‘Rocket scientists of Wall Street’ often follow a career path through math

Most people just talk about the weather. Uday Shirahatti profits from it.

Shirahatti graduated in 1997 with the first group of students to receive a master’s degree in Financial Mathematics from the University. After graduation he traded options of various kinds but turned to weather derivatives after he joined Equitec Group in Chicago two years ago.

Weather derivatives are a small segment of the massive financial derivatives industry, a potential career path for graduates of the University’s Financial Mathematics Program. “This is a multi-trillion-dollar industry,” Shirahatti said. “It’s probably the biggest industry you can think of. It’s global and it affects everyone.”

The University’s Financial Mathematics Program encompasses a faculty of professors from the Mathematics, Statistics and Economics departments, as well as financial industry professionals. Last summer, the program hired its first full-time faculty member, Roger Lee, Assistant Professor in Mathematics and the College. The program also plans soon to hire a visiting professor who will focus entirely on teaching and research in financial math.

Lee, formerly a Szegö assistant professor of mathematics at Stanford University, was attracted to Chicago because of its “leading position in mathematics and in finance,” he said.

“As financial markets continue to evolve and expand, the risks that they encompass will increase in magnitude, variety, complexity and interdependence,” Lee noted. “Mathematical models and methodology play an essential part in the valuation and management of risky assets, and hence in meeting the challenges and seeking the opportunities inherent in these risks.”

Graduates of the Financial Mathematics Program work for investment companies such as UBS, Lehman Brothers and Morgan Stanley, or institutions such as the Central European Bank, the World Bank or the International Monetary Fund. Starting salaries range from $85,000 to $125,000 annually, depending on the city.

“They go all over the world,” said Program Director Niels Nygaard, Professor in Mathematics and the College. “We have a very large number of international students. I would say that 60 to 65 percent of our students are in fact international students, so a number of them go overseas to their home countries.”

There are approximately 25 quantitative finance programs in the country, Nygaard said, but only a few, like the one here, are based in a mathematics department. And although students in financial mathematics can take courses in the Graduate School of Business and vice versa, the two programs share no formal ties.

“Big investment banks and other banks that are involved in derivatives trading and trading in general tend to be interested in hiring people who have quantitative backgrounds,” Nygaard said, “while M.B.A.s are still preferred in a lot of positions like marketing, corporate finance and some parts of investment banking.”

The Mathematics Department established the Financial Mathematics Program under the leadership of Robert Zimmer, a former chairman of the Mathematics Department and now the provost at Brown University. Most individuals with mathematics Ph.D.s pursue jobs in academia. Zimmer noticed that some of his students went to work for banks or investment companies instead. “He saw an opportunity there,” Nygaard said.

An advisory board of industry professionals guides the program, and Robert Frey, the director of the Program in Quantitative Finance at Stony Brook University and former managing director of Renaissance Technologies Corp., heads the advisory board.

Many employees at Renaissance Technologies, an investment firm that manages more than $5 billion in assets, hold doctoral degrees in scientific and technical fields. Shirahatti followed a similar career path in a field whose practitioners have something of a reputation as the rocket scientists of Wall Street. He formerly taught mechanical engineering at Old Dominion University, but left academia after his wife landed a job at the Center for Astrophysical Thermonuclear Flashes.

Shirahatti said students who have been trained in financial mathematics are qualified to trade any number of financial products, including stocks, bonds, commodities, oil, gold and currency. “The program’s core goal is to teach you the various techniques that are useful for pricing, hedging and risk-managing of the portfolios.”

During the Autumn Quarter, 69 students were enrolled in the program either part time or full time. They take courses in mathematics, probability theory and economics, and financial applications and simulations.

“The program is quite demanding,” Shirahatti said.