Financial Analysis vs. Computer Science

[Wax]

Yeah someone mentioned Quants earlier and it seems to be a viable option if your goal is to make it big. The only problem is that most quants are physics degree holders and not finance.
http://en.wikipedia.org/wiki/Quantitative_analyst

I'm not saying anything is wrong with a finance degree. A finance degree is a good option to find a job but a horrible choice if your goal is to land some big time job making a six digit salary in NYC.Here's a good forum if you are interested. It was my first google search. According to one guy, "Get an MFE or PhD in Quantitative field. Learn about finance and get good at programming (C++) ".
http://www.quantnet.org/forum/showthread.php?t=2187

 

[Wax]

OMG. Quants make a bazillion dollars.

http://news.efinancialcareers.com/NEWS_ITEM/newsItemId-4131

Hemendra Rai, a U.S.-focused recruiter at Huxley Finance, says Wall Street packages for credit derivatives analysts with similar experience average around $450,000. Barry Franklin, of Arizona-based recruiter Integrated Management Resources, put U.S. packages even higher at $600,000 to $700,000. “This is the product everyone is looking for right now,” he says.

 

[Locrian]

I don't know how related this is to financial analysis, but can anyone offer some insight into what mathematicians do in finance.

Quants are primarily involved in pricing derivatives. Derivatives are difficult to price because of the probabilistic nature of their underlying securities. An example of one way to deal with this is stochastic analysis; see the Black Sholes Equation/Formula as an example, but note that modern derivatives pricing moved past it in that form.

Since solving many of these equations (BSE, for example) is essentially solving a second order differential equation, often with boundary conditions, it suits itself well to people comfortable with that type of problem. Some computer programming, especially C, is used, along with lots of excel and probably some VBA as well.

The above is pretty basic and there's lots of cutting edge stuff that goes beyond it, but it should get you started.

For a more formal introduction, you could see the Derivatives Markets text, by McDonald I think.

 

[Locrian]

Yeah someone mentioned Quants earlier and it seems to be a viable option if your goal is to make it big. The only problem is that most quants are physics degree holders and not finance.

Quants come from lots of mathematical backgrounds. Historically physicists were some of the first to be recruited because, as I mentioned above, they deal with similar mathematical problems.

Lots of mathematics PhD's are hired as well though. An increasing number of Computer Science phd's are hired, as well as Masters in Financial Engineering.

Note that the quality of school you get your degree from is critical, contrary to what you wrote earlier in this thread.

 

[Locrian]

OMG. Quants make a bazillion dollars.

True, but they work a kabillion hours, so the ratio isn't as good as it sounds

http://news.efinancialcareers.com/NEWS_ITEM/newsItemId-4131

Okay, but that is from 2005. You may have heard some rumors about little bumps in the financial system since then. The rumor mill has suggested that compensation wasn't hit too hard, but hiring was definitely down, as of recently. It may be picking up as we speak, but has a long ways to go till 2005 levels.

I think people going into quantitative analysis right now should be looking ahead carefully.

 

[Locrian]

Quants are primarily involved in pricing derivatives.

Meh, I should restate that. Quants are traditionally involved in pricing derivatives. They do other stuff - high frequency trading, study price signals, etc. I don't know what they do most these days. I'm betting its still price derivatives, but that could have changed.

 

[Wax]

Quants come from lots of mathematical backgrounds. Historically physicists were some of the first to be recruited because, as I mentioned above, they deal with similar mathematical problems.

Lots of mathematics PhD's are hired as well though. An increasing number of Computer Science phd's are hired, as well as Masters in Financial Engineering.

Note that the quality of school you get your degree from is critical, contrary to what you wrote earlier in this thread.

Okay, that's great but that's a masters degree and not undergraduate. It seems that your undergraduate degree for a Quant can be anything as long as it's related to math so I don't see a degree in Finance being a viable option. From reading the Quant forums, a degree in computer science is a much better choice for an undergraduate degree which is one of the options the topic creator laid out.
Edit: From just doing a quick scan of what the job market really wants in a Quant, you can easily see that an undergraduate degree in finance will do absolutely nothing for you. From all the job listings, the market seems to want strong C++ knowledge and a PHD in a quantitative field.

Quant Job listings
http://www.quantfinancejobs.com/jobs/quant.asp

 

[Niles]

I think it is a good idea to keep in mind that the number of quant-jobs is not very big compared to the number of eligible physicists who can possesses those jobs (at least not; I don't know how it will be in some years). I am saying this because most people I know (including myself) would much rather have a very well-paying job in a bank as a quant rather than jumping from one post-doc to another in hope of getting hired as a associate professor.

Thus keep in mind that if you study physics with the goal of becoming a quant, then there will be many smart guys from MIT, Princeton, Harvard etc. applying for that very same job as you are applying for, and there is a good chance that they will get the job instead of you (unless of course you are one of those guys).

I am not saying this to discourage anyone, but it is important to be realistic.

 

[Wax]

Have you guys ever seen the movie, "The Pursuit of Happyness"? It's about a homeless man named Chris Guardner who made it big in the financial world by becoming a broker/financial advisor without a college degree.



I know I've beaten this topic to death but I came across this guy in an article and I thought I'd show you exactly how he made it big. This is a quote taken directly from his wiki page, " Gardner worked to become a top trainee at Dean Witter Reynolds. He arrived at the office early and stayed late each day, persistently making calls to prospective clients with his goal being 200 calls/day."

linky.
http://en.wikipedia.org/wiki/Chris_Gardner

 

[avant-garde]

Maybe accounting is a waaaaaay better choice. lol

 

[Locrian]

Okay, that's great but that's a masters degree and not undergraduate.

Read the OP - it makes no such distinction. You're narrowing to your field of knowledge again.

 

[Locrian]

I am saying this because most people I know (including myself) would much rather have a very well-paying job in a bank as a quant rather than jumping from one post-doc to another in hope of getting hired as a associate professor.

Wow, that's not something you hear every day in this forum.

 

[Locrian]

Maybe accounting is a waaaaaay better choice. lol

Accounting would be the choice if you were looking for consistency and flexibility.

Compared to things like quant or actuarial work, accountants have a much larger number of companies hiring, a much broader list of geographic locations to work (what % of US quant jobs aren't in NY or Chicago?), and possibly more flexibility in working hours. They also deal with more competition in the job market, typically lower pay, and less prestige.

 

[kote]

http://en.wikipedia.org/wiki/Financial_analyst

Advisers are not analysts. Most companies have the job title "Financial Analyst" in addition to banks having various particular types of analysts.

If CS is an option and you're worried about your career I'd recommend EE if it's not too late. Starting salaries for EEs (and other engineers) are high 50s out of undergrad, and an engineering degree will open doors in other industries that value quantitative skills (think finance, management, consulting).

Very few recruiters in any field will turn down an accredited EE with proven quant skills and work ethic for a business major who may or may not have had a fluff undergrad program. Show leadership and social skills through extracurriculars, a soft double major, minor, or just extra humanities courses, and the interview.

 

[avant-garde]

Locrian, how much less prestige does an accountant get?

 

[Locrian]

Locrian, how much less prestige does an accountant get?

That's a great question. How do you measure it? What made me believe that's true? And most importantly - to whom? Thank you for calling me out on that.

I'll actually stand by the statement (and can even give reasons, though I'm not sure how convincing they are), if people really cared. However, I encourage people to assume I'm wrong and go try and pursue the question on their own, instead.

 

[kote]

That's a great question. How do you measure it? What made me believe that's true? And most importantly - to whom? Thank you for calling me out on that.

I'll actually stand by the statement (and can even give reasons, though I'm not sure how convincing they are), if people really cared. However, I encourage people to assume I'm wrong and go try and pursue the question on their own, instead.

I think the US economy has answered part of the question for you:

"Median annual earnings of wage and salary accountants and auditors were $54,630 in May 2006."
"Median annual earnings, including bonuses, of wage and salary financial analysts were $66,590 in May 2006."

http://www.bls.gov/oco/ocos001.htm
http://www.bls.gov/oco/ocos259.htm

See also related titles like "budget analyst" and "financial manager" which are more closely related to financial analysis.

 

[coldmountainr]

This thread may be old, but is surprisingly relevant to my life situation. Maybe I can offer a bit of insight when it come to the analyst/accounting career path, at least as it relates to corporate analysts and corporate CPA's. I took an undergraduate physics major, then decided to pursue a career in accounting/finance. So I got a masters in accounting (MPA) from Texas and slid in for a quick 15 months of work experience as a big four auditor. Was laid off last April and am now a Texas CPA. I really love finance and particularly enjoy the mathematical and statistical problem solving that relate to the various financial instruments. Currently, I am a CFA level II candidate for next year.

I can attest to the fact that trying to get in as an entry level corporate analyst isn't really happening now. The number of general accounting, auditing, and financial reporting roles available is quite large despite the economy. Corporate analysts, in comparison, are much more expendable and are currently very top heavy with applicants who have tons of experience. Just look at the size of a corporate finance division compared to the mass number of accountant roles.

I spent seven months looking for any comparable finance position and could not land one. I didn't even get a second look despite pertinent academic background and a CPA. I decided to look at financial reporting roles about two weeks ago. I have my first job interview scheduled for next week as a result.

Unless you end up knowing someone or have an 'in' otherwise, job hunting will largely involve recruiters and hiring managers with eyes glued to your resume. They really do not look at anything else other than your work experience followed by your academic background and other relevant professional achievements.

My thinking way back a long time ago was that I wanted to learn business and eventually start another firm on my own (ran small blue collar business earlier in my life). My idea would be to eventually create freedom of time to pursue my studies as I see fit without the need for a standard job (as mentioned the mundane daily tasks in most fields are not terribly interesting, but end up taking up so much of your valuable time).