Why Math Students Haven’t Discovered Quant Finance? #Finance

foreign hey YouTube It’s Dimitri and today I’m going to answer a subscribers question here so abstract schnitzel uh he has asked many questions before and I’ve made CashNews.cos for him um but I think this is a really good question I’m not going to read the entire

thing to you guys um because it was a super long question with many details um I don’t know you can’t see that really on my phone but I mean it’s this really long uh question here the question though is really you know how come Quant

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance is so Niche and how come it’s not more popular um essentially you know they looked at doing all these different types of jobs with a math major and of course things that came up are like data science data analysts

actuaries Financial analysts financial advisors Etc and yet nobody told them there was a job called a Quant uh and the questions kind of going into you know how come you know basically like engineering so why is engineering so ubiquitous compared to Quant

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance especially with the exaggerated salaries of Quant Finance and they’re kind of wanting to

know like is there like what’s going on why do we not talk about quantitative Finance in the math World engineering has high salaries which is why a lot of mathematicians go to the

engineering route and so it would make sense that you would go into the quantitative Finance route because people throughout ridiculous numbers on Quant

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance and so I thought a lot about this and it’s challenging and I think there are multiple factors I’m sure I’m going to miss a ton of these but let me just start off with here so we’re going to go to

the AC which I believe is the American Society for engineering education according to the United States Bureau it says on their website I’ll put a link below so you can look at this um so United States Bureau of Labor Statistics BLS there was approximately two million engineers in the US 700

000 engineering technicians and technologists and 4.1 million computational Professionals in the U.S Workforce in 2018. so quants scale very well and I’m going to put there’s a caveat to this kind of um but text-decoration: none;">Finance as a whole industry scales really well you can have a few people with a strategy and it will scale to a specific point and then typically it dies out and you can’t scale it any further but when you look at for example um so one of the first Banks I started

at had 10 000 employees okay out of ten thousand employees there are 60 people that we would consider put in air quotes quants Loosely considered here but uh model development model validation you had I think around like 60 at the time and then I moved around and I went to a global firm and I went

to a division here in the US which does not cover globally um but in the US here my validation team was like 31 to 32 people and that included governance which governance is non-quot they just do paperwork um so out of 31 34 you might have had 20 to 25 actual validators and then I would say uh

development is probably double to Triple that size so you might be looking at I don’t know 60 to 100 quants plus the third 25 20ish let’s just say 200 round even number and if you go to the really large firms even like City uh JP mortgages they have a lot larger teams like significantly

larger like they’re in the hundreds but when you start to think about this there’s also an issue so talk about banking only the super large Banks and only the regional banks that are fairly large have quants after that they’re just too expensive and most traditional

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance people don’t see any value in adding them so they just manage risk the old school way like in the 80s and 90s you don’t have a whole staff of people building these and I know

this because I consulted is that the American Bankers Association conference once this one specifically on Risk Management and I was talking to this lady who ran this really tiny itty bitty bank and she’s wanting me to somehow come and educate their whole staff and team on

how to do Credit score card model development they want it just to be automated if I could just make a series of CashNews.cos for them and be nice and easy and they’ll do it you know they’re only hiring undergrads they’re only paying I think it was like forty

thousand to sixty thousand you know but 60s those are really good undergrads and I’m just looking at her like no so the small Banks don’t have quants this is the issue you run into um there’s a lot of jobs in engineering so schools can churn out a ton of math Majors engineering

students like every University Under the Sun can have a math and engineering department in every city and county and the state and you know Federal we all need buildings and it’s really hard to duplicate in scale Engineering in the sense that even if you take the same blueprints for two you

know buildings you put one here in Dallas Texas which sits on black clay soil uh you move one up to like Washington state where I was at uh there’s hard rocky soil uh the engineering’s probably gonna have to differ just because of how the footings are set Texas also has the issue that

when you go down so many feet you end up running into limestone so we can’t there’s there’s issues uh there’s foundational issues uh but engineering is just not as scalable and because of that there’s lots and lots and lots and lots of Engineers to do all this work

that’s required to build everything and it’s constantly churning and there’s just new stuff being built now Quant Finance is scalable in the sense you can have one Quant

that can manage a hundred thousand dollars and that same Quant can probably manage up to a few million dollars and use the same strategies and you know the Market’s probably deep enough in those depending which areas you’re in uh that you can actually scale that to a specific point now

of course you can’t skill things I mean imagine Skilling a strategy for Tesla into the trillions like you’re gonna move the stock and then it causes issues and you know there’s financial reasons why you can scale to a point but you can’t just keep scaling for forever and on

top of that it’s just that I don’t think there’s that many jobs and so when you have Educational Systems as well so talking about age here engineering and math is really really old like it’s really old Financial engineering is probably the first quants I would argue are

probably late 70s at the earliest um and then you have like the 80s and then real Quant Finance hasn’t really taken off until probably the 2000s so you think about let’s just say

the year 2000 here um it’s 23 years old math and Engineering is thousands of years old like I was watching a CashNews.co recently on you know talking about some math theorems and it was like 3000 years old so Financial engineering is very very new this is one another reason why no one’s

heard of it there’s not a lot of jobs it’s super new um also most of you are probably really young that are watching this so when I went through like you know Junior High and even part way through high school I didn’t have a cell phone uh when I grew up as a kid I think we had

like Windows 95 and you know the modem and the cool sound and like we didn’t use the internet for things I’m still not a massive fan of technology which shocks a lot of people but it’s it’s due to my age somewhat I didn’t you know I wasn’t born in growing up with

Facebook and you know Myspace if anybody knows what Myspace is uh those things just weren’t around so computers computer technology the internet all this wasn’t present when I was a kid when I was growing up even when I was starting off into my college Years like high frequency trading

was this really big deal and it was like really starting to take off and like you know it was starting to take hold here back in um probably like 2007 2008 so I came out of high school think around then um during 2007 so I was like right right in that period where the financial crash hit computers

have not been that advanced for very long we’re still just right at The Cutting Edge of this stuff like it’s not a very popular field to be done uh the other piece of this on top of it I think is probably just the distaste for business I don’t know I don’t I don’t hold

any grudges against the engineering and math communities uh quants aren’t treated very well in many firms uh the business people the business mentality the training the MBA is you are so great you are just an amazing person you have an MBA you went to this program you know you’re really

somebody I mean I was talking to somebody who had their MBA and they’re like going on well my professor you know they worked at this firm and they’re like telling me and I’m like yeah they were a vice president they were a dime a dozen like I was past that at I don’t know

the age of like 28 or something like your 50 year old Professor that barely made it to that point at the age of like 45 and went back into teaching like the business side just it’s not very nice and fun to work with they kind of look down on everybody they don’t really appreciate the

mathematics and so finding people in the quantitative Finance Community which is another problem with this they do not like to communicate they don’t like to work with a lot of people I

am one of these crazy people I push myself into doing YouTube and going to conferences and talking to all these people and I seem really happy and chipper and like really extroverted uh the truth is I’d rather just be like alone working on a long complicated problem digging through math

theorems and figuring out why you know I can’t solve something like I’m not looking to go out there well I am but most quants aren’t out there looking to find you know undergrads to teach and train and educate and on top of that this is a problem I have seen with the

Master’s programs as well so the Master’s programs in quantitative Finance around the United States here they’ve been talking to me and they’ve mentioned the same

issue like they really want you know smart well educated and trained people in the stem fields to go into quantitative Finance for their master’s program so they want to have more depth

a lot of these programs too want to get away from hiring as many or bringing in as many Indians and Chinese and predominantly those two groups but bringing in a lot of Internationals to do quantitative none;">Finance the industry’s kind of talking about you know be nice to have some Americans doing it you know and people like Dimitri keep saying they don’t exist and the industry agrees and we just don’t know how to get Americans to do that and some programs started waiving

application fees and surprise surprise not many Americans applied and when I say that I mean there’s a bunch of Finance students applying which are not qualified typically because they

don’t have the math background but the math schools don’t even know about it like your professors don’t even know it exists and again it’s just because I don’t think there’s a lot of jobs in this area and also when professors why not go online and they realize

like salaries are a million dollars plus to start uh you guys their PS indicators going off they know this is a lie and so I think a lot of them just kind of Turn away and don’t want to deal with it why would I you know know talk to these I don’t know slimy sleazy business people and

then try to put math students there it just seems distasteful but the programs the undergrad programs I do wish I could go talk to more undergrad programs the math departments the engineering departments like if you like what you’ve done you like the engineering you like the math but you

really don’t want to be an engineer like this is a perfect opportunity for you we’re going to be using calculus we’re going to be using real analysis we’re going to be using probability Theory and statistics and some programming of course and so I think it’s an amazing

fit for math students but I think part of it too with the math department says they don’t know what skills are needed and there’s not a lot of communication between these Master’s programs and these math undergrads and I know a few of them at least one of them which I have rated

because they’ve done a great job on trying to bring in a diverse background of people that are super qualified and that are already here in the US they’ve been working with undergrads trying to find where is that next top talent and how do you get those schools and universities you know

education programs and get them excited about it I wish I had the funding the money to do this I don’t I don’t have the funding and the money to travel across the US my little tiny YouTube channel does not make enough funds for me to travel to a bunch of like I would love to go to my

undergrad University and just talk to them and say you know this is a great opportunity this is where it’s at or even go to like high schools and things and explain like you know this is an amazing opportunity for those that like math and stats and you know computer programming this is a

great area to be in um but I think the reason we see such a slant towards engineering is there’s a lot of opportunity there’s also a lot of types of engineering so you know electrical um don’t test me here mechanical I mean Hydraulics like I had a friend at Michigan who was

studying uh Naval engineering and it was talking about waves and how water interacts with ships and the types of the bow on the ship and the shape and how it moves anyways there’s all kinds of cool things in engineering Quant color: #1a73e8; text-decoration: none;">Finance though I think we’ve done an absolute terrible job at marketing it’s why me poor old me on here on YouTube I can yell and scream and talk and I’m the largest channel just because there’s not that many people in it the other

issue too I think is that we all focus on the buy side like investing Hedge Funds like again most quants probably are more on my thinking pattern here that just sounds like Sleazy and dirty and not productive for society where there’s a wholesale side of people actually

generate products like Loans from mortgages Auto and people vastly oversimplified on the internet and say like oh you just do ABC and this gives you a Loan but they don’t see it and I’m working as I’m trying I’m trying there’s been a

bunch of requests lately I’m trying to figure out how to show you guys um some of the modeling pieces more so to understand what we’re doing and how the analytics so we actually do some analytics with this how the analytics ties into the modeling ties into the decision making because I

get to do a lot of this stuff now in my my actual job but that’s why I think that’s why it’s so just unheard of I wish there were more math Majors like I wish more math Majors would apply and do it but at the same time I wish the Master’s programs in the industry would reach

backwards into them and explain more exciting and fun and interesting things especially above and beyond the prop trading dream job that everyone keeps you know over hyping and talking about the money is good but typically math Majors that just do it for the money are never that great I ran into a

math PhD at Princeton excites me because the the topics are just so good and it’s like I can have a real Converse station if these individuals were out applying for jobs and you know they were a little more educated on the industry themselves because they were asking me specifically how do

these topics connect if that was more clear between the math side and the Quant Finance side because big surprise most people hiring quants aren’t quants uh then you would have

something you would really have a great in-depth industry here I think so I think there needs to be a lot of work in this area I don’t know why it’s not happening I’ve been excited lately just because I’ve seen more Americans in General on my channel but more specifically

I’ve been seeing a lot of high school students which just like blows my mind because I had no idea what I really wanted to do in high school and then it took me years going through my undergrad and failing miserably of picking a

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance degree and then finally realizing I want to do something meaningful I want to do math and stats so anyways that’s my two cents that’s why I think so many math Majors go into engineering and why

it’s so unheard of I don’t even think the universities know about it the career placement advisors don’t know about it is such a top secret weird area to work in and most of us are super quiet I’ve had complaints from subscribers of like I’ve emailed like 25 30 people

on LinkedIn and no one responded like thank you for responding and I’m like oh I actually have a whole YouTube channel check me out and put my little Marketing in there uh but yeah it’s great so I hope more math Majors will do it if you’re a math major feel free to reach out and

ask me questions I’m happy to make CashNews.cos on this as well because the questions you have many other math students probably have but I just don’t think about them because I’m not a math student so anyways thanks for listening thanks for watching and as always until next time

thank you