The International Association of Quantitative Finance (“IAQF”) has been participating in a series of panels around the country titled “How I Became a Quant”, one of which was hosted locally by the University of Minnesota’s MCFAM (Minnesota Center for Financial and Actuarial Mathematics in the School of Math) on Friday, April 15 2016. The discussions are focused on providing students and practitioners a personal view into the careers of a range of quantitative finance professionals. I had the good fortune to be asked to participate on the panel which presented in the Twin Cities, along with Anna Kincannon, Capital Planning Manager at Bremer Bank; Dharini Loknath, Petroleum Products Analyst at Cargill, and Michael Szwejbka, SVP Risk Analyst at US Bank. The panel was moderated by Chris Prouty, an instructor with the Master of Financial Mathematics (MFM) within MCFAM and exotics trader at Cargill.
To be clear – I am not a quant, nor did they expect me to be one. I introduced myself as a “Quant-a-be” (rhymes with “wannabe”), which basically means that my career in fundamental analysis, portfolio management, and asset management has repeatedly crossed paths with our more quantitative brethren, while my actual skills remain mired in prose and poetry rather than mathematics. In spite of my deficiencies, the discussion was excellent, and focused on a few key themes.
First, all of the panelists were in agreement over the importance of communication skills, and the need to work closely with business units on the development and implementation of models, whether they are risk management, decision making, or business analysis tools. Without clear understanding of the business need, it is very difficult to develop successful tools, and yet much of our industry remains sharply divided along quantitative / not-quantitative lines. There is great opportunity for students who are successful in developing their skills in both areas.
Second, the panel dwelled on history for some time, and the importance of knowing exactly how we have gotten to where we’ve gotten. There is a lot to be learned from understanding market failures of the past, and the role that quantitative finance may (or may not) have played in those episodes. While the development of quantitative models seeks to guide forward-looking decision making, they are based to a large degree on history, and having a solid understanding of that history can help to identify key assumptions and potential weaknesses.
Third, there was a fair amount of conversation around the role that quantitative finance currently plays in the banking world, particularly around the implementation of the capital planning process and stress testing required by the Federal Reserve under CCAR. While there is not necessarily strong agreement around the ultimate effectiveness of CCAR, it is clear that this has become, and will continue to be a driving force around the employment of students with strong quantitative skills.
Finally, there were many topics covered of a significantly more technical nature, during which time I felt rather like Winnie the Pooh roaming the Hundred Acre Wood, humming a little hum to myself until something came ‘round which I recognized. And perhaps, in the end, that is all that we can ever do as Investment Professionals. By I really do believe that the continued evolution of quantitative finance provides those of us who wander with the best of hope of charting a course through the woods.