Interview with Dr. Linda Kreitzman(2)

2007-04-16 11:08:09 [ Big Normal Small ]  Xing Zong  　Comment

Xing Zong: Qualitative analysts (quant), traders, investment bankers. To a lay person, what are the differences between these jobs?

Linda: A trading desk is like a chamber orchestra: different people play different roles and there are different "partitions", which require full coordination for the performance to be successful.

Marketers/sales are selling the financial products to the clients (insurance companies, mutual funds, pension funds, retail, hedge funds.). Successful people in this area are articulate, outgoing, good salesmen but in addition they need to have a deep understanding of the products, of the needs of the clients and why a product has the desired features from the client's' perspective. Usually, the salespeople maintain a longstanding relationship with the clients, understand their needs so that they can anticipate the needs of the clients and help them to articulate these needs. They need to be aggressively proactive with the clients to generate business.

The structurers work closely with the sales people and the traders. They are the architects of the products. The structurers keep designing new structures which produce attractive risk/reward profiles for clients given market conditions and the economic environment. Structurers are also responsible for pricing these new structures. Structurers are usually former quants with market savy and creative minds. They have also good communication skills as they constantly interact with the trading desk, to make sure that the traders feel comfortable with the risks involved with these new structures, and the sales people and sometimes the clients.

The quants are the financial engineers with strong mathematical skills who are responsible for developing and calibrating pricing models. This is a highly technical job that requires a thorough understanding of the theory, the numerical techniques to implement the models, and strong programming skills.

Trade support people are also quants directly attached to the traders and are responsible for "tweaking" the models to adjust them to new payoffs. They are "commando" type of people who should react very quickly to the need of the traders.

The traders are managing the risks of the portfolio of positions accumulated by selling products to counterparties. They constantly use the pricing models to mark the books, compute the hedge ratios in order to readjust the hedges to maintain the portfolio within the risk limits.

Investment banking is a different area of a bank. It covers mergers and acquisitions, private equity, merchant banking, underwriting, etc…

Xing Zong: Berkeley MFE program is consistently ranked No.1 among the similar programs. How intensive is the one year study? What are the subjects for students to study?

Linda: It is VERY intensive. Ask our current students and alumni. They know how hard it is and the sacrifice it entails. I invite you to check our curriculum on our site http://mfe.haas.berkeley.edu/curriculum.html

Xing Zong: You wrote “it is the networking and frequent communication with decision-makers in the industry that allows us to find most of the opportunities for our graduates”. Could you please elaborate?

Linda: Yes, indeed. I constantly network and try to get the best opportunities, anywhere in the world, for my students. I go to conferences, visit buy side and sell side firms to understand their recruiting needs, etc…It goes back to the success of the program. It will always be measured by how well the students do post MFE. I like to make them happy when they exit the program because the truth is, they work really hard during the program!!

Xing Zong: What future trend do you see occurring in financial world? What qualifications will be mostly valued by the financial firms in Wall street?

Linda: The markets will keep on innovating and proposing new instruments to hedge and trade risks which, currently, can at best be insured. A good example is the fast growing market for credit instruments - over the last five years credit has become an asset class by itself. New risks, such as catastrophic risks, risks related to pollution, the climate, etc... are now being securitized. To model and trade these complex instruments will require an increasing level of sophistication in financial mathematics and statistics.
Xing Zong: Is there any collaboration between Berkeley MFE and Chinese institutions? What do you think of the Chinese students in MFE program, do you have any plan to attract more Chinese students?

Linda: The MFE Program has no relationship with China, but CED, the Center for Executive Development at Haas (which is separate from the MFE) has indeed offered a certificate in finance in Singapore. Our plan is to attract the best students, wherever they are. Because of our reputation, we have a large number of very qualified applicants from all around the world. It is an exciting time for the HAAS MFE Program.

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