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Despite market turmoil, financial engineering 'quants' see number-crunching future

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Anne Ju

Strolling by the New York Stock Exchange on Wall Street, Cornell financial engineering master's students' cheerful chatter echoed across grim canyons. Lehman Brothers had just announced its historic collapse, and these students found themselves in the midst of a quickly spiraling worldwide financial crisis.

But they were taking it all in stride.

"Maybe it's bad to say this, but I think it's quite awesome to be in the city and to be experiencing this -- not reading about it in textbooks, but actually being here," said Elisabet Gudrun Bjornsdottir, a native of Iceland.

Bjornsdottir is one of 35 master of financial engineering students spending their third and final semester at Cornell Financial Engineering Manhattan (CFEM), a newly renovated facility with classroom and study space at 55 Broad St., in the heart of the Financial District.

The third semester was added to the traditional two-semester master of engineering program for the first time this year. Back in 2006, the faculty voted to expand the M.Eng. program in financial engineering, which is housed in the School of Operations Research and Information Engineering, agreeing that a practice-driven third semester for project work was needed to supplement the students' theoretical, math-heavy coursework. And what better place to do it than Wall Street, where theory meets practice every day?

Like many others, these students -- likely to become financial-sector quantitative analysts, or "quants" -- will face a troubled job market and tough times in the financial industry after they collect their degrees. But they and leaders of the program see a silver lining: Now, more than ever, quantitative financial professionals are needed, and their highly specialized skills may, in time, be exactly what Wall Street needs to right itself.

"If you talk to any trader on Wall Street and ask them what they wish they'd learned more about, or they think is the most valuable thing to learn in school, most everyone would say, 'math,'" said student Mattan Horowitz. "At the end of the day, it comes down to a numbers game on Wall Street, so you have to have a certain amount of comfort working with numbers."

These "historic times," said CFEM director Victoria Averbukh, Ph.D. '97, are a good environment for the students to learn how to be effective Wall Street math wizards.

"Wall Street is going to change, but Wall Street is not going anywhere," Averbukh said. "We're still going to have banks. We're still going to have hedge funds and quantitative asset management firms. We're going to have insurance companies and pension funds, and probably more financial regulators. Across the financial industry, one theme has emerged more clearly than any other: a dire need for vigilant management of market risk. All of this suggests a growing need for quantitative professionals who understand the basics of finance and are excellent problem solvers."

Averbukh, who did her master's and Ph.D. in operations research at Cornell, spent 10 years on Wall Street specializing in mortgage-backed securities, most recently for Deutsche Bank.

In addition to such lecture courses as computational finance and bond mathematics, the students are required to complete a semester-long project, in which they work on a financial problem for a sponsor company. And every Thursday night, the students take part in a financial engineering colloquium, where Wall Street professionals, many of them Cornell alumni, lecture on varied and current topics, from risk management to private equity to algorithmic trading.

Averbukh noted that the program never lacks industry speakers, who have been generous with their time and enthusiasm. "Despite the tough times, not a single talk or lecture was canceled," she said.

Cornell financial engineering gets top marks
Advanced Trading magazine placed Cornell's master of financial engineering program in its top 10 "Quant Schools," according to a July article. A board of Wall Street veterans selected the top financial engineering schools, based on Wall Street recruitability.

Cornell has offered a financial engineering degree in some form since 1989. Traditionally, quantitative analysts were people with a Ph.D. in math, physics, statistics or another science, said Sasha Stoikov, CFEM head of research and the students' project supervisor.

Over time, the discipline has morphed, as "some of these people recycled themselves as quantitative people on Wall Street, because it turned out many of the formulas used in science can be transposed to the market," Stoikov said.

Since 1989, more than 500 Ph.D. and master's students have graduated from Cornell with a financial engineering degree.

But few have done so in an economic climate like today's, noted student Urvashi Batra.

"This is a bad time," she said. "But there is so much to learn in this time."

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