Financial Engineering

College Majors Engineering Majors
1

<p>I really am curious about this engineering field. </p>

<p>I have some questions if anyone can help,</p>

<p>a) What is the typical path to get in there? I hear you need a masters in a MFE program. For a MFE, is work experience usually required? How competitive are the admissions?</p>

<p>b) What are good undergrad majors to help you prepare?</p>

<p>c) What are the typical salaries for people in Financial Engineering (after masters)</p>

<p>d) Is mathematical finance or financial mathetmatics the same thing? If not, what are the differences?</p>

<p>Also, this more of a general question, is the admission process for getting into a school's MBA program different from their MFE program? Like different level of competiveness? Or is it in the same "business" category. This also goes towards economics as well (someone applying for a masters in Econ)</p>

2

<p>As someone who completed 2009 cycle of admissions for financial engineering programs, let me try to answer your questions.</p>

<p>a) I’m not sure if there’s one set path in financial engineering. Historically, the quants on Wall Street were truly rocket scientists: from particle physicist like Emanuel Derman to Math PhDs like Jim Simons. In recent years, MFE programs tried to condense all this into 1-2 year of intense training in math, CS, and modern finance. To that end, they look favorably upon people with strong mathematical background, but this can be attained from different disciplines at varying levels. I don’t think having a masters is necessary to get into a good MFE program, as long as your mathematical training is sufficient during your undergraduate years. Relevant work experience is less weighted in admissions than in MBA programs; indeed, some programs are intended for career switchers, although having some of them can boost your chances. Admissions are extremely competitive – look at Princeton MFin (4% acceptance rate this year), or Stanford FinMath (3%, though the number is inflated by co-term students). I’d expect somewhat similar numbers for Berkeley MFE, CMU MSCF, and NYU FinMath.</p>

<p>b) Like I said, any major that prepare you well mathematically should work. I think the denomination of your undergraduate degree does not matter much; at the very least you’d need to have courses in basic: calculus (up to multivariable), differential equations, linear algebra, probability/statistics. More courses such as mathematical/numerical analysis, stochastic process, probability theory etc are also very good to have. In addition, some school stresses heavily on programming, so it’s also a good idea to have some under your belt.</p>

<p>c) You have to understand that some people come into MFE programs with industry experience, while some others go straight from undergraduate. Obviously the one with more experience will come out of the program at a higher salary point. That said, some data points for you: average starting package for 2008 Princeton MFin grad is 140k (bonus not included), whereas the average starting package for 2008 Berkeley MFE grad is 153k (bonus included). Keep in mind that the numbers might meaningfully change in the near future, as popular jobs in quant finance are getting scarce, thanks to the financial crisis.</p>

<p>d) Pretty much. They all compete for the same spots.</p>

<p>MBA vs MFE is quite different, especially in the types of people that they seek. Hope this post helped.</p>

3

<p>Thanks that really helped! Though a couple of questions you probably have the answer</p>

<p>1) Do these MFE programs usually require you take the GMAT or GRE? Or either? Does this depend on the program? Is there any “in general” statement?</p>

<p>2) I’m a double major in Mathematics and CS, from a non-target though (Though the CS program here is Top 10 in the country). How would MFE programs look at that? Is the mathematical/programming preparation good enough (I would hope so!), do they really favor target schools?</p>

<p>3) Is it uncommon for undergrads to go into a MFE program either straight out of UG or 1 year of work experience? Do most of the people there already have a master or PhD in something? </p>

<p>4) 4% admission rate? That’s quite lower than any MBA school rate I have seen. That is the background of a typical student getting admitted to one of those top programs?</p>

4

<p>Sure, I’ll try to answer your questions:</p>

<p>1) Most programs require you to take the GRE. However, some programs have stronger emphasis on financial economics, and thus take GMAT as a replacement. From an applicant’s standpoint, I’d suggest the GRE since it allows you to apply to more financial engineering programs. I’m not really sure what do you mean by ‘in general’ statements. Are you talking about personal statements? If you are, then yes, statement of purpose is most definitely required by all programs.</p>

<p>2) School ranking is not an excellent proxy for education. That said, ceteris paribus, I’m guessing that a degree from a higher ranked school can be beneficial in admissions, if only for the prestige. I really cannot say if your math/CS prep is good enough until I see your transcript – and even after that, I’d probably still want to see the course descriptions to make sure the degree of rigor from those courses are up to my standards. My previous post covered some of the more important courses; I’d also suggest you going to the website of these programs (Princeton, Berkeley, CMU, NYU) that put up the resumes of their current students online. This way you can get a good sample of profiles of successful candidates.</p>

<p>3) In my experience, it is not that uncommon to see people going to top FE programs directly from undergraduate, though these people usually already showed promise of excelling in FE/quant finance through related internships etc. The candidates with PhDs are usually career-switchers into finance. Some schools do really like their candidates to have work experience (e.g. average age of entry to Berkeley MFE is 27 if I recall correctly), but I don’t think it is necessary to gain admissions as long as you can clearly show potential.</p>

<p>4) Yeah, it’s getting pretty damn competitive. The yields are pretty crazy for some of these schools too. One explanation I can offer is that MFE programs have more superspecialized barriers to entry (the math requirements) versus MBA programs, and thus this induced the lower acceptance rate. In other words, there are so many paths that can lead you to become a good MBA candidate (indeed, more MBA schools are even encouraging off-beat prospective students to apply), relative to the few paths that a good MFE candidate can take.</p>

5

<p>Thanks a whole lot Icebox!</p>

<p>Can you give me advice to landing into one of these top programs? That is what I’d like the most.</p>

<p>I’m going to be a Junior next quarter (So I have 2 years left). My GPA is 3.7 in Mathematics and CS. I’ll try to take the courses you have listed. I really have no internship experience unfortunately. I volunteer a lot though and am in some finance clubs.</p>

<p>So what’s the best advice you can give me? Should I look for an internship? If so, exactly what kind of internships would show I have promise in quant/FE? How does my GPA stack up?</p>

<p>Do you think it’s a more realistic path if I didn’t go to a MFE straight out of undergrad? If so, what would you suggest? Work experience + MBA? Masters in Math? Or something else?</p>

<p>Bottomline, what would it take to get into one of the top MFE programs?</p>

6

<p>To be honest, I think you should just work hard in school. Take the necessary courses, look for relevant internships in finance, ace the GRE, get good recommendations, write good statements of purpose, and then apply for the programs come your senior year.</p>

<p>I’m not even sure if I’m understanding your career goals correctly. What do you want to do? There are many ways to make a lot of money (which I sense is what you want to do), but only few that fits your strengths and personality.</p>

7

<p>Thanks icebox. Yes one of my main motives is money, the other is I do actually like math & finance, and enjoy working with the 2. </p>

<p>Any others have thoughts on Financial Engineering and MFE programs?</p>

8

<p>from what ive read, the amount of MFE grads vastly exceeds their demand…which would leave you potentially making same amount as you would have in an engineering field you actually enjoy</p>

9

<p>Yes, in light of what just happened, it’s not so much the increase in the supply for FE professionals as it is the contraction in the demand for these jobs. The financial crisis brought with it a deep aversion for structured finance and quants in general. That said, I am of the belief that financial innovation will not stop from growing, albeit hopefully it will be done with much more prudence.</p>

<p>Further, rsala004, I believe that some people truly love doing financial engineering. Not everyone jumps to this particular career path because the lure of money.</p>

10

<p>Hi, does it matter where you got your bachelor’s degree in order to become a financial engineer?</p>

11

<p>Well, I’ll put it this way: ceteris paribus, a better university reputation can be advantageous.</p>

12

<p>^ i meant, does it have to be a target school?</p>

13

<p>student01, most people get MFE degrees or similar…so it only matters in the admissions process to that school.</p>

<p>some say that its best to seek a school near a large financial sector, like chicago or newyork</p>

<p>and research job statistics among the grads of schools your interested, some have 90% employment rate while some program’s grads are only half employed by graduation…(columbia)</p>