PhD Physics to Quant

oreliphan

Hi All, (Especially Bankers reading this forum!)

I first want to thank twofish-quant for giving very great and sound advice throughout the forums - I have learned so much from this helpful person. I hope they can comment here as well!

I'm a PhD high energy experimental student, going to graduate anywhere between 1-2 years. I'm working on the LHC, and I know it's the last step of physics research for me.

I want to go into investment banking, and become a quant. Can you please give some advice on what I can start doing? Would it be a good idea to do an internship this summer?
What ideal things should I do so that I can have a greater edge to break into the finance industry?

I read a little about the different fields, but the things I'm looking for are interesting, challenging, and hectic work. (and lucrative pay, though I know this is something that shouldn't be admitted). I would love to work directly on Wall St.

I offer good communication skills due to working on such a large collaboration (institutes from all over the world convene for a single experiment), and C++ everyday I've been a grad student.

So, please, if you can, offer me some advice based on your own experience to get me that edge! (I know it's tough to get in, but I'll do what it takes!)

Also, do you like your job? Is it stressful, long, etc? Cons, Pros? (psst: for you, twofish-quant!)

-Oreliphan

twofish-quant

The big thing is to learn C++. Most quant positions are glorified coding positions, and even if you don't get a heavy coding position, C++ is the standard language. If you have done much coding in your Ph.D., this is what banks are looking for, but if you haven't try to get as much as you can.

The first thing to remember is that banks are looking specifically for numerical modellers. So keep your math skills sharp.

One thing that is sort of refreshing about Wall Street is that you don't have to be ashamed to admit that you are doing something for the money. People will think that you are weird if you *aren't* doing something for the money.

But you have to keep the money in prespective. Salaries for Ph.D.'s all Wall Street are good, but don't expect anything totally insane. NYC is a *very* expensive city, and the money you get from Wall Street is going to be only somewhat higher than you can get at high end coding positions in other places. Typical salary for a starting Ph.D. is ($90K base + $40 bonus) whereas you can probably get a job as a C++ coder in Texas for $90K. After a few years of experience, the total salary ends up in the $200K range.

The other thing is that you are likely to feel poor, even though you are not. The weird thing is that *because* there are vast amounts of money that flow on Wall Street, you end up feeling poor. I've had bizarre conversations with people that are convinced that they are desperately poor because they make $150K, and the reason people feel that way is that they have social contact with people that make $500K+. If you live in Grand Rapids, Michigan, you aren't ever going to bump into someone that makes $1M/year, whereas in NYC there are 50 billionaires, and they make their presence known. If you go down 5th Avenue, you end up hitting entire stores that are devoted to selling things to people that make way, way, way more money than you ever well.

It's not difficult for a physics Ph.D. to get a job on Wall Street. I don't know of anyone with a physics Ph.D. that has tried to get a job on Wall Street that has failed to do so. It may be tough to get a particularly *type* of job, so if you want to be a bond trader, you are in for a struggle. But just like universities need massive numbers of serfs to teach undergrads, Wall Street banks need massive numbers of serfs to babysit computers. The only real difference is what Wall Street considers "serf wages" is very different than what universities do. Physicists on Wall Street generally are pretty low on the food chain. It's just that there is so much money that "low salary on Wall Street" is "high salary everywhere else."

It's important to realize that it isn't *that* tough to get in, because you will be dealing with headhunters that will make it seem that your life will be over if you don't take the job they have. If you realize that you do have some choices, then you can say no. Something that I'm very firm on is that I will not work people that I do not trust, and I will not do jobs which I don't believe to be socially useful.

I like my job. The reason I like my job is that the work environment is pretty much exactly like graduate school. Sitting down in front of a computer. Code. Answer e-mail. Code. Get a frantic call of the phone that something broke. Put down what you were coding, and code something else. Fix the problem. Code. Code. Read some papers. Code. Attend meeting. Code. Go home. My job is extremely stressful, but it's pretty much the same sort of stress that I had while I was doing my Ph.D. dissertation, so I sort of like it if it doesn't get too far out of hand.

oreliphan

Do you find that you have time for a social (read: love, family) life? And, should I expect to work on Wall St (move to NYC) for better chances at landing a job?

If I do end up working on Wall St., is it possible to put in a few years work and then will it be easier move to a more desirable location?

I'm under the impression that there is sorta inflexibility of location.

Does prestige of your PhD University matter? (I know it can definitely help, but can it hurt to come from the lower end?)

twofish-quant

The work hours are reasonable. Also a lot depends on the company that you work for and your supervisor. If you work for some firm in which the CEO often gives talks about the importantance of making time for family, then family is not going to be a problem. I don't think that Wall Street firms work programmers particularly hard in comparison to other industries.

I don't know of any Ph.D.'s that work killer hours. There are a lot of MBA's analysts that work killer hours, but this is a supply-demand thing.

That's the big catch. Pretty much all of the jobs are in NYC / London or in a few cities in Asia. There are a *few* jobs in Chicago, San Francisco, Dallas, and maybe Houston but they are very, very few. Also one thing that I found was that companies outside of NYC just would not hire me, because they assumed that once I found out how much more NYC paid, I'd leave, and I had a few interviewers tell me this directly.

It turns out they were right for not hiring me, because I would have left.

One other irony is that there is almost no finance being done on Wall Street itself. Wall Street is where the stock exchange is, and everyone has moved to electronic trading so there is no need to be physically there, and NYSE is becoming a ghost town. Also 9/11 changed things, when banks realized that it was a bad idea to put all their operations in one place, and so banks have changed their operations so that their eggs are scattered.

Most of the big banks are in mid-town, and the hedge funds are scattered in various places with a lot of them on Long Island or Connecticut. Much of the back end operations work is happening in Jersey City.

The only thing left on Wall Street itself are high end condos.

Maybe, but this would be semi-retirement. There are a lot of hedge funds outside of NYC, and most of them are run by people that have been burnt out by NYC and want to leave. Also, if you really don't like NYC, you'd probably be better off getting a non-financial job elsewhere. The reason that you have to be realistic about money, is that Wall Street does pay high salaries, but they aren't "forget about everything else" high.

Very little. It might help a little in that you can use alumni networks to find open positions and it might help with getting past a headhunter, but you get contacted for the interview, it doesn't matter at all. There are some interesting forces at work....

1) You aren't competing with people with the really high prestige Ph.D.'s and very deep social networks. People that have Harvard and MIT physics Ph.D.'s and tons of recommendations and publications, aren't looking for jobs on Wall Street, they are looking for academic positions. I've never met a physics Ph.D. for which working on Wall Street was first choice of careers. If some university offered me a job as tenured astrophysics faculty with a 30% cut in salary, I'd be gone, gone, gone.

2) The interviewers and the hiring managers are also Ph.D.'s. If you say that your research is on lattice gauge theory, your interviewers and hiring managers are going to know what that means, and they are also likely going to know the reputations of the people in the field.

School branding works on people that don't know what you've actually done. If you have two people one that says that they are working on Hodge theory and the other says that they are doing Shockman-Teller Q analysis, then I know that the second guy is talking total gibberish (since I made that up), but your average HR person will not know this, so he needs to know that one guy went to Princeton. Someone who knows mathematical physics knows when someone is talking total gibberish so it's less important that they went to Princeton.

Also this is different from MBA hiring. For MBA hiring, branding is everything since business schools are putting out MBA's by the truckload. Something to realize is that the US puts out about 1000 physics Ph.D.'s each year, while Harvard alone puts out about 900 MBA's each year.

It turns out that on Wall Street there are really few jobs for physics Ph.D.'s, but there are even fewer physics Ph.D.'s

comp_math

What about knowledge on finance, for e.g., things contained in the Hull book?

twofish-quant

Reading finance is useful, but the important thing to remember is that they are looking for a physics Ph.D. with maybe some knowledge of finance. If they wanted to hire a finance expert, they'd hire a finance expert, but it's important to understand *why* they are looking at physics Ph.D.'s.

If you look at Hull's book is looks like an nice intro textbook, that introduces finance in the same way that Halliday and Resnick introduces classical mechanics. The trouble with Hull's book is that about half of it is wrong or irrelevant. There are serious problems with all of the bond models for example. So you should read Hull not so much as you would an intro physics text, but rather as a review paper for an area that you are interested in. You can get the jargon and the basic concepts, but just realize that much of the book is wrong.

Now you might ask if Hull is wrong, where you can find a better textbook, and the answer is that you probably can't, because a better book hasn't been written, and Hull is probably busy himself trying to fix up the next edition. So if the equations and techniques in Hull are wrong or irrelevant, where are the right equations and techniques written down? The answer is for the most part they aren't. People are still trying to figure out lots of stuff. OK then, if there are no good texts, and no one really knows what is going on, what are you supposed to do...... Hmmmmm..... Sounds like a dissertation....

The thing about physics Ph.D.'s is that if they put you in a front of a computer, with instructions that are vague, confusing, and possibly wrong with textbooks and papers that may also be either irrelevant or wrong, you'll figure out what to do, because you did something similar before on your dissertation. If you put a MBA in the same position, they may or may not be to cope, because they are waiting for someone to tell them what to do, and it make be that no one knows.

Also one thing that you'll find that's cool is that a lot of the important information are things that people, or someone just knows, and hasn't been written down anywhere. You may find that yourself writing a program and the suddenly how you code an algortihm depends critically on the dates of Brazilian holidays or exchange rate restrictions on the Thai Baht, and so you have to start e-mailing people to figure out who the expert on Brazilian holidays is. You may find that that person left the company six months ago, and so you are going to have to become the local expert on Brazilian holidays.

The book I'd recommend is Fusai and Roncoroni "Implementing Models in Quantitative Finance: Methods and Cases" since thaty book gives the best example of the "flavor" of the types of problems you see in finance. Also Kuznetsov's "The Complete Guide to Capital Markets for Quantitative Professionals" is good with the standard caveat that a lot of what he has written is probably someone outdated.

oreliphan

For good measure, are there any C++ books you like?

xepma

This is some good stuff written here. Thanks a mill twofish-quant.

Dolphiney

I graduated in CS 1o years ago, I was learning Hilbert and Deitel's books on C++. But I changed my direction into fashions couple of years later. SOftware making is old and I am not interested any more

oreliphan

Twofish-quant, can you tell me a little bit about the future finance career options of a PhD physicist quant who started out on Wall St.? I'm looking at some job postings at QauntFinanceJobs.com, and there are some hedge funds in New York looking to hire Quants with a salary of $450k. Is that plausible?

Here's the link to the job posting:
http://www.quantfinancejobs.com/jobd...id=&JobID=7745

Is that not the same "quant" we're talking about? What's the deal?

What's the career ladder like, basically?

spb

While we're on the subject of quantitative finance and other related jobs, can I get into that field with a PhD in computer science? MS in computer science?

EDIT: I do know that masters programs in computational finance exist (Carnegie Mellon), but how is that different than entering the field with an advanced computer science degree or a physics PhD?

twofish-quant

It's plausible but unlikely. You can get $450K if you happen to have a few years of experience, if you are in a prime position in a hot field. But I wouldn't count on it. My guess is that with three to five years of experience, a physics Ph.D. would have a 1 in 10 chance of making $450K. On the one hand, you shouldn't count on making that much money, but on the other hand, having a 1 in 10 chance of making $450K and a 8 in 10 chance of making $180K isn't that bad.

Part of the reason I'm doing what I'm doing is that I figure that I have maybe a 1 in 50 chance of making $1 million/year sometime in my life. Now 1 in 50 isn't great odds, but I can't think of anything else that I could be doing that realistically gives me 1 in 50 of making $1 million/year.

Something that does happen is the window case effect. A recruiter is going to put their best job in the showroom window so that you walk in the store. You probably can't get the diamond necklace that they show out in front, but they might have something else for you. One thing that you have to be very, very careful about is to realize that getting rich is largely a matter of "dumb luck." If you think to yourself, I'm smart so I'll be number one and get that $450K, well it doesn't work that way.

For example, this year people doing bond products made a ton of money because you had a sharp interest rate yield curve. Next year, someone else will get the jackpot. Even if the market totally self-destructs, someone will win big. So whether you get the really big money is luck not skill.

"Quant" is like "webmaster" it was a job that existed a while ago, but because the industry has grown a lot, people now tend to specialize. One curious thing is that people really don't have fixed job titles.

Hard to say. The industry is so new that people are just making things up as they go along. One thing that people that enter the field have to think about is long term sustainability. Personally I think that I'm doing things that are wealth-creating and socially useful. There are intelligent people that disagree. This matters because since I think that I'm creating real wealth, there will be enough money to keep me in business. Now if Paul Krugman is right and we are just faking stuff, then it's all a bubble that's going to fall apart.

I think Paul Krugman is pretty smart, he might be right, but ultimately I have to make my decisions based on what I think is going on. This matters, because I look around me and figure out that with the salaries that people are making, this is sustainable. If everyone were making $2 million/year then it wouldn't be since we are just not creating that much wealth, and so everything is going to blow apart.

Also part of the reason I'm careful not to get scammed by Wall Street is that I got scammed by academia before.

twofish-quant

Books by Meyers, and Lakos are good

Skiena's The Algorithm Design Manual are also good.

Two things that you need to have basic knowledge on are STL, and some template programming.

One other thing is that the more important knowledge in writing C++ is what not to do.

oreliphan

For interested readers, here is a very interesting discussion I found by twofish-quant in these forums discussing the same topic:

http://www.physicsforums.com/showthread.php?t=354287

98whbf

How did you get scammed???

twofish-quant

See Supplement 2 of "Education and the Supply of Physicists" An Overview: Physics Through the 1990's.

http://books.nap.edu/openbook.php?record_id=626&page=91

I'd be less annoyed at these sorts of lies if they weren't still telling them.....

http://www.nsf.gov/nsb/documents/200...69/nsb0369.pdf

Or if they had always been telling them.

http://www.usatoday.com/tech/science...eer-jobs_N.htm

Or that they hadn't always been telling them. If you look back to the 1960's, there has always been this mythic shortage of scientists.

What really gets me upset is

*** But Education Secretary Arne Duncan says a surplus of STEM graduates is a problem he'd like to have. ***

twofish-quant

Personally, I think it's a great thing if people study science and engineering, and I do think that in the long run having more people study science and engineering will help the economy. But please *DO NOT LIE TO ME*. And especially *DO NOT LIE TO ME TO FOR YOU OWN PERSONAL BENEFIT*. The weird thing about all of these studies is that they always end with some stirring call for more funding for universities.

What's basically happening is the moral equivalent of a Ponzi scam or Nigerian advance fee scam. Actually it's worse than a Ponzi scam. When someone sends you a Nigerian spam e-mail or sell you a bad used car, they don't claim to care about you. This ain't some guy in the alley lying to you, it's the damn National Science Foundation and the damn National Academy of Sciences.

There is this wonderful quote by Michael Nesmith.

"It's like finding your grandmother stealing your stereo. You're happy to get your stereo back, but it's sad to find out your grandmother is a thief."