Quant Finance - for VIPs only
When it comes to quantitative finance education, similar bubble-detecting signs can be found, this time emanating not from cabbies but from relevance-seeking academics.
I have recently been made aware of a proposal to offer a quant finance degree at a completely unsuitable institution. This proposal comes from an individual with an econometrics background and four or five graduate degrees under his belt. His main sales pitch seems to be "this is a must for business schools", with no apparent further explanation.
He displays a complete disregard for the reality of the targeted institution, which does not house a math, statistics, engineering, physics, or computer science department. Not a single mathematician, engineer, physicist, or C++ expert works at such institution. A course in quant finance has never been offered over there. The local market for quants is, to put it mildly, limited. The chances for this institution of successfully competing globally in the market for quant education would be insignificant. Anyone who spends five minutes analyzing the institution would instantly understand that it is as bad a fit to quant finance as cricket would be to America.
Why then would this individual peddle the idea of a quant finance program to such an unseemly place? There are two reasons: one, he is aware that for the past few years a bubble in quant finance degrees has been developing throughout universities across the world, and like a cab driver would do with equities, he feels a tip is the proper thing to do; second, he probably wants to take advantage of the bubble to guarantee profits for himself, here in the form of an academic post. In essence, by peddling quant finance to a far-from-quanty school the peddler is trying to con the naive innocent into joining the bubble. As we all know, it is precisely the late-entrant innocent that gets slaughtered once a bubble irremediably bursts.
The main lesson of this story is that quant finance education is a very tough field and that only a few institutions can truly offer top-notch programs. Quant finance, simply put, is not for everyone. It´s only for VIPs, those that posses the necessary mathematical and computational muscle, and that can also boast the presence of experts who can really explain how things are done in the real world. Also, you need a strong quant job market nearby.
It is my personal opinion that many of the universities that have joined the quant bandwagon in recent years are going to have a lot of trouble trying to keep pace with the top programs. You see, in the MBA world a top-50 school can still do very well. It can deliver a satisfactory education and can place its graduates well. Though being top-10 would be nice, being top-50 is not a threat either to reputation or to existence.
When it comes to quant finance, not being top is almost akin to not being. Quant jobs are much more limited, and thus employers can be much more selective. Of course, when it comes to quant finance there can be no bull: either you are really proficient at C++ and stochastic calculus, or you aren´t. Managerial or sales jobs, in contrast, are accesible without such a high knowledge-based barrier. If the interviewer happens to like you, you can get in independent of your brainpower or school pedigree. Not so, clearly, with quant finance. Knowing your stuff and having studied under star professors carries decisive weight.
That is why it would be reputational suicide to offer a quant finance degree unless you can really aspire to be considered elite. Last thing you want is to see your students being systematically slaughtered at job interviews, and your name consequently dragged through the mud. People need to understand that the barriers to entry when it comes to quant finance are very high and that you just cannot become a leader in C++ and numerical methods overnight simply because some individual tells you that you´ve got to buy into that quant finance thing.
Everyone wants to be invited to the Playboy mansion, but very few have what it takes to get in and enjoy the untold pleasures. Same with quant finance education. It is a highly tempting, very exciting, rewards-filled world that is strictly reserved to those VIPs who boast the required very-hard-to-get credentials. Just as it would be delusional to dream of mingling with the drop-dead gorgeous playmates when Hugh Heffner doesn´t even know your name, it would be suicidal to think that you can make it in quant finance when you are not endowed with any of the indispensable resources.
ptriana@profesor.ie.edu
