A realistic look at the MFE

grandunification · 3/26/15

In a few weeks I will be two thirds of the way through my MS in mathematical finance. I would like to inform prospective students about what a masters in financial engineering really means, and what it was intended for.

First, we need to think a bit about the history of the field, and how the MFE actually came about. Recall, the MFE is a degree which has been around for at most 30 years. Why was it invented? In the last half century, we have seen the birth and development of highly involved mathematical models of options pricing. It must have been very taxing for the physicists and mathematicians to try to convey these ideas to their co-workers who had only a basic high school working knowledge of mathematics. In fact, it was very troubling to them. It was so troubling that they began cooperating with universities to make it less of an annoyance -- the MFE was born. Read that again, the MFE was designed to improve the IQ of those beneath the quants. It was not designed to educate quants, but to improve their subservient coworkers. Those contemplating beginning an MFE really need to understand this point: YOU WILL NEVER BE A QUANT! If you want to become a quant, you absolutely have to have a phd in mathematics, physics, or computer science. On the other hand, if you are satisfied working "for" quants, and making a decent salary 60-100K, then an MFE is a good option. I just wanted to inform some of the prospective students, so they don't have the wrong impression of where the MFE will lead them.

TehRaio · 3/26/15

What are the jobs that you would consider beneath quants?

IntoDarkness · 3/26/15

I don't really know what op is talking about. We just hired a PhD who will work for me. I'm a quant with bachelor degree. It is not about the level of academic degrees. It is all about how well you do the job, how fast you learn new things, and how well your boss (and your boss' boss) likes you.

DannyF · 3/26/15

grandunification,

I'm gonna need sources for that.

grandunification · 3/26/15

TehRaio said:
What are the jobs that you would consider beneath quants?

MFE graduates typically obtain what might be called "quant assistant" jobs, which go under various names that companies give them. As an analogy an MFE is to a phd in particle physics as a nurse is to a doctor. Essentially, MFE's assist the people with superior education and ability. Of course nurses serve a huge function, and MFE's do as well.

financeguy · 3/26/15

grandunification said:
MFE graduates typically obtain what might be called "quant assistant" jobs, which is go under various names that companies give them. As an analogy an MFE is to a phd in particle physics as a nurse is to a doctor. Essentially, MFE's assist the people with superior education and ability. Of course nurses serve a huge function, and MFE's do as well.

This just isn't true. Graduates of both PhD and MFE programs get jobs as junior quants (among other things) and then can go on to be more senior with time. Anyone going from school into a professional environment will always start as someone's junior regardless of program. MFEs aren't destined to be subservient to anyone.

grandunification · 3/26/15

financeguy said:
This just isn't true. Graduates of both PhD and MFE programs get jobs as junior quants (among other things) and then can go on to be more senior with time. Anyone going from school into a professional environment will always start as someone's junior regardless of program. MFEs aren't destined to be subservient to anyone.

It's very true. This is a typical job that I'm talking about -- http://jobs.bloomberg.com/job/New-Y...oomberg_RD_US&sponsored=ppc&utm_campaign=RDUS

mhy · 3/26/15

There are plenty of PhDs who have similar jobs to the one you posted. Quant research is a shrinking field.

yo yue · 3/26/15

grandunification said:
In a few weeks I will be two thirds of the way through my MS in mathematical finance. I would like to inform prospective students about what a masters in financial engineering really means, and what it was intended for.

First, we need to think a bit about the history of the field, and how the MFE actually came about. Recall, the MFE is a degree which has been around for at most 30 years. Why was it invented? In the last half century, we have seen the birth and development of highly involved mathematical models of options pricing. It must have been very taxing for the physicists and mathematicians to try to convey these ideas to their co-workers who had only a basic high school working knowledge of mathematics. In fact, it was very troubling to them. It was so troubling that they began cooperating with universities to make it less of an annoyance -- the MFE was born. Read that again, the MFE was designed to improve the IQ of those beneath the quants. It was not designed to educate quants, but to improve their subservient coworkers. Those contemplating beginning an MFE really need to understand this point: YOU WILL NEVER BE A QUANT! If you want to become a quant, you absolutely have to have a phd in mathematics, physics, or computer science. On the other hand, if you are satisfied working "for" quants, and making a decent salary 60-100K, then an MFE is a good option. I just wanted to inform some of the prospective students, so they don't have the wrong impression of where the MFE will lead them.

dont mean to be offensive... that salary number seems way off though... phd is good for research, for more practical stuff or buy side, master i think is enough for most of positions... the salary you are talking is probly half of what a decent MFE 1st year compenstation looks like.

grandunification · 3/26/15

yo yue said:
dont mean to be offensive... that salary number seems way off though... phd is good for research, for more practical stuff or buy side, master i think is enough for most of positions... the salary you are talking is probly half of what a decent MFE 1st year compenstation looks like.

120K is possible with some experience. 200K may be possible after 20 years experience. Very few MFE's are making 200K their first year out of school.

At any rate, salaries don't mean anything to me. I wanted to become a quant, developing sophisticated pricing models with advanced mathematics, and it's never going to happen with an MFE. I just wanted to inform other prospective students about this if they had the same feelings that I had.

yo yue · 3/26/15

grandunification said:
120K is possible with some experience. 200K may be possible after 20 years experience. Very few MFE's are making 200K their first year out of school.

At any rate, salaries don't mean anything to me. I wanted to become a quant, developing sophisticated pricing models with advanced mathematics, and it's never going to happen with an MFE. I just wanted to inform other prospective students about this if they had the same feelings that I had.

first year fresh graduate MFE should look at 150K total compensation (in NYC)... if more experience then 200K is possible.

you could pave a hard path yourself ... dont count school too much to teach you everything... if they do, then i dont think it is sophisicated...personally, i think program is built to lay a good foundation for your future career on the practical side. once the foundation there, you could learn by yourself, by work, by all sort of means...

you could develop sophisicated pricing models with advanced mathematics, too many times they just dont have a closed form solution, at the end of the day you still gonna resort to numerical method... i just dont see any reason why you couldnt do modelling with MFE...

CasanovaJ · 3/27/15

yo yue said:
first year fresh graduate MFE should look at 150K total compensation (in NYC)... if more experience then 200K is possible.

you could pave a hard path yourself ... dont count school too much to teach you everything... if they do, then i dont think it is sophisicated...personally, i think program is built to lay a good foundation for your future career on the practical side. once the foundation there, you could learn by yourself, by work, by all sort of means...

you could develop sophisicated pricing models with advanced mathematics, too many times they just dont have a closed form solution, at the end of the day you still gonna resort to numerical method... i just dont see any reason why you couldnt do modelling with MFE...

Hate to break it to you, but for most MFE programs (even the top ones), the average starting base for fresh MFE's with no full-time work experience tends to be more in the $70-80k range. $150-200k total compensation would be for a top 10 MBA with 4+ years work experience-- not a 23 year old with a degree in Ito calculus and no language skills.

mhy · 3/27/15

CasanovaJ said:
Hate to break it to you, but for most MFE programs (even the top ones), the average starting base for fresh MFE's with no full-time work experience tends to be more in the $70-80k range. $150-200k total compensation would be for a top 10 MBA with 4+ years work experience-- not a 23 year old with a degree in Ito calculus and no language skills.

Base 80k + bonus can easily break 100k, and 150k all-in is not unreasonable at certain firms

In NYC a base of 150k is nothing

yo yue · 3/27/15

CasanovaJ said:
Hate to break it to you, but for most MFE programs (even the top ones), the average starting base for fresh MFE's with no full-time work experience tends to be more in the $70-80k range. $150-200k total compensation would be for a top 10 MBA with 4+ years work experience-- not a 23 year old with a degree in Ito calculus and no language skills.

Thx for sharing... I thought that will be like a Bachelor's compensation... maybe I am too optimistic ...

TehRaio · 3/27/15

yo yue said:
Thx for sharing... I thought that will be like a Bachelor's compensation... maybe I am too optimistic ...

I believe, in the US, a typical Bachelor's degree compensation is 40-50K.

yo yue · 3/27/15

TehRaio said:
I believe, in the US, a typical Bachelor's degree compensation is 40-50K.

is that in NYC though... my friend intern salary at NYC is like 65K - thats not even front office position... maybe my data point is too skewed...

CasanovaJ · 3/27/15

mhy said:
Base 80k + bonus can easily break 100k, and 150k all-in is not unreasonable at certain firms

In NYC a base of 150k is nothing

If you're talking CMU/Columbia MSFE/Baruch grads who land something in a bulge bracket front-office, then yeah-- but it's fiercely competitive, and not where the vast majority of prospectives here will likely end up.

In general there is way too much of a misconception (especially abroad) that all you have to do is manage to get into a semi-decent MFE program in the US, and you'll be home free for an immediate six figure salary in New York... that misconception is wrong and very dangerous.

TehRaio · 3/27/15

yo yue said:
is that in NYC though... my friend intern salary at NYC is like 65K - thats not even front office position... maybe my data point is too skewed...

that's an average figure. you need to factor in the cost of life in NYC which is very very high.
so basically in order for companies to compensate for that, they raise the salary, but at the end of the day, your purchasing power remains synced with rest of the bachelor degree owners of the country.

IntoDarkness · 3/27/15

Yea, casanovaj's numbers r about rite. Just trying to add that many seasoned PPL will find their base capped at around 120-150, and bonus around 10-20%, 50% if its a good year. Traders at my place r not really real quanty, but they make around 300 and usually just joke around. If making money is priority, better switch career

yo yue · 3/27/15

IntoDarkness said:
Yea, casanovaj's numbers r about rite. Just trying to add that many seasoned PPL will find their base capped at around 120-150, and bonus around 10-20%, 50% if its a good year. Traders at my place r not really real quanty, but they make around 300 and usually just joke around. If making money is priority, better switch career

Hey thanks for sharing... do you know if any of your classmates land to any Hedge fund place - such as two sigma, do you know what the compensation will be like in those places...

NVM, I just read prior post...are you doing a master as well or just stick to your current work