Master of Financial Engineering for Prop Trading or Quant Hedge Fund

helelayup · Oct 6, 2015

Hi everyone,

I am an industrial engineer that will graduate in two years time, hopefully. I have been interested in algorithmic trading for a few months now, trying to learn programming languages to develop a basic backtesting and paper trading platform.

I also researched a lot about Financial Engineering (FE) masters programmes, but cannot figure out whether a masters degree in FE would be beneficial for algorithmic prop trading or a trading job at a quant hedge fund.

I would love to hear your thoughts and comments, I will be grateful for any guidance. I wish everyone success in their trading.

xandman · Oct 6, 2015

Here is an interesting Wiki on Mathematical Finance. (There is a link to FE,which is weighted to Q.) It nicely divides the P and Q world of buy-side and sell side. I think this gives you a nice hint of the computational skill/domain you may want to develop.

It is rather hard to develop mastery of both domains, but many do.

https://en.wikipedia.org/wiki/Mathematical_finance

gwb-trading · Oct 6, 2015

helelayup said:
Hi everyone,

I am an industrial engineer that will graduate in two years time, hopefully. I have been interested in algorithmic trading for a few months now, trying to learn programming languages to develop a basic backtesting and paper trading platform.

I also researched a lot about Financial Engineering (FE) masters programmes, but cannot figure out whether a masters degree in FE would be beneficial for algorithmic prop trading or a trading job at a quant hedge fund.

I would love to hear your thoughts and comments, I will be grateful for any guidance. I wish everyone success in their trading.

Questions like this are discussed many times over in the Wilmott forum.

garachen · Oct 6, 2015

Most FE programs have just become cash cows for the university. I used to hire from them exclusively. Nowadays I wouldn't touch anyone coming out of them. I know others feel the same.

volpunter · Oct 7, 2015

What did you miss in such graduates? And what did you gain from whom else?

garachen said:
Most FE programs have just become cash cows for the university. I used to hire from them exclusively. Nowadays I wouldn't touch anyone coming out of them. I know others feel the same.

globalarbtrader · Oct 7, 2015

garachen said:
Most FE programs have just become cash cows for the university. I used to hire from them exclusively. Nowadays I wouldn't touch anyone coming out of them. I know others feel the same.

+1, with the exception of Oxford and LSE. I don't feel qualified to comment on the US schools.

GAT

trade4succes · Oct 7, 2015

It's hard to say (at least for me) what type of program you need, as there are many ways to algorithmically trade the markets. Machine learning is the hype for the moment, but who knows how long it will last. Maybe better to choose a generalist program.

helelayup · Oct 7, 2015

xandman said:
Here is an interesting Wiki on Mathematical Finance. (There is a link to FE,which is weighted to Q.) It nicely divides the P and Q world of buy-side and sell side. I think this gives you a nice hint of the computational skill/domain you may want to develop.

It is rather hard to develop mastery of both domains, but many do.

https://en.wikipedia.org/wiki/Mathematical_finance

The link was very helpful, thank you. So what I understand from that is MSc in Computational Finance or Mathematical Finance would be more appropriate for someone who is aiming to become a quantitative trader/portfolio manager.

xandman · Oct 7, 2015

helelayup said:
The link was very helpful, thank you. So what I understand from that is MSc in Computational Finance or Mathematical Finance would be more appropriate for someone who is aiming to become a quantitative trader/portfolio manager.

Not at all. I am no expert. But your background in engineering tells me you are already familiar with the numerical analysis of PDEs and have a start in some desired math skills for pricing derivatives.

However, it is still early in your learning. Some courses in stats, though unrelated, will round out your math skills. Then, there is finance and a ton of programming (of course).

cjbuckley4 · Oct 7, 2015

MFE's aren't worthwhile in most situations. If you go to grad school for anything, make it something marketable outside of trading like CS or stats. If you have two years left in school and want to be a prop trader don't bother looking at MFE's, look at prop shop internship programs. If trading is what you want to do, go do it. The opportunity cost of grad school is just too high.

Grad school:
Learn theory underpinning what they teach first year prop traders. Spend 60K+. Still need to find a job. Compete with extremely cliquey and generally very smart international students.

Prop trading:
Learn applicable material about derivatives. Theory isn't necessarily neglected. The most common required readings on the topic I've seen are Hull and Natenberg, which you'll see are the same texts they use to teach intro courses for MFE programs most places. Earn 70-100K. Don't need to find a job (hopefully). Compete with your coworkers only to keep your current job.

If you have a good working knowledge of probability, data structures, and algorithms I would hazard that it may be just as easy for you to get a prop trading job now as it would be when you finish your MFE. I'll also hazard that a MS C.S. goes a lot further on a resume than an MFE. With the exceptions of Columbia, CMU, MIT, NYU, Stanford, Princeton, and U Chicago, I couldn't see an MFE really enhancing your employability.