My Life as a Quant

Last week I was in a bookstore and ran across a new book by Emanuel Derman called My Life as a Quant: Reflections on Physics and Finance. Derman got a particle theory Ph. D. here at Columbia in 1973 when he was one of Norman Christ’s first students. He then went on to post-docs at Penn, Oxford and Rockefeller and a tenure track job at Boulder. By 1980 he had decided he didn’t want to stay in Boulder, partly because his wife couldn’t get a job there, so he left academia for a job at Bell Labs.

In 1985 he went to work in the financial industry at Goldman Sachs, staying there until 2002, interrupted by a one-year stint at Salomon. He’s now back at Columbia, teaching in the Financial Engineering program run by the IEOR (Industrial Engineering and Operations Research) department of the Engineering school. This kind of master’s program is extremely popular; besides IEOR, the math and stat departments collaborate on a separate MA program in the Mathematics of Finance which has been wildly successful. Each year we get more and better applicants, and they seem to do very well on the job market when they get out.

The first half of Derman’s book gives a good view of what it was like to be a theorist of the phenomenological variety during the seventies and early eighties. The second half has a nice description of the mathematical problems involved in pricing options and mortgage-backed securities, as well as many comments on what it is like to work in the financial industry. He was one of the earliest particle theorists to do this, but many others have followed him there in recent years, some of whom are regular commenters here.

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7 Responses to My Life as a Quant

  1. Chris Oakley says:

    Getting off topic, but wouldn’t it be nice if in the presidential debates the candidates bragged about their ingenuity in avoiding draft to Vietnam rather than the heroic and selfless ways in which they served their country – ?

    “Every American can be proud of the way that, by getting a physics post-doctoral position at a young age I managed to avoid getting involved in that stupid civil war in Indo-China. It was not easy. It required resourcefulness and careful planning. My fellow Americans, by this I have demonstrated that I can look after my own interests effectively – have no doubts, therefore that you can trust me to look after the interests of the whole nation.” [Applause]

  2. Peter says:

    Not very usual for someone to get a Ph.D. in one year. I think Christ was a student of T.D. Lee’s and was also a Columbia undergrad. He may have just done much of the standard graduate program while an undergrad, then started grad school at a point when he was already doing research.

    Since this was the mid-sixties, there also may be a story about the draft there. My colleague John Morgan also got a very quick Ph.D. around that time, and I remember him telling me some story about this that involved avoiding being sent to Vietnam. Perhaps it was that, at least during certain years, grad students could be drafted, but if you were a postdoc, there was some way to get out of it.

  3. Tim M. says:

    Regarding Norman Christ: According to http://www.college.columbia.edu/bulletin/faculty/faculty.php he earned his doctorate one year after his bachelor’s degree. Does anyone know about his early career? For example, how is this possible? Is this a phenomenal feat or commonplace? Maybe I should have posted this in the callow youth discussion.

  4. Thomas Larsson says:

    Gross, Politzer, Wilczek got the prize, we (which includes Peter Woit, me, and others) were guessing correctly this time. ๐Ÿ˜‰ More precisely, the committee chose correctly.

    Old news, Lubos! I posted the press release after the appropriate blog entry an hour ago ๐Ÿ™‚

  5. Lubos Motl says:

    Gross, Politzer, Wilczek got the prize, we (which includes Peter Woit, me, and others) were guessing correctly this time. ๐Ÿ˜‰ More precisely, the committee chose correctly.

    Congratulations!

  6. sol says:

    I mean if you really think about it, you have to orientate this view around the very small, and one tends to think, “is there some possible organization going on here?

    Okay, maybe some of you don’t, but I think quickly here of the math mind, and the ideas of negotiated processes, and again as quick, John Nash comes to mind.

    So I think this crossover is more then just being feed up with doing the search for the unifying principal in particle physics, and a transferance to real time functions, in bank processes?

    Imagine looking for this principle with Robert Laughlin.

    http://large.stanford.edu/rbl/lectures/index.htm

    So the one who controls the dollar, controls the reality? I think shifting sands/dollars in population, could have easily destroyed institutions, had minds set themself towards shifting those same dollars?

  7. Chris Oakley says:

    Oxford particle physicists I know who have ended up in finance:

    Guy Coughlan – at JP Morgan.
    Kelly Kirklin – formerly AIG, now back in physics
    Paul Miron – National Westminster (UK Bank)/UBS/Chase Manhattan. No idea what he’s doing now.
    Me – Barclays/Citibank/UBS/HSBC/Nomura. Doing mainly financial software.

    Guy is a “risk metrics” guru at JPM. This involves, inter alia, treating the financial portfolio as a mathematical optimisation problem. A mixture of maths, programming and giving presentations to customers.

    Kelly and Paul were successful interest-rate swap traders. Mostly this was about trying to buy low and sell high and is more gamesmanship than mathematics, although they needed mathematics in the early days to set the trading book up (nowadays this is not a requirement as systems are better).

    I, on the other hand have never traded. This is not because I abhor the idea of becoming rich, it is just that since the age of 11 software has been one of my main interests in life. I have still not managed to build the perfect trading system, but at Nomura, at least, I gave it a serious try.

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