A friend of mine who runs a derivatives desk made job offers to 2 percent of the Caltech class of 2006. That's only 4 people, but still a pretty high percentage! 3 have accepted, the other went to a well-known software company. It makes me wonder how many kids who otherwise would have gone on to grad school (e.g., in engineering, math or physics) are heading right into finance these days. Smart move, if you ask me :-)
Most of my colleagues still don't take the theory of modern finance seriously at all. Even researchers who work on complex systems (modeling traffic, sandpiles, networks, ants, etc.) show surprisingly little interest. I guess the future belongs to the young!
I tend to think of "no-arb" as an equilibrium condition, but of course we expect to find systems out of equilibrium at times. It is clear that behavioral factors (among others) can lead to very long equilibration timescales in markets.
ReplyDeleteRather than be shocked scientifically by finding an arbitrage opportunity, I suggest people trade on it :-)
Physicists may not be taking finance seriously but the PDE community has gone wild over finance. For example, Fields medalist Charles Fefferman is now working on it. Pretty much every math department in the country with applied math is scrambling to get into finance.
ReplyDeleteSTS: I think you diagnosed it perfectly. Sandpiles are great, but an industry that underpins economic development and resource allocation worldwide is "dirty"!
ReplyDeleteCarson: Fefferman is a smart guy ;-) BTW, I bet math finance programs spend too much time on martingales and too little time on quick and dirty Monte Carlo...
D.E. Shaw used to (still does?) send out letters to undergrads at Caltech when they graduated. Actually I think they must have selected for certain students (maybe it was physics, maybe it was those who graduated with honors.) BTW the smartest physicist in my Caltech class now works for Shaw and loves it, although he did go to grad school and PhD himself first.
ReplyDeleteActually, they're mostly in love with free boundary problems but there is quick and dirty in math departments too!
ReplyDeleteThat pretty impressive! I’m assuming this is one of the better desks and it was a good choice for all. It sure makes my job tougher at the entry level for Caltech folks, but generally we help more people in their second job search. Most entry level guys randomly submit their resume online, and one of the pure internet recruiting firms places them.
ReplyDeletePass my info onto them for later on! :)
Quick correction… mistyping: “That’s pretty impressive” and “on to them”
ReplyDelete