Astrobetter:Astronomy jobs - Finance and banking
These pages are a rough draft for the wiki at www.astrobetter.com
So what do astronomy Ph.D.'s do in finance?[edit | edit source]
Astronomy Ph.D.'s are highly sought after in banking and finance. The jobs that they do are a mix of the following...
- Develop mathematical models of financial instruments. This involves looking at data and figuring out what the underlying dynamics are in the same way that astrophysicists look at data and figure out what the dynamics are. Unlike the laws of physics, however, the rules of finance are constantly changing.
- Babysitting and programming high performance computers - The global economic system relies on the use of massive amounts of computing power. Astrophysicists often have a lot of experience doing these sorts of computations. Much of the computational work in banking is like that of other high technology industries.
So why not finance Ph.D.'s and MBA's?[edit | edit source]
Finance Ph.D.'s and MBA's are very heavily employed by the financial industry, but they generally do not do the jobs that physics Ph.D.'s do because:
1) Except for some hard core econometricians, they usually do not have the hard core mathematical and computer skills. And lots of finance majors don't like math, whereas if you've spend five to seven years getting a physics Ph.D., we can assume that you don't hate math.
2) They do not have research experience. MBA students learn equations and concepts from a textbook and courses. They do not have experience in situations where the textbook is wrong, and no one knows what is going on.
One thing to remember is that for research positions, banks specifically want physics Ph.D.'s. If they wanted a finance masters or an MBA or an economics Ph.D. (and there are lots of jobs for those people), they will hire one.
What are the good parts?[edit | edit source]
- You learn lots of new stuff, and the environment is a lot like graduate school. You are always learning new stuff, and a lot of the stuff that you learned before quickly gets outdated.
- What you do matters. Bad finance can seriously mess up the world, and you quickly see how what you are doing matters, and how you can change the world (for better or worse).
- The pay is good, although it's not nearly as good as the movies.
- The glass ceiling for physicists is a lot higher than in most industries. In most industries the technical people hit a glass ceiling quickly. While there is a glass ceiling in banking, it's much higher, and it's quick common for astrophysicists to end up in senior management.
- You don't have to convince the interviewer that a astronomy Ph.D. is useful, since more likely than not, your interviewer is also a Ph.D.
- Having your boss's boss's boss's boss be an astrophysics Ph.D. has its advantages.
- There's no such thing as being overqualified or "too smart" (not being as smart as you think you are is a problem, but that's something different)
- You will have to live in NYC, London, Hong Kong, or Singapore. Some people love NYC.
What are the bad parts?[edit | edit source]
- It can be enormously frustrating to work on cool things and not tell people what you are working. Banking and finance works is a very tight lipped culture, and there are good reasons for that. If you go to a university and ask for directions for a lab and want to know when the person involved with the lab gets off duty people will tell you. If you go to a bank and ask for directions to the bank vault and want to know when the security guard goes off duty, people are trained to not tell you and to point you to someone else that can grill you to find out exactly why you want this information.
- There's also the corporate hierarchy. Corporations are very socially stratified places.
- You will have to live in NYC, London, Hong Kong, or Singapore. Some people hate NYC, and it's a very expensive city.
- The pay is going down, and it's less than what it seems when you realize that you're marginal tax rate is 45%.
What extra training to I have to have?[edit | edit source]
Self study. Go to Amazon and on the web, download material, do research. There are a few "core concepts"
- risk neutral pricing
- no arbitrage principle
- trader jargon (long, short, greeks, duration, convexity)
One thing about textbooks, is that you need to read them knowing that a textbook is likely to be 70-80% wrong or irrelevant. Also there are a lot of academic papers that are also either wrong or irrelevant. If you aren't working in the industry, you have no real way of knowing if a paper is useful or nonsense, but the important thing is to understand the language.
The way you should read a textbook on mathematical finance from five years ago should be like reading an astronomy textbook from 1960. There is a lot of stuff that's wrong, but at least you can understand the basic language. If you study a book from 1960, much if not most of it is wrong, but you can have a conversation about why it's wrong.
You will need to be able to program C++. If you aren't an expert in C++, you aren't going to be one in two months, but the more you can pick up, the better it will be.
Math contest books are useful. Also, if you have a chance to audit hard-core statistics and probability, do it.
If you have a physics/astronomy Ph.D., then a MFE degree is a total waste of your time and money. MFE's might be worth considering if you have a bachelors.
What should I do if I'm working on my Ph.D.?[edit | edit source]
The most important thing that you can do if you are currently a Ph.D. student is write a high quality dissertation and finish your degree. Also study hard math and do lots of computer programming. An internship would be helpful, but it doesn't have to be at a bank. Working as a programmer at a high tech firm will make you attractive to banks.
It's a bad idea to focus too much on finance, because no one knows what the market will be like in 2+ years. If there are no jobs in finance, then it was a waste of your time. If there are jobs in finance, then you should be able to get something based on your Ph.D. work alone.
Again, remember that point that for a certain type of job, banks want science Ph.D.'s. Don't turn yourself into an economist (unless you want to be an economist), because the types of jobs that banks hire physics Ph.D.'s for, use physics skills.
The other thing is that Ph.D.'s are not weak in intelligence. The thing that is difficult is social skills (i.e. how do you handle the situation in which someone says something you think is obviously stupid)
Where do I sign up?[edit | edit source]
- The best way of getting into the industry is to find someone you know that's already in it, and if you know any alumni that are in the industry that's the first place to go.
- Campus recruiting is nice if it's available.
- Headhunters. You can start at the major technical sites www.wilmott.com, www.nuclearphynance.com, www.phds.org, www.efinancialcareers.com, www.dice.com (look for NYC jobs). If you go onto Wilmott, Dommic Connor will give you a very will written guide to careers if you ask.
Companies will not post directly, but there are dozens of recruiting firms that will try to get you a job. Note that headhunters are like used car salesman. The quality can vary a lot.
- Writing to directly to companies is generally useless. Your resume will end up with the wrong person, and no one will ever see it.
Further reading[edit | edit source]
All of this is with the caveat that much of the information provided is wildly outdated.
- The Complete Guide to Capital Markets for Quantitative Professionals - Alex Kuznetsov
- The Arxiv.org section on quantitative finance
- The movie "Margin Call" - A very good and realistic drama that lets you see what the inside of a bank would have looked like circa 2007-2008.