Robert Young is a vice president in Mortgage Research for Salomon Brothers Inc., New York City. The Mortgage Research division supports mortgage-backed securities sales and trading. They are responsible for maintaining production systems and the relevant software used to produce daily reports about the market. They write up the market commentary that reports on expected trends and the reasons for past trends. It is also their job to perform the relative value analysis needed, for instance, to identify which securities are cheap, and they perform research on models used to value securities. In his five years at Salomon Brothers, Robert has been involved in various tasks while in mortgage research and is presently writing C code for their mortgage prepayment model.
"Mathematics is used quite a bit, although often not at a high level," says Robert. "For instance, we use basic algebra, which sounds simple, but understanding and interpreting the meaning of a solution is very important." In addition he uses statistical regression, basic calculus, variants of Newton's Method for finding zeros of a function, optimization methods, and stochastic partial differential equations.
"Stochastic calculus is used a lot in modern finance theory," he says. "We use it for the theory that our term structure interest rate model is based on. The term structure interest rate model is a basic calculation tool used by many mortgage market participants."
Robert has a B.S. in Electrical Engineering from the University of Pennsylvania, and an M.S. and Ph.D. in Mathematics from New York University, Courant Institute. He began work with Salomon Brothers in 1991, four years before completing his Ph.D. "I obtained my job by an unconventional method," he notes. "I sent a resume to Salomon directly." Previously, he worked briefly (summer jobs) as an actuary and engineer, and was a Peace Corps Volunteer in West Africa for two years.
"Wall Street jobs offer a relatively fast pace and relatively more stress," he says. "My job has forced me to learn a lot about the mortgage market, finance related math, and computer programming. Many people prefer a more relaxed environment like that in the insurance industry, but I prefer having some pressure. Projects actually get done."
Among the courses he recommends for a mathematics student interested in a career in finance are stochastic calculus, stochastic partial differential equations, statistics, calculus, finance, economics, options theory, operations research, and computer courses.
The mortgage research group consists of about ten people with backgrounds ranging from people with Ph.D.s to people with just undergraduate degrees. "Among the people in our group, we have a couple of former professors, a former lawyer/philosopher, and a former AT&T manager." And most of the members of the group are relatively young so a generation gap is usually not an issue. However there are a couple of more senior people who act as elder statesmen helping out the more inexperienced people.
To succeed on Wall Street Robert recommends that you "make sure you have the right personality to work for and with other people, possibly under pressure." Although students often feel they are working hard when in school, it is his experience that, on average, people working on Wall Street work harder than people in academia. "Also," he says, "a Ph.D. in mathematics does not mean an employee is more valuable than someone without advanced degrees. In my group, we have had people with advanced degrees from top schools let go for mediocre performance - not poor performance."
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