
Do It Yourself Masters in Financial Engineering - genieyclo
http://blog.hiremebecauseimsmart.com/post/2860511335/design-your-own-mfe
======
gahahaha
"""But you pay someone to indoctrinate you with exactly the same methods and
formulae that all of your competitors are using. Then you expect to come to
not just a different conclusion, but a market-beating conclusion? That just
sounds dumb."""

Counter argument: Creativity entails not only novelty (that outside the box
stuff) but also utility, and in order to be useful, it has to go above-and-
beyond what is already known (that inside the box stuff). It's about embracing
what's been done before, because it's practice that gives us the capacity to
build on the old ideas to make the new.

If you never venture outside the box, you will probably not be creative. But
if you never get inside the box, you will certainly be stupid.

~~~
tyng
The question is, once you get in, how do you get out?

~~~
katovatzschyn
I think the answer to that question is genius and hard work.

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noname123
DIY Financial Engineering:

1\. Sign up for an Interactive Brokers account; state that you want to trade
options.

2\. Transfer >25K (day-trading capability) or whatever is reasonable amount
money for you. Enough for you to care about but not over the amount where if
you lost it all, you'd lose sleep over.

3\. Now use the highest/lowest volatility scanner and buy/sell some options
randomly in that list; max out your real cash to accumulate positions (do not
go on margin).

4\. Now figure out what the fuck you just did and how much money you are going
to lose. This is the most important step, nothing motivates you to learn
security analysis, risk management, Black-Scholes/Bionomial Tree option
pricing, post-transaction cost analysis than the threat of losing your money.

5\. If you get over step 4, then you probably have a strategy that turn over
7% monthly, or turn over 100% annually. Now automate it as much as you can
with IB API.

~~~
iwwr
DIY Financian Engineering Lite Edition (TM)

1\. Go to Las Vegas

2\. Transfer >25K in chips (high-roller capability), or whatever is reasonable
amount of money for you

3\. Play the tables

4\. Figure out what the fuck you're doing while you're doing it

5\. If you get over step 4, you probably think you have a solid strategy for
winning against a casino. Now, automate the task by getting people to pay you
for your new book/DVD and public talks.

~~~
gatsby
"When I was young, people called me a gambler. As the scale of my operations
grew, I became known as a speculator. Now, they call me a banker. I have been
doing the same thing all along." -Sir Ernest Cassel

------
joshkaufman
This is exactly what I did with business, instead of getting an MBA or a PhD.

Here's my reading list: <http://personalmba.com/best-business-books/>

Here's the book I wrote, condensing what I learned in the process:
<http://www.amazon.com/gp/product/1591843529/>

I now own my own business, work for myself as a business teacher and
consultant, have an enormous amount of flexibility in my day-to-day schedule,
and make more than professors who teach at top business schools.

Education is changing.

~~~
fuzzythinker
Wow, incredible reviews, just picked up a copy ;)

~~~
joshkaufman
Thanks, I appreciate it!

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localhost3000
wondering how you compete with the MFEs from MIT / Harvard / Yale / [other top
school] for that BSD quant job when on your resume it says "I read a lot of
free shit on the internet" ?

you don't pay $100k for the knowledge, you pay $100k for a ticket to the
party. everyone knows that.

of course, if you want to be an entrepreneur or trade your own $, that is a
different story. but this seems unrealistic for any kind of mainstream career
move.

~~~
crasshopper
Great point, I have experienced exactly this problem.

It's actually the reason I started writing on the internet (note the extremely
clever site name).

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jteo
You go and get a Masters because of 2 reasons

1\. Signalling to your future employer / Getting past the HR filter. 2\.
Networking with others.

Learning something useful is usually a bonus.

~~~
crasshopper
I would like to hear much more discussion about these two parts of it.

~~~
crasshopper
In particular, aren't you also signalling that you're a fraidy-cat conformist
who can't do things for him/herself?

------
goblgobl
I'm deciding between MFE/MS programs and starting independently at the moment.
Here's what I've sort of cobbled together.

My understanding is that your value to a firm is directly proportional to your
ability to generate alpha. Credentials would be useful for securing an entry-
level position, but eventually, it is your ability to develop profitable
strategies that will secure your position in this industry.

This is such a secretive business, that I doubt academia will be teaching
anything other than the fundamentals/theory . As pointed out in the article,
MFE employment stats are murky at best. I haven't had much luck getting
confident stats. There's only a few of programs that staff actual
practitioners, people who, you know, actually made/make money doing this
stuff.

One of my concerns with the credential-path is future career growth. Many of
the firms that hire from schools place candidates in specific roles that need
to be filled. You might get stuck in an area thats not as profitable as other
areas of the market. You will also not be exposed to the firm's intellectual
property until they've worked you hard and for many years.

Contrast this with the option to start independently. I've spoken with quite a
few people who've started out this way. Some have parlayed their experience
and performance into jobs/partnerships at the big firms. Others continued to
scale and build out their own fund. They all say the same thing, if you can
develop profitable strategies, you will find people more than willing to
invest in your strategies.

As far as networking, I think the internet is helping that immensely. Quite a
few fundamental investors have received job offers or started their own hedge
funds from blogging/posting on forums when it became apparent they had an
edge. There's always a few headhunters and fund managers hanging around
nuclearphynance, and other forums.

There is a higher risk, perhaps, of getting nowhere. But you also have the
freedom, and less dogmatic structure to think independently, and the time to
learn things thoroughly (vs. in a degree program).

I'd like to hear other's thoughts on this.

~~~
crasshopper
Ultimately yes, just like any business what you add to the bottom line is the
brick-hard determinant of wage.

But just like in other businesses, perceptions, measurability, and org
structure are very important.

It's not as simple as "can you generate alpha". Does your desk manager give
you as much leeway as you desire? Does your alpha come only after your
position has been underwater for weeks and you were given position to double
down?

Measurement is also a huge issue. How much did you contribute to the bottom
line? Can you prove it? What if you told Moira about low-discrepancy
sequences, which improved her Monte Carlo sims, which somehow affected
someone's trading down the line ....?

I met my current (quant fin) employer on the internet. While I was living in a
trailer park.

------
verysimple
We live in the so called information age and everyday someone posts something
like this on the web. Some road map to better educate yourself cheaper in x or
y field.

Ironically, governments throughout the world still struggle to find solutions
to education. Please, just teach people to open a book and do some damage.

~~~
crasshopper
Verysimple, how much actual reading do you think comes out of people
bookmarking and voting up these lists? I would guess very little.

~~~
verysimple
You can't know that. Reading is highly dependent on your perception of the
activity. If you were conditioned to believe that learning is something that
happens mostly in a classroom, then you'll perceive a book as "1000 pages to
go through", a hurdle.

On the other hand, if you're conditioned to believe and trust in the
transmission of knowledge through independent reading, like most autodidacts
are, you perceive them as an opportunity to improve.

I, myself, am an autodidact programmer. I had never heard of many resources
before encountering them in threads on HN, Reddit, or Stackoverflow. I haven't
read all books, or followed all the videos, but at least, now that I'm aware
of them, it prompted me to start working toward shifting a few things in my
life to allow me the time and opportunity to dig deeper in the material.

It's a process.

~~~
crasshopper
For me, the more hard drive space I have, the more PDF's I save. Doesn't mean
I read them. The more time I spend on the web, the more "to-read should-read"
stuff I find. Doesn't mean I read it.

Real reading happens for me when I shut the computer and focus on just one
thing.

------
Confusion
I still remember the moment in statistical physics class when my prof wrote
down the Black-Scholes model, explained how people made a lot of money using
it, added that the inventors had received a Nobel prize _and proceeded to show
that it was just the diffusion equation_.

The diffusion equation. It was so underwhelming that I lost any interest in
going into financial engineering.

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chrisaycock
> It was hard enough to make you feel smart for knowing that the third moment
> of a distribution is its skewness...

If you think that makes you smart, then I want you to be my competitor.

~~~
crasshopper
Read on, the next clause indicates that I don't think it makes you smart.

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thebigredjay
It would be great to develop an open directory for all DIY degress. For each
degree path you would have a list of freely available resources summarizing
what knowledge you need to cram into your head, like you have done. Huurmm...
I really like this idea...

~~~
crasshopper
academicearth.org

Reddit has a lot of such things.

------
choffstein
Well, since I have a Masters in Financian Engineering (well, technically, a
Masters in Computational Finance -- but same difference), I feel like I at
least have to comment on a few things.

1\. Just because the material is freely available on the internet does not
mean you will have the ability to learn from that material. However, an
inability to learn the material does not necessarily indicate a disinterest or
an ineptitude. Quite frankly, it took the threat of a grade and the commitment
of paying tuition for me to sit down and read through Shreve's Stochastic
Calculus books, despite the fact I had picked them up almost a year before
attending CMU.

2\. Reading a bunch of books doesn't make you knowledgable on a subject. Deep
interaction with the material does. You don't go to school just for a piece of
paper -- you go for a structured learning environment. I went because I
believed, and still do, that the teachers who understand this material will
know the best way to organize and present it to me. Furthermore, most MFE
programs stress the importance of an internship, giving students pragmatic
experience. Finally, most MFE programs also offer speaker series to provide
interaction with industry practitioners.

3\. Whoever is saying 'Girsanov's Theorem' doesn't understand the connection.
Girsanov is only relevant from the Fundamental Theorems of Asset Pricing,
which is only relevant in that it translates the question of arbitrage into a
question of existence of a risk neutral measure. Ultimately, pricing is merely
replication.

4\. "So you’re trying to get a job where you face the market everyday and
disagree with it." This quote tells me you fundamentally are misunderstanding
what occurs on most Sales & Trading desks, which is where most people from MFE
programs try to place. Don't worry -- most people don't understand what they
do. Quite simply, most Wall Street traders do nothing other than execute
trades for clients and try to match and offset the risk of the trade with
other clients. Sometimes traders will carry some risk in their book (most of
the time, it is second-order risk) -- but for the most part, they aren't
actively taking bets on market direction (though, rumor has it Goldman is
notorious for this…) -- they leave that up to the hedge funds.

5\. This whole notion of independent thought versus 'indoctrination' is
ridiculous. I'm sorry, but math is math, whether you read it on your own or
are taught by a professor. Independent thought is a characteristic of the
student, and they either have it or they don't.

6\. Is the degree expensive? Heck yes. Is it worth it? Only you can answer
that. For me, having the degree is priceless because I own my business, and it
acts as a certification of qualification when I meet with clients. It serves
as one more point for them to check off in their due diligence on me.

7\. You will completely miss out on the opportunity to network with peers. I
now know people who I worked with on a daily basis at almost every major Wall
Street firm, from investment banks to hedge funds to consultancy firms. That
is a priceless network.

So can you learn the material all on your own? Sure -- but I bet it takes you
a lot longer than the year and a half it took me. By going to school, I was
able to dedicate myself full time (homework and classes well exceeded 40+
hours a week), to learning the material. In my opinion, this isn't really
material you can learn 'part time,' and if you try, you certainly won't have
the opportunity to develop any practical understanding of it.

~~~
crasshopper
Thanks for the relevant comments.

I addressed #1 in the article. Suffice to say I disagree.

#2 Who says you interact deeply with material in school?

#3 comes from Emanuel Derman's interviews of fresh grads.

#4 I do understand the difference but I would rather prop trade than make
markets.

#5 There are so many sub-areas. Should you study wavelets? Finite element
method? Differential geometry? EDA? Bayes? ML?

#6 Perhaps I am more risk-averse than you. Or less trusting.

#2, #7 - I said that's the irreproducible part of an MFE.

Would you mind adding your comments to the Disqus on the site? They're very
thorough and as you're an MFE grad they counterbalance what I said. I think
your viewpoint is quite valuable.

------
binarysoul
I'd just like to point out that all those amazon product links have his
affiliate ID in there... He's getting a cut, keep that in mind

~~~
joshkaufman
So? He put a lot of effort into that list, and he published it for free. If it
sells some books, good for him.

~~~
kmfrk
I don't think there's any harm in saying that.

It was just something "for your consideration". Nothing accusatory.

------
nerfhammer
I'll just leave this here:

<http://www.khanacademy.org/>

~~~
kmfrk
In its current state, Khan Academy's exercises are _very_ basic, once you
start following the courses. You learn the basics, but not enough to become an
entrepreneur.

I've been mulling over a project to deliver more courses in a similar vein,
but I'm still struggling with how I'll manage to collate the user-submitted
YouTube-videos automatically without mandatory approval on my side.

~~~
ecounysis
You're not going to learn enough to become an entrepreneur from any school.
You just fucking do it. [http://www.cloudave.com/1171/what-makes-an-
entrepreneur-four...](http://www.cloudave.com/1171/what-makes-an-entrepreneur-
four-letters-jfdi/)

