QuoteOriginally posted by: quantmehQuoteOriginally posted by: quantstudent1111Hi Quantmech.. Can you please elaborate...?i don't think that you can do anything original in finance without very solid understanding of microeconomics. you can certainly implement all the known stuff in code though.Economics underpins quant finance, you can derive the major option pricing theories from an understanding of utility functions. All finance is essentially a subset of economics. So if you really want to know the 'rigorous' explanations behind the pricing techniques, rather than just the assumptions of no-arbitrage etc, you will get the big picture view from knowing economics. Economics attempts to put a humanistic face to the models, explaining them in terms of agents' (people, companies and market actors) behaviour rather than the technical assumptions about the market. Its arguable that no quant finance models are valid without an equivalent derivation from ground-up microeconomics. This is often the ultimate test of a quant finance model, because the microeconomics-based path to a pricing equation is often distinctly different and sometimes considered more robust, partly because it belongs to a much broader and older canon of principles, but mostly because it adds behavioural intuition to the distributional assumptions and technical basis of the quant finance approach to modelling. Having said that, you won't learn financial economics to a high level until an advanced stage, you may see only basic elements in a postgrad diploma. The real value comes from doing higher level, eg Masters and PhD Economics. Economics also has a lot more breadth and potentially, depth than quant finance. You can bring in lots of different elements from different disciplines, whilst in quant finance you would usually look at issues in a very technical (ie how do we model the maths) way. I'd say getting a PhD in Economics, if you can hack it, is very worthwhile. I personally find it a bit of a headf**k - quant finance is so much more finite. Economics will drive you crazy with all the theories and countertheories. Even at postgrad level it will consist of a lot of stuff you may be less interested in, and that is the major hurdle you have to overcome. Having said that, you survived possibly the most boring exposition of Economics that there is, which is the CFA level 1, so if you're still motivated then that's a good sign.
Last edited by nyasha
on July 5th, 2011, 10:00 pm, edited 1 time in total.