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WHAT! WORK AT AN INVESTMENT BANK?

FINANCIAL MATHEMATICS AT THE UNIVERSITY OF CHICAGO

THE MATHEMATICS IN FINANCE PROGRAM AT THE COURANT INSTITUTE

USING MATHEMATICS IN FINANCE AT THE UNIVERSITY OF TORONTO

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SCIENTISTS AS MARKET ANALYSTS: FEATURE INDEX

One of the most perplexing questions to many people outside the financial industry must be: Why does anyone working within the bowels of Mammon when you ask about their job reply that they are "something in the city?" Inevitably, this looks suspicious to anyone living in the real world. Whoever heard of someone who couldn't give their job description in straight language when asked?

Well, I am "something in the city." I'm not a banker, although I work for the one of the top five commercial banks in the United States. Bankers inhabit a different floor, and a different world: I work in capital markets, specializing in foreign exchange (FX). Also, the city here is a virtual rather than physical location, as I work in a spacious dealing room sited at the top of Tottenham Court Road (perfect if you like a spot for furniture shopping).

I work in the Strategic Risk Management Advisory group. One of our main functions is to look at how fluctuations in FX rates affect our customer's (typically medium to large corporations) profits. If a change in some market rate affects your bottom line, you are said to have a market "exposure." We aim to do two things: help them understand and quantify the risk associated with these exposures, and help them to control this risk by recommending trades or trading strategies. You don't even have to import or export to have FX exposure: If you're a U.K. company producing goods for the U.K. market but all your competitors are Japanese, then you have exposure to the Sterling/Yen exchange rate as a weak yen will result in you losing market share.

My first degree was in chemistry at the University of Bristol in 1992, then I spent a further 3 years doing postgraduate research in physical chemistry before joining the First National Bank of Chicago in 1996. In our group we currently have two people from Oxford, one from Cambridge, one from Manchester, and two from Bristol; this is more to do with the fact that most recruiting has been done through personal contacts than conscious selectivity, although there's little question that the city as a whole is biased towards Oxbridge and the "old" universities.

So what on earth is a chemist doing in the city? Well, there's a lot more physicists than chemists in finance-land, but it's far from a closed shop. When I joined the bank, not only had I no experience of foreign exchange, I hadn't even used a spreadsheet. The things I really value from my degree and postgrad work are:

  • Numeracy: I am not, and have at no time ever claimed to be, a mathematician. However, experimental statistics, distributions, and optimization have proved indispensable. The important thing I have found is to be able to use mathematics as a means to an end. The end may be different now, but the means are the same.

  • Self-Management: In a dealing room no one has the time or patience to spoon-feed you. Flexibility and the ability to deal with steep learning curves are essential -- 2 weeks after I joined, I was working on three different client projects, and teaching myself Excel/Visual Basic as I went.

  • Experimental approach: nothing to do with Bunsen burners (what?) but everything to do with designing tests to validate your ideas using available data. One of the most exciting things we do is to devise trading strategies: devising rules to exploit market inefficiencies and patterns, enabling companies to hedge more intelligently, or even to make money out of their business exposures. I start with a hypothesis, design a strategy to exploit this, build a spreadsheet or code up a model to test the strategy, then examine my results, refine the model, and assess the assumptions and errors. A scientific approach is essential here, and scientists or engineers (like my boss) are the best people to do it.

The main areas of interest in capital markets for postgraduates are the front office (trading and marketing jobs) and middle office (internal risk analysis and control). If you like flexible hours, late starts, ability to study whatever you fancy, and lack of pressure, then the city really isn't for you. You need to have good communication skills, an ability to work with people with short tempers and a variety of backgrounds, a willingness to work long and hard hours (12-hour working days are still a fact of life, whatever the European directive says), and a high tolerance for crowded tube trains.

If you're looking for a job in the city, then it's wise to see if any of the academic staff have contacts there: This is increasingly the case in physics, where considerable "cross-pollination" has already taken place. Applying through advertising is vastly oversubscribed, and you won't be talking to the people that matter. When you get through to an interview, bear in mind that answering "interview questions" (the ones everyone knows) only get you through human resources, they don't get you a job. What will impress people you'll be working for will be things like:

  • Good homework: Know something about the company.

  • Knowledge of the field you're applying for: They probably don't expect you to be an expert, but ignorance implies lack of interest.

  • Motivation: They need someone with staying power.

  • Personality: If you don't get on with them at the interview, they won't want to work next to you. Make an effort.

One final word of advice: If you do end up with a job title like "Strategic Risk Management Advisory Analyst," stick to "something in the city" at dinner parties. ...