Perspectives: Newsletter of the College of Arts & Sciences

Risky Business Leads to Master's Degree

With the recent financial crisis, many investors learned a painful lesson about risk versus reward.  And financial institutions learned that market tail risks—which are “rare event risks”—are less rare, with more serious consequences, than most people had imagined.  As a result, many financial firms are now hiring more risk analysts and paying them generously for their expertise.

It’s no surprise, then, that a new UW master’s program in computational finance and risk management, which trains people for such careers, has been a popular offering. What is surprising is that the program almost didn’t happen.

Professor Eric Zivot talks to students in the new master's program in computational finance and risk management.
Professor Eric Zivot talks with students in the new master's program in
computational finance and risk management. Photo by Jacob Lambert.

Prior to the master’s program, the UW offered a graduate certificate program in computational finance. Taught by professors of statistics and economics, the program had no home department and was in jeopardy.  A review committee led by Nathan Kutz, professor and chair of the Department of Applied Mathematics, suggested creating a master’s program in its place. Kutz approached several departments about taking it on, but they all declined. Convinced this was an opportunity not to be missed, Kutz offered his own department as the program’s home.

“I wanted in,” he recalls. “I felt the master’s program had a place at the UW and there was a demand for this sort of training. Firms have renewed their aggressive hiring of people with exceptional quantitative skills. I think we’re at the infancy of having a whole professional class trained in modern methods of portfolio construction and risk management.”

Inspired by the success of the UW’s professional master’s degree in applied mathematics, Kutz developed the self-sustaining program with Doug Martin, professor of statistics.  It combines finance courses previously offered in the certificate program--taught by Martin and Eric Zivot, professor of economics—with courses on data analysis and computational methods taught by faculty in the Department of Applied Mathematics. Industry experts will also teach courses, sharing their expertise as professionals in this growing field.

“The emphasis on computing across the areas is a very important part of this,” says Martin. “Students who complete the program will have skills that will be very attractive to employers.”

The response from prospective students has been phenomenal. Although the department had only five weeks to advertise after receiving required approvals, the program easily met its goal of 30 students for the first year. “We not only made our numbers but exceeded them while still being quite selective,” says Kutz. “We have some pretty stellar students coming in.”

"Firms have renewed their aggressive hiring of people with
exceptional quantitative skills. I think we're at the infancy of
having a whole professional class trained in modern methods of
portfolio construction and risk management."

Those students are a mix of experienced industry professionals and recent college graduates. Kutz and Martin welcome the mix, believing that each group brings something the other lacks. 

“New graduates have been immersed in theory,” explains Kutz. “They are clueless about what these jobs entail, but their academic knowledge is still fresh. The professionals have tons of work experience, but they haven’t cracked a book in years or done hardcore math. It’s going to be an interesting dynamic.” Adds Martin, “For those fresh out of college, it will be important to have internship opportunities. Fortunately we have considerable support from the community of quantitative finance professionals in the Puget Sound area, as well as good contacts with such individuals in the broader U.S. market.”

One welcome aspect of the program, particularly for working professionals, is an online option available to all students. Students can attend lectures in the classroom or online, attend office hours in person or via Skype, participate in class discussions in the classroom or through conference calls, and interact with classmates through a dedicated “general forum” message board. It is the first program of its type to offer an online option, with content and quality identical to the on-campus option.

“The technology has gotten pretty sophisticated, so online students can feel as integrated as they want,” says Kutz, whose department already offers another master’s program with a successful online option.

Kutz and Martin anticipate that the program will expand after its inaugural year, as interest continues to grow.
“In the past, asset managers felt it was important to say they did risk analysis, but it was as much a marketing tool as anything else,” says Martin. “Now people are taking risk management more seriously. As a result, the growth in demand for programs like ours is truly outstanding.”

Return to Table of Contents, September 2011 issue