We can never predict the future but we can be prepared for it. Whether it is an environmental disaster, an economic downturn or plain bad luck, quantitative models have the power to hedge our risks and help us minimize our financial losses.
Shweta Sharma, our next pathbreaker, Quantitative Analyst, helps investors take informed decisions regarding their investments by analyzing how a financial product/asset is going to behave in different market scenarios.
Shweta talks to Shyam Krishnamurthy from The Interview Portal about her initial foray into the world of financial derivatives that caught her attention due to the applications of her favourite subject, Mathematics, in the world of risk modeling.
For students, mathematics plays a very important role in protecting our investments which help us and our society save for a rainy day !
Shweta, tell us about your growing up years?
I grew up in Lucknow, UttarPradesh. My father is a small businessman and my mother a homemaker. Since childhood, my grandfather made me sit for hours to solve math questions. Slowly and steadily my interest in mathematics began to grow. I did my schooling from St. Fidelis College, Lucknow. During my school days, I observed how mathematics was binary unlike other subjects. You could either get a question fully correct or totally wrong. This increased my interest as you could get full score if all questions attempted were correct. I started focusing more on Mathematics. As a result, I had been a consistently good performer in Mathematics throughout my school life. On the funnier side, since I didn’t know my talent or inclination towards a specific hobby, I participated in almost all extracurricular activites from dancing, debating, dramatics and sports. I loved them all.
What did you do for graduation/post graduation?
I completed my graduation in Bachelors of Mathematics (Honours) from Sri Venkateswara College, Delhi University. Back in 2009-2010 , everyone in my batch in school started preparing for Engineering. I started exploring options where I could only read Mathematics. I came across a course Mathematics Honours in Delhi University. I decided to go for it. I belonged to a middle class conservative family . Thus it took a while to convince my family of my decision.
I completed my postgraduation in Masters of Computational Finance/ Mathematical Finance. After my graduation, I wanted to study the applications of mathematics. Thus I started exploring my options until I came across few colleges like IIT, NIT and IMA which provided higher education in applied mathematics. I started giving entrance exams and I got through Institute Of Mathematics And Applications, Bhubaneswar.
What made you choose this career?
I was greatly influenced by Raghuram Ranjan the former governor of RBI. His work in the field of banking and finance pushed me to take up a career in finance. Since I had always loved Mathematics, I decided to pursue mathematical finance.
My second mentor was Mahendra Nath Mishra – Emeritus Professor at Department Of Mathematics- Institute Of Mathematics And Applications, Bhubaneswar. He gave me guidance on research topics related to quantitative finance. One of the topics that he guided me to research was Fractional Brownian Motion and its use in Quantitative Finance. This was a very new area of research and there were limited resources available for study. Under his guidance, I developed curiosity on how basic quantitative problems can be framed in a financial organization.
Thus, instead of going for further studies, I decided to work in the private sector to see how a day in the life of a quantitative professional would look like in India.
How did you plan the steps to get into the career you wanted? Or how did you make a transition to a new career? Tell us about your career path
During my post-graduation, I had been interested in the study of financial derivatives which I found as a very innovative field. Derivatives are a sort of financial products whose price is derived from something. This is what makes it innovative. As you can put a price on almost anything ranging from shares to commodities like iron, gold, wheat, pulses etc, derivatives can be formed on all varied types of products defined above.
A very basic example of a financial derivative is a forward contract. This contract enables two parties to buy or sell an asset (shares, commodities etc.) at a specified future time at a price defined at the time of contract initiation. For example : A rice farmer’s risk is when the future market price of rice goes down to a certain level. In order to hedge his risk, he enters into a forward contract with a Government to sell rice at predefined fixed price at specific time in future.Thus he is able to sell his rice at a better rate even if the market price of the rice goes down. Derivatives are used to hedge financial risk.
So instead of doing an internship in a corporate setup, I did a research internship under Dr. Chittaranjan Mishra – Professor at Department Of Mathematics , IIT Punjab. My research thesis was based on “Calibration of Stochastic Parameters for weather derivatives”.
Weather derivatives help people to trade (buy or sell) weather as some commodity. By weather, I mean temperature, precipitation, snowfall and fog etc. For example, a greenhouse crop production company may worry about extreme hot temperatures as it will increase its expenditure on energy required to bring the temperature of the greenhouse to the optimal level. It could enter into a derivative contract say a forward contract with a energy distribution vendor to hedge the risk of the future temperature increases in such a way that if the temperature increases the company could financially gain from the contract, thus hedging the temperature risk..
The aim of this internship was to see how we can forecast and model temperature data for weather derivatives which is then used to trade weather.
This developed my interest more on derivative pricing.
I worked for 1.5 years in KPMG Global Services in Risk Analytics Department where I worked on Valuation and Pricing of Derivatives using financial software Bloomberg for audit purposes. I also worked on model validation projects for few statistical models. The main challenge was working on multiple projects at the same time. This helped me to learn about time management keeping efficiency in place.
My second venture was with Credit Suisse where I was a part of Portfolio Management Services. Here I got to work on pricing of structured products along with working on new programming language C#. This helped me deep dive into the world of derivatives.
How did you get your first break?
My first break was with KPMG Global Services. Since I didn’t had any placements in our college during postgraduation nor did I have any prior work experience, I had to look for other alternatives to get my first job. I created a good Linkedn profile and started creating connections and taking guidance from people in Quant roles. Many times, I had to face rejections from people themselves. Amidst this, I was constantly applying when a friend of mine mentioned there is an opening for a quant role in his organization in KPMG Global Services. I applied and got through my first job after giving multiple rounds of interviews.
What were the challenges? How did you address them?
The biggest challenge was coming from a conservative family where no one had any exposure to the field of mathematics. It took some time to convince my family of many of my decisions from education to choice of employment. I never lost hope.
The second challenge was hailing from Uttar Pradesh where the most popular choice is to prepare for UPSC if you have been consistently good in academics. People go to work in the private sector only if they are not able to crack government sector jobs. Working in the private sector is not people’s first choice. Thus I had to face some astonishing and not so good responses from my friends and acquaintances when i decided to pursue Quantitative Roles in the private sector instead of looking for jobs in the government sector.
I still get some career advice and suggestions from my friends and relatives to look out for jobs in the government sector.
Since I had always been passionate about what I love, it has been a clear path for me. I would suggest anyone who is passionate about something to listen to all the advice and suggestions, but do what you love the most.
Where do you work now?
I have worked with Credit Suisse for 1.5 years. My work revolves around supporting the generation of information documents for investors. This document analyzes how a financial product is going to behave in different market scenarios. The skills needed for this role is knowledge of financial markets , applied mathematics and basic level of object oriented programming language. I acquired these skills over time starting from graduation, post graduation and by learning on the job. I had always been a big fan of reading books rather than online training. So I keep reading books on relevant topics.
A typical day involves generating information documents for investors and answering questions regarding how and why a structured product is behaving in a certain manner. It is exciting to work on new products and then analysing their behavior in different market scenarios. This has been my role as a Quantitative Analyst.
How does your work benefit society?
One of the roles of a quantitative analyst, is to analyse financial markets and products. This helps investors to take informed decisions regarding their investment. This gives the opportunity for people to invest in the right product according to their risk appetite. Calculating and reporting the correct price of financial products also helps in reducing the discrepancy in the balance sheets of companies.
Tell us an example of a specific memorable work you did that is very close to you!
As a part of the valuation and audit team in KPMG Global Services, we had to verify the prices of many financial derivatives for different companies as a part of an audit exercise. This required studying the product and then correctly pricing it in order to verify the quoted price. I was really happy working on different products and interacting with different people associated with the projects. Sometimes I had to analyse and provide a rational answer as to why the quoted price was very different from the calculated price. If there was no rational answer to it, we reported it as a discrepancy in the balance sheet. I was glad that I could provide my opinion and final take on the auditing of financial products of a particular company.
Your advice to students based on your experience?
I would advise students to explore as many options as they can and then decide on what they are passionate about. What is it that excites and never exhausts you. Once you decide on a career path, don’t be afraid to break the conventional and societal norms and be determined to achieve whatever you want in your life.
There will surely be obstacles coming your way but rise above them and find alternatives and don’t stop unless you reach your destination.
A very special note to women readers, don’t let society pressure or rules bind your limits. Women are equally talented. Treat every single opportunity that comes your way as gold.
In the future, I would love to do relevant research on the problems in the financial domain. The thirst for knowledge is unending. I would love to constantly explore new concepts and ideas.