Rewarding Mathematics

We hear a lot about how talent will leave the major financial centres if taxes or regulations become unacceptable. That people move to more favourable locations is more or less plausible. But what seems to not ever be asked is how much talent does this “talent” really have?

Combine this with what I have often said, that the mathematics of quant finance is straightforward if approached properly, and the following idea immediately suggests itself: Measure the ratio of typical salary in a quantitative field to the difficulty of the mathematics in that field. How much better off is the quant compared to the aeronautical engineer?

And does salary correlate with talent?

Quantifying the math difficulty, for the denominator in the ratio, is the hard part. Inspired by the kind of differential equations seen in many physical sciences as well as in finance we could start as follows.

Parabolic equations 5 points; elliptic 10; hyperbolic or mixed 15.

Four or fewer dimensions 5 points; five or more 10 points.

Linear no points; nonlinear 10 points.

The aero engineer might have a ratio of 5 (after rescaling by 1,000 to make the numbers neater), the quant a whopping 30.

In other words the aero engineer ought to be on the quant’s salary and vice versa.

P

Related Posts

Misinterpreting The Evidence I saw a news story recently saying something like there are more germs on your iPhone than on a toilet seat. From which we conclude what? We are to...
Where Do You Keep Your Offshore Money? Where do you keep your offshore money? The media is all upset about celebs, politicians, etc. having money in various offshore places, in order to ...
Bloomberg View Columnist Barry Ritholtz Interviews... Listen to Barry Ritholtz interview Paul Wilmott about quantitative finance, mathematical modelling, reputational risk, Tom Cruise, JK Rowling, Billy J...
Boris Johnson, Yanis Varoufakis And Sir Vince Cabl... Boris Johnson, Yanis Varoufakis and Sir Vince Cable all have something in common…. All three have been in the news lately with their interpretation...
Webcast – Paul Wilmott On “The Money F... Paul recently gave a talk in downtown Manhattan about his new book, co-authored with David Orrell, The Money Formula. Other topics get dragged in alon...
Jeremy Corbyn: My Part In His Ascent First, disclosure: I am rather right wing, from the school of "take some of my income in taxes but otherwise leave me alone, please." And as a general...
The Money Formula – New Book By Paul Wilmott... The Money Formula: Dodgy Finance, Pseudo Science, and How Mathematicians Took Over the Markets OUT NOW!!! Explore the deadly elegance of finance's...
Ed Thorp: A Man For All Markets The book we've been waiting for, the full story of Ed Thorp's career in mathematics, science, gambling, and finance. An inspiration for us mortals. ...