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Careers in Finance at DE Shaw group

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IMO Gold medalist, USAMO winner, and MATHCOUNTS National Champion Sasha Schwartz discusses careers in finance at D. E. Shaw group.

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Facilitator:

rrusczyk (19:32:26)
Tonight we have a special Math Jam brought to you by D.E. Shaw group, one of the sponsors of our Worldwide Online Olympiad Training. We have with us Sasha Schwartz, a past MATHCOUNTS National Champion, IMO gold medalist, USAMO winner, and 2-time Putnam fellow who now works at D.E. Shaw with some of my past coworkers (it's a small world!)

rrusczyk (19:32:38)
As some of you know, I worked at D.E. Shaw as well for 4 years, and I believe that my coworkers at Shaw compared favorably to my fellow students at the Math Olympiad Program when I was in high school.

rrusczyk (19:32:56)
We've invited Sasha here tonight to discuss careers in finance at D.E. Shaw, and perhaps you'll understand why so many strong problem solvers choose to pursue this career.

rrusczyk (19:33:05)
Sasha will begin with an introduction, then will take questions. Please be patient during the question-and-answer session; it takes a while to type up the answers!

rrusczyk (19:33:17)
And now, I'll turn over the floor to Sasha.

schwarta (19:33:27)
Hi everyone. Thanks for attending the DE Shaw info session. I'm here to answer any questions you have about careers in finance in general and specifically DE Shaw. Before we start though, I'd like to give a little of my background and how I ended up working here.

schwarta (19:33:36)
I started college in 2000, attending Harvard as a math major. Although I planned to continue on to graduate school and academia, I thought it would be worthwhile to explore other career opportunities. I ended up working at DE Shaw as an intern the summer after my junior year, and I liked it so much that I decided to come back full time after graduating in 2004. Since then I have been working here as a quantitative analyst in the futures and currencies group.

schwarta (19:33:45)
Also, please ask if at any point I use terminology you don't understand.

schwarta (19:36:35)
Without further ado, I'll open the floor to questions.

danthemanvt (19:37:08)
What is a typical work day like for you?

schwarta (19:37:46)
My work mostly consists of individual projects, ranging from half a day to two months in length. I work on things like designing algorithms to predict future price moves (forecasting) and developing models to predict how our trades will impact the market (slippage). Other quants here work on assessing how risky our positions are (risk modeling), determining the best trades to make (optimization), and deriving mathematical formulas to price complicated assets (theoretical pricing).

schwarta (19:37:55)
Although the projects are mostly individual, there are many collaborative aspects to my job. People often ask each other for help with various pieces of their projects, and we have regular meetings to discuss current work and plan future projects. Also, when I finish a substantive project, I generally send a report to somewhere between 5 and 15 colleagues, and I always get insightful and prompt feedback.

ChrisChang (19:39:11)
are these projects time consuming (do you find yourself in a time crunch alot, working day and night)?

schwarta (19:39:54)
I generally work about 50 hours a week, although this varies throughout the year. I have a lot of freedom in this respect though, and I usually work late because I'm really interested in my project rather than rushing to meet a deadline. Typical finance hours are 40-60 hours a week at hedge funds and 60+ at investment banks.

ben12345_5 (19:39:12)
How much money does the average quant make?

schwarta (19:40:39)
Compensation depends on the specific experience of each individual and the role they fill, but our offers are always competitive with those given by similar firms and often better. I can also say that my current lifestyle is substantially different from what it would have been if I were a grad student.

joml88 (19:41:09)
How did you become an intern at DE Shaw and how much did being an intern help you to get hired later?

schwarta (19:43:32)
I was recruited by a Shaw employee who had TF'd a class of mine at Harvard.

schwarta (19:45:18)
Being an intern was very helpful. Shaw knew all about me instead of just what could be gleaned from a few interviews.

ben12345_5 (19:45:15)
Do companies like DE Shaw actively recruit former USAMO / IMO participants?

schwarta (19:45:49)
Absolutely; that's what I'm doing right now. (;

hilbert (19:46:22)
How many years have you worked at Shaw?

schwarta (19:46:52)
16 months

hilbert (19:47:39)
Did they hire you directly out of undergrad, or did you go to grad school first?

schwarta (19:49:12)
I came straight out of college.

ChrisChang (19:48:57)
do you know anything about what its like to be an investment banker?

schwarta (19:49:38)
not really, sorry

danthemanvt (19:45:49)
Do your projects ever get repetitive, or are they always different?

schwarta (19:51:29)
Whenever something is repetitive we try to automate it away. In seriousness though, I have really enjoyed the variety of projects I have worked on. Most of my work tends to be in new/unexplored areas, so there's always something interesting to learn.

pdiao (19:47:52)
You mentioned that you spend 50 hours a week working. What exactly do you spend those hours doing? Sitting in meetings, deriving stuff, coding, gathering info, etc?

schwarta (19:54:29)
The majority of my time is spent thinking and coding. Sometimes I will spend hours just trying to figure out the right way to think about something, and sometimes I will spend a full day coding. I only spend about 2-3 hours a week in meetings, which I consider a big plus of the job.

hilbert (19:55:34)
How important is it to know math vs. knowing how to code. I doubt that you can give any specifics, but which fields of math do you use the most?

schwarta (19:56:01)
A sound knowledge of multivariable calculus and linear algebra is pretty much mandatory, but beyond that little is required. A general sort of mathematical sophistication is very useful though, which you pick up simply by taking a lot of math courses.

schwarta (19:56:06)
Strong programming skills are certainly a plus but not strictly required for candidates here. We tend to use perl, java, and C++, but each firm has its own preferred set of languages. I would focus on developing general programming skills rather than knowledge of specific languages, by taking classes in algorithms and complexity say.

fleeting_guest (19:55:13)
Intellectual scope of the work compared to academia (e.g. grad school)? What do ex-academics at DEShaw say about this?

schwarta (19:57:45)
I thought long and hard about finance versus academia, and I do not regret my decision. Many of my reasons are personal and not generally applicable, but there are some clear advantages to finance. Publishing an academic paper is generally a lengthy process, and most papers will only be interesting to a handful of people. When I send a report out it only goes to the same handful of people, but they all work in the same building as me and I get much faster feedback. I also value having control over where I live, which is often challenging in academics, and I find it very exciting to know that my ideas are actually influencing how money flows around the world.

schwarta (19:57:50)
One common concern people have is that quantitative finance is boring/tedious and that the only reason people do it is for the compensation. This is completely opposite to my experience. I work on very challenging problems in a variety of areas, and I find my work as intellectually satisfying as mathematical research. That's not to say everything is exciting and fun, but pretty much every job has some unpleasant component to it. Overall, I enjoy my current job as much as anything else I've done.

ChrisChang (19:51:37)
what exactly are all the different occupations that you can be in regarding finance?

schwarta (20:02:04)
At Shaw, the three basic front office roles are trader, programmer, and quant, which I am. Traders do things like execute our trades, maintain relationships with counterparties, and investigate trading opportunities. Programmers develop and maintain our software infrastructure, and quants deal with the models underlying our trading systems.

joml88 (19:58:59)
Are there any courses you would recommend someone to take in college if they are aspiring to become a quant (or something similar) besides the math and computer programming courses you mentioned earlier?

schwarta (20:02:55)
What to study in college depends on what part of finance you are most interested in. If you want to become a trader, then your best bet is probably majoring in economics (although at DE Shaw in particular we have many math majors in trading roles as well). For the quantitative side though, just take whatever math/science courses interest you (math and physics are best). It would probably be a good idea to take a few programming courses, and an economics course or two couldn't hurt, but most of what you learn in college will not be directly applicable to your job anyway. Personally, I took 12 math courses, 6 CS courses, 3 physics courses, and 1 economics course in college. I regret not taking any statistics, but otherwise I feel well prepared by my college experience. DE Shaw in particular is mostly looking people who have excelled in some area (related to finance or not), and we figure we can teach you whatever knowledge you need when you get here.

chubixqube (19:53:08)
I am interested in D.E. Shaw R&D's work with computational biochem. Can you briefly talk about that?

schwarta (20:07:19)
Unfortunately I know very little about DESRAD. I think your best bet would be to e-mail career@world.deshaw.com for more information.

pdiao (20:02:21)
Obviously it is very competitive to get hired at DE Shaw. Does this competitiveness continue after you are in and affect the atmosphere at work? How much pressure is there to produce (are the 50 hours not only enjoyable, but necessary)?

schwarta (20:11:45)
DE Shaw's corporate environment is very much like a graduate school department. Certainly there is pressure to produce, but most of that comes from myself. I enjoy what I do and am excited at the challenge of beating the market. Most employees are hard working and self-motivated, so there are very few deadlines etc.

fleeting_guest (19:44:07)
Similarities/differences with other quantitative funds, e.g. Renaissance Tech, that like to hire math/cs/physics people?

schwarta (20:14:48)
I applied to many different hedge funds when I was a senior, and I ended up choosing Shaw because I liked the people here the best. I also think Shaw is fairly distinguished in the very rigorous approach we take. There are many dangerous traps in quantitative finance - overfitting, underestimating risk, etc. - and I am impressed with how carefully we avoid each one.

ChrisHarvard (19:55:20)
How large is DE Shaw and what areas does its business focus on?

schwarta (20:16:12)
The best source for answers to these questions and others is probably our public website, www.deshaw.com. Following is a description taken from the main page:

schwarta (20:16:19)
The D. E. Shaw group is a specialized investment and technology development firm whose activities center on various aspects of the intersection between technology and finance. Headquartered in New York, the D. E. Shaw group encompasses a number of closely related entities with approximately US $19 billion in aggregate capital. Activities range from computer-based quantitative investment management to the development and financing of technology-oriented business ventures, but are tied together by a common focus on the economic implications of technological innovation. Since its organization in 1988, the firm has earned an international reputation for financial innovation and technological leadership, and has been described as "the most intriguing and mysterious force on Wall Street."

rookworm (19:53:32)
Could you give us an example of the types of problem you work on?

schwarta (20:19:25)
A typical short project might be "here's some phenomenon we observed; look through our historical data and see if this is prevalent." If it did turn out to be common, then I would have the longer project "determine if and how this phenomenon can be used to develop a forecast of future price moves". If I figured out a way, we would put the forecast into production and start trading based on it.

Yrael (20:12:23)
Would it be more appropriate to go into finance from a pure science degree (e.g. math, CS) than from an engineering degree?

schwarta (20:20:11)
Pure science majors are certainly more common, but we have employees from many other backgrounds as well.

hilbert (20:20:33)
How strong does the correlation have to be to be useful?

schwarta (20:22:55)
It depends a lot on the context, but correlations as low as 1-2% can be profitable in many cases.

ChrisChang (20:15:07)
what exactly is a hedge fund?

schwarta (20:26:49)
A mutual fund, which you may be more familiar with, takes money from many different investors and buys some collection of stock (stakes in various companies). They are restricted in many ways, such as only being allowed to buy (not sell short), only participating in certain markets, and various disclosure requirements. Hedge funds can both buy and sell in any market they please and are mostly unregulated (although this is currently changing). While anyone can invest in a mutual fund though, there are restrictions on hedge fund investors. Most are large institutions or wealthy individuals, and investments are usually eight digits or more.

rookworm (20:26:09)
Could you tell us about the relationship between traders and quants, in particular: how/about what do they communicate? culture gap? difference in compensation? Pecking order?

schwarta (20:33:20)
It varies from group to group. Futures, the group I work in, is entirely black box; this means that all trades are generated by computers with no direct human involvement. The traders simply execute the trades and add value through precise market timing and relationships with brokers. The quants tend to communicate with the traders mostly when there is a problem with the system, although we do bounce ideas off each other occasionally.

schwarta (20:33:23)
In other groups the traders and quants work very closely. Energy, for example, has both a black box trading system and discretionary traders. The quants often look to the traders for specific market knowledge and ideas for forecasts. The traders often look to the quants for help with mathematically complicated situations or assets.

empiricist (20:31:55)
Is your work as much fun as math contests were?

schwarta (20:37:20)
It's very different. Math contests are all about solving a specific problem in a given time frame. An answer is usually right or wrong, and that's more or less the end of it (not to say they aren't a lot of fun). My current work though is much more open ended and often ill-defined. I have projects like "explain why such and such happens"; sometimes I discover a clear explanation, but more often I come up with a few possible explanations, none of which is perfect. And sometimes I just have no idea. Markets are complicated.

rrusczyk (20:42:07)
That's it for the Math Jam tonight. We'll be inviting DE Shaw back in the future to answer more questions. Thank you very much, Sasha, for participating.

schwarta (20:42:33)
Before I go, I'd like to add that wWe are looking for both full time employees and college interns. To apply, please send your resume and a cover letter to sschwartz@deshaw.com. We would also be happy to hear from high school students to stay in touch for later.

Copyright © 2024 AoPS Incorporated. This page is copyrighted material. You can view and print this page for your own use, but you cannot share the contents of this file with others.