how much math is needed in … #a few finance IT fields

I always maintain that math is key domain knowledge. In the few areas I know, when a bit of math is required, a lot of regular developers would need to brush up before they can “play in the band” (as in a heavy metal band).

– Bond trading platforms? Close to zero math. Definitely less than bond pricing. Developers do need to remember basics like when interest rate rises, bond prices drop, and zero-coupon bonds trade at huge discounts (due to price/yield math relation). Also high-grade bonds tend to trade at lower yield — minimal math.

– Bond pricing? Slightly more than zero math. Price/yield conversion, yield-to-worst, modified duration, dv01 rollup, time-value-of-money are widely used, but developers usually don't need any mathematical insight into them to do the job. Developers just need basic understanding. Hiring managers may think differently.

– Forex trading? Arithmetic only, I believe. Add/subtract/multiply/divide only. Bond math requires high school math. In contrast, Lots of Forex trading IT jobs require primary school math.

– Option pricing? A bit of statistics and calculus. Like in bond pricing, developers don't need any mathematical insight. However, they need a basic grasp of historical vol calculation, implied-vol inversion, delta and other greeks. Even more fundamental concepts include PCP and the option payoff diagrams of about 10 basic strategies, but I don't think developers need these.

– VaR on a portfolio including bonds and options? Requires more than bond math and option math. More statistics. But I suspect a dedicated developer in a bond pricing system may need more in-depth bond math than a VaR developer, because a stringent math requirement on software developers is impractical, overkill and giving the wrong focus to the wrong role. Instead, the real math is usually for the quant analysts. Risk systems use more math than pricing systems, and employ more quants.


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