it was often mentioned that this language was used as the defacto standard in quantitative finance.

Projects
There was an individual programming project that focused utilized the concepts that we were taught throughout the course. Numerical analysis, finite difference methods were used. It was a very comprehensive project that required the development of the model, the programming of the model, and the calculations of stock prices, associated option pricing, hedging, jump models,etc.

Career service
When I took the course, no career services were offered.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
1

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
As I took the course online, it was more expedient to form a study group that focused on our location rather than any ethnic group. Our study group consisted of 4 people that met fairly regularly. I met with someone outside this group and spoke with someone I knew in another city also.

What do you like about the program?
The practical nature of the program is one of its strengths. It is not enough to be strong in simply one area whether it be math, programming, or capital markets / investments. The math wiz must also understand the nature of capital markets to be effective. Programming skills are also extremely helpful. Likewise, the person that only understands the capital markets needs to understand the math behind the pricing and strategy.

On a scale of 1-10, how would you grade the value of the program for the price tag?
7

What DON’T you like about the program?
If I were employed in the field, the value relationship would improve.
Career services / placement offerings would significantly improve the value.
Aside from the application process, other aspects of the administration could be improved. I did not receive the math primer materials until I was well into the math primer course. I did not realize that others already had these materials and was scrambling to find material on my own. Post-completion administration also needs to be improved.

Suggestions for the program to make it better
The offering of career services would be the single-most big improvement.
More focus on programming VBA / C++ for people without any programming experience.
Additional Excel training.
The pace of the program is very fast. It would be helpful to have the course last longer so that people could balance work / education better.

These suggestions have already been made to various people associated with the CQF.

On a scale of 1-10, how would you grade your experience in the program?
8

What are your current job status? What are you looking for?
Looking for something in research, risk management, compliance, etc.. I don’t think that I will ever be a hardcore quant. There are too many others that are better mathematicians / programmers. But, I do feel that I can be very successful in other areas that need to understand the dynamics of quantitative finance and combine this understanding with business practice.

On a scale of 1-10, would you recommend this program to others?
10

Other comments
I have recommended this course to others and will continue to do so. My recommendations also include what I think are shortcomings of the course such as those listed here. I try to be balanced in my assessment. I don’t believe that any course / program is 100% perfect, there will always be areas that can be improved.

The CQF has many students that are sponsored by their organizations. If there is some unhappiness with career development post-CQF, I believe that is a function of a lack of career plan by their organization and the student. For others, like myself, that are not involved in quant careers when they take the course, finding a position is their responsibility. It would be nice for career services to assist but ultimately it is ourselves that are responsible for our careers.

Likewise, the development programming skills should be pursued independently as well as being offered by any quant program. One should also seek to improve their knowledge of developments in the quant finance field. Taking any course and doing little else to improve except showing up to work cannot result in long-term satisfaction.

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Review of UC Berkeley MFE program

QuantNetwork — Sat, 20 Feb 2010 04:33:27 +0000

yanec/Flickr

University of California at Berkeley, Haas business school.

This review was submitted on 2/11/2010 at 2:56:27 by a student who studied full-time in the program from 3/2009-3/2010*

Can you tell us a bit about your background?
I studied science/engineering and worked in the engineering field for 2-3 years before undertaking the MFE program.

Did you get admitted to other programs?
No

Why did you choose this program (over others, if applicable)?
Housed in business school. Accelerated 1 year program. Embedded internship

Tell us about the application process at this program
Comprehensive application followed with phone/in-person interview.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
4

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
Yes, preparation programs were offered in math, statistics, and computer programing. These courses were useful to prepare for the program

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
8

Tell us about the courses selection in this program. Any special courses you like?
There was a financial innovation course that was taught by a professor who gave interesting insights and perspectives.

On a scale of 1-10, how would you grade the flexibility of the curriculum?
5

Tell us about the quality of teaching
Most of the instructors are working practitioners. Thus, class schedules are arranged to fit their schedule and often require late evening or weekend classes. Furthermore, availability of practitioner instructors is essentially non-existent.

On a scale of 1-10, how would you grade the quality of teaching?
2

Materials used in the program
Poor choices of text books. We used a pre-print edition for one text, it was full of typos, notational errors, and did not include a table of contents. Course books were essentially useless during the MFE study and you are dependent on instructor’s lecture notes.

On a scale of 1-10, how would you grade the practicality of the curriculum?
5

Programming component of the program
Mainly matlab. Although students have the flexibility to use whatever they wish in most situations. Most courses are very programming intensive. More effort is spent on coding than learning underlying financial concepts.

Projects
There is a applied finance project that all students must undertake. It is an individual project designed to hone the students ability to attach a real-world financial problem.

Career service
The MFE office helps secure internship and full-time positions.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
5

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
Great diversity in ethnicities. Although, most people still work/socialize with their own ethnicity. This is particularly true for foreign students (i.e. no other academic study in US).

What do you like about the program?
Interesting curriculum.

On a scale of 1-10, how would you grade the value of the program for the price tag?
4

What DON’T you like about the program?
Too much useless material. Program administrators are generally unprofessional in their duties. Genuine learning takes a back seat to internship, employment statistics. Too expensive.

Suggestions for the program to make it better
Better instructors and design of course curriculum.

On a scale of 1-10, how would you grade your experience in the program?
4

What are your current job status? What are you looking for?
No current full time job offers. Open to most all fields.

On a scale of 1-10, would you recommend this program to others?
3

Review of Baruch College’s Financial Engineering program

QuantNetwork — Sat, 20 Feb 2010 01:43:33 +0000

Prima Vista/Flickr

Newman Library, Baruch College

The following review was submitted on 1/11/2010 at 12:39:15 by Roger Trimble who studied full-time in the program from 9/2008-12/2009*

Can you tell us a bit about your background?
BS Mechanical Engineering, West Point, 2001. Five years active duty in the U.S. Army as a cavalry officer.

Did you get admitted to other programs?
I was also admitted to Columbia MSOR.

Why did you choose this program (over others, if applicable)?
I basically had a choice between an MS in Operations Research at Columbia and an MFE at Baruch. After a challenging interview with Professor Stefanica, I realized his vested interest in maintaining a world-class program at Baruch. I was genuinely impressed with his level of involvement, and knew that was where I wanted to earn my master’s degree.

Tell us about the application process at this program
I followed the published directions and no administrative problems in the application process. I think I remember the process taking longer than other places, but learned that it is because Professor Stefanica personally reviews every application after it passes an initial filter through the admissions committee. He takes time to interview, in person if possible, each potential candidate. During the interview you get an honest appraisal of your chances as a candidate.

On a scale of 1-10, how would you grade the accessibility of the faculty and staff?
10

Programs like Baruch MFE, UCB MFE have refresher courses for incoming students. Does this program offer such courses? How useful was it?
Yes, and they are essential. These rigorous courses enable an incoming student to achieve a base level to begin the fall semester. Even though the courses have general names, like calculus refresher and probability refresher, they introduce fundamental concepts in finance that are built upon during the program.

On a scale of 0-10, how would you grade the usefulness of these refresher courses?
10

Tell us about the courses selection in this program. Any special courses you like?
For full-time students, the courses are front loaded with the basics one is expected to know coming out of an MFE program. In the second and third semesters there are electives that focus on optimization, market and credit risk, structured finance and statistics. The courses I valued the most were Numerical Linear Algebra, Stochastic Calculus and Statistics for Finance. Although the program offers an array of electives, students are free to take courses from the business school.

On a scale of 1-10, how would you grade the flexibility of the curriculum?
8

Tell us about the quality of teaching
Most of the elective courses are taught by practitioners, which provide diverse exposure to how concepts are applied in industry. The only classes where an active TA was important was in Probability and Stochastic Calculus. Otherwise, close interaction with fellow students and professors was sufficient to learn the material.

On a scale of 1-10, how would you grade the quality of teaching?
8

Materials used in the program
Shreve for Probability and Stoch. Calc. Otherwise, courses reference multiple texts and are mostly taught from lecture notes.

On a scale of 1-10, how would you grade the practicality of the curriculum?
10

Programming component of the program
The official language of the program is C++. However, there is opportunity for one to learn many other languages like VBA, R, Python, Perl, .NET, Java, Matlab.

Projects
Most projects are group oriented and depend on the nature of the subject. Market Risk and Advanced Computational Methods involved trading simulations. However, most of the home work assignments are projects in nature.

Career service
Professor Stefanica is fully vested in this process. He is integral ( and tireless ) with regard to internships and full-time placement.

On a scale of 1-10, how would you grade the career service for internship and full-time job?
10

Can you comment on the social interaction between students of different ethnics, nationalities in the program?
Due to the small class size, each year group develops cohesive bonds. Every one admitted into the program is qualified to be there, so there is a high level of respect between students from the beginning.

What do you like about the program?
Hard work is rewarded with career opportunities.

On a scale of 1-10, how would you grade the value of the program for the price tag?
10

What DON’T you like about the program?
Some of the elective courses are taught by multiple practitioners, which in some cases dilutes the depth of instruction. But this is a case-by-case issue.

Suggestions for the program to make it better
Modularize the elective courses to give students more choices and give full ownership of the module to one instructor. The obvious constraint, though, is ensuring there are enough practitioners able to teach the modules, and enough students taking each one to make it worthwhile for the instructor.

On a scale of 1-10, how would you grade your experience in the program?
10

What are your current job status? What are you looking for?
Graduated with multiple offers, and will start working at the beginning of February as a commodities trader for a hedge fund.

On a scale of 1-10, would you recommend this program to others?
10

Other comments
None

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