MIT Sloan Students Speak: M.Fin. Class of 2012

Nobel Spring

 

Choosing a graduate school is a decision that involves several factors, among which one of the most important is faculty. When people choose MIT, they know they will work very hard, but also learn a lot from the best professors and researchers in their fields. It is indeed an honor to be able to listen to Andrew Lo's inspiring talks, watch carefully Leonid Kogan derive some option pricing models, learn from Douglas Breeden's vast experience, be able to take classes with Stewart Myers, John Cox, Steve Ross, Jun Pan, Hui Chen and many others. When people consider MIT, they know it is the birthplace of modern finance, and being able to learn directly from its fathers is an unique experience. As a matter of fact, one of the most important contributors to modern finance is now here, and many people are curious about having the chance to take classes with Nobel Prize winner Robert Merton.

 

The first question that comes to mind is: Is he really teaching? The answer is yes! And 2 classes! I am taking both his courses: Retirement Finance and Lifecycle Investing, and Functional and Strategic Finance. From these two weeks so far, I can say both of his classes are very interesting, with Merton providing a very high-level view of relevant topics in finance. The topics themselves might appear simple, or well-known to some, but Merton provides us with many intelligent insights on items we would not pay a lot of attention to. For example, in his last Retirement Finance class, he talked about alpha generation, and how a private equity firm could report very high alphas with no change in the strategy. An apparently simple topic, but Merton's twist totally makes the difference. 

 

The only reason I cannot say I am looking forward to his following lectures is that I will be closer and closer to the end of the semester!. But I am happy many of you, incoming MFin students, will have the opportunity to live this starting this summer!

 

Tchau!

 

Ready, Set... Spring Term is Here!

Welcome again to our blog!

It has been two weeks since the  Spring Term started, our last one at MIT. The following months look challenging in terms of the new knowledge we will acquire and all the readings, problem sets, papers and exams we have to do before graduation. The courses I will be taking during this semester are:

• Psychology and Economics (14.137) with Drazen Prelec
• PoF: Private Equity and Hedge Funds (15.419) with Phil Cooper
• Options and Futures Markets (15.437) with John Cox
• SSM: Valuation (15.S02) with Stewart Myers
• SSM: Functional and Strategic Finance (15.S12) with Robert Merton
• Research Practicum (15.S26) with John Minahan
• Taxes and Business Strategy (15.518) with Michelle Hanlon

As you may notice, the Spring Term does not require any restricted electives for MFins, provided they have completed the Proseminar (either on Financial Management or Financial Engineering). Similar to the Fall Term registration process, in order to enroll a course at Sloan (the ones that have the "15" Prefix) you go through a bidding process.

I would like to briefly explain how the bidding process works. Everyone is given an endowment of 1000 points which you need to allocate among the courses you are interested in. When the first bidding round  opens, only graduating students are allowed to place their offers (as an MFin you will have priority). You may allocate your point endowment as you like, trying to bid more for those courses that you think demand will be high. Notice that you don't have any restriction in terms of the number of courses you can place a bid as long as you don't go over the 54 credit limit that you can enroll at Sloan (66 in total between Sloan and other schools per semester).

After the results of the first round are posted, you are able to see if you got into the courses you wanted. At this point the number of points that you will have is your initial endowment (1000) minus the clearing price of the courses you got in. The clearing price is the bid placed by the last person that got into a course that is now full. If a course is still open, the clearing price is zero and you get a refund of the points you originally bid for that class. During the second round, you can still bid for a course that is full as other people might renounce to their seats and make those spots available. This round is open to all students at MIT so the competition can be tougher.

When the results of the second round are posted you might still have one more chance to get into those courses that are closed. There is a waitlist round where you get back 1000 points and can place them into closed courses. The highest bids get priority in the waitlist and, when classes start, it is the Professor who determines if those persons get in.

From my experience and that of my classmates, I can tell you that if you do a little research before you place your bid it is very likely that you will get all the courses you want. By this I mean that you read the information that Sloan registration provides you and that you talk with other fellow Sloanies. For instance, checking the results of past evaluations of the courses, learning the clearing prices for the previous year and assessing the level of popularity of a Professor, you should be able to make an educated guess about the number of points that you have to bid.

The popular courses among MFin students for this term are: Valuation (15.S02), Functional and Strategic Finance (15.S12), Retirement Finance, Lifecycle Investing and Asset Management (15.S14, this is the other class taught by Prof. Merton), Analytics of Finance II (15.460), Entrepreneurial Finance (15.S05) and Fixed Income (15.438).

By the way, I am looking forward to meeting some of you during the AdMIT day!

I wish you all a nice week!

Cheers,

Hi Everyone,

It has been a little while since my last post and I hope everyone is doing very well. Today I would like to share with you my winter IAP experience.

Winter break at MIT can be cold, but it could also be as fun as any regular semester. During the month of January (January 9th to February 3rd for this year), we have one of the most special periods at MIT – the Independent Activities Period (IAP). During those four weeks, students from all departments of the school can organize or participate in various teaching and learning activities. These activities can be anything you would like to try hands-on, ranging from classes on How to Win at Texas Hold'em Poker to externships that connect current students to alumni in workplaces.

My IAP activity was the Finance Research Practicum offered by our own Master of Finance Program. Similar to the Proseminar classes that we took during the fall semester, the Practicum is an opportunity to work on real world problems posted by leading financial institutions. The sponsor of our project is Blackrock, and our research question is developed around global equity portfolio construction. To us, this is not only time to apply our knowledge and skills acquired in the past few months but also a great learning experience. Although the problems themselves are unsolved when handed to us, all of our sponsors have been working on and are experts in related topics. They usually offer great insights and guidance to us that are otherwise not taught in classrooms.

Having said this, it doesn’t mean that you need to be an expert in finance to participate in the Practicum. My team is made up of three fellow M.Fin students (including myself) and one PhD student from the Chemical Engineering Department – every one of us offers a unique perspective and skill set. Every weekday, we commit a few hours working together, and by the end of the week, we communicate with our clients over the phone to keep them updated.

In order not to confuse you, I should mention that there are two types of Practicum projects: on-site and remote. Unlike the on-site teams who work in clients’ offices, our team works remotely in Cambridge and meet once a week with our sponsor over the phone. This is one of the primary means to talk to our client about our progress and hear back what comments and suggestions they may have.

So far we are making some good progress, but due to the scale of our project, we will take the option of extending IAP into February. In the first half of the spring semester, everyone who has taken the Finance Research Practicum will meet once a week as a class and each team will make a thirty-minute presentation. I look forward to hearing from my classmates soon about what they have done and learnt.

Florida Rowing Trip

Hi everyone!

I hope your January's have been as interesting as mine has.  After my last final, Analytics of Finance, I headed back home to Kentucky for a few days.  I got to spend some time with my friends from high school and with my girlfriend, who goes to Boston College and is also from Kentucky. 

After a few days of relaxing at home, I headed to Cocoa Beach, Florida for the annual MIT Crew Winter Training trip.  Since the Charles River in Boston is frozen, and spending time indoors exercising gets old, we take the entire team down to Florida for a week of practice, beach, and pool time.  We do two-a-day practices on the Banana River, and we have plenty of other activities to fill the time in between, although we mostly spend that time sleeping!

Florida is an important bonding trip for our team, and it made me think about other types of bonding trips I've been able to be a part of at MIT.  I think everyone should come to MIT for the education, which I think is the best in the world.  But the one thing every person who comes to MIT should take advantage of is MIT-sponsored trips.  For graduate students, there is everything from ski trips, to finance field trips to New York, and of course the Asia trek.  MIT can be a pretty difficult place sometimes, and you don't truly get to know people until you get away from the stress and pressure and just relax somewhere together.  Maybe on a beach, or maybe on the side of a mountain. 

For the rest of IAP (Independent Activities Period), I kept myself busy with classes (for fun of course), practice, and travel.  I took an incredible wine tasting class with Professor Linn Hobbs.  There were five 3 hour sessions, and each one was jammed packed with wine knowledge and tasting.  I highly recommend it.  The other classes I am taking are a poker class and a MatLab class to brush up on my skills.  For practice, the MIT crew team is still going all the way through the winter, jamming away on our indoor rowing machines.  It's a tough sport, but I love being there every day. And for travel, I got to slip away to New York City for a weekend to meet with some of my future colleagues at Morgan Stanley, and to celebrate my birthday with some of my best friends.

The semester picks up next week, and I'll be back to give you an update of what's going on with me then! Stay warm everyone!

Cross-registration courses

Hi there,

In order to make my previous post easier to read I decided to split it into two and added some information at the end that I think might be interesting for you to know.

I was told that some of you were wondering whether you could take courses at other MIT departments or at Harvard and count them as restricted electives. You definitely can do it provided you have the approval of the Program Office, that the selected courses are targeted to graduate students and that they have at least a minimum number of credits.

Enrolling courses at other MIT schools is generally easy, you just have to make sure it is on your list during registration day. Sometimes there are prerrequisites or you need permission of the instructor but apart from that you won't find any other restriction. Next term, I am planning to enroll the Psycology and Economics course at the Economics Department, I will let you know how it goes.

In order to take courses at Harvard you have to follow a different process and it varies from school to school. As HBS is the most popular I can summarize you the process (notice that some courses might have a special process): there is a list of courses that cross-registered students may take, you choose from the list and fill some paperwork, get the signature of the Professor and the registrar's offices at both Sloan and HBS. By following those steps you enter a lottery that decides whether you get into the course or not. The probability of being selected by the lottery varies depending on the popularity on the course. Nonetheless, I can tell you that many of my classmates who were interested in taking courses at HBS were able to get at least into one of their selected courses.

For the Spring Term these are some of the courses that MFins will take at Harvard: Venture Capital and Private Equity, The Political Economy of Transition in China, Behavioral and Value Investing, Creating Value through Corporate Restructuring and Real Estate in Frontier Markets.

Have a nice week!

Best,

Having fun during the IAP

Hello again!

I hope you are doing great and wish you the best of lucks if you have already sent your application. We are missing snow in Cambridge, so far winter has been very mild. Temperatures have been on average over 40F and we have seen little snow around campus. In today´s post I would like to talk a little about what I have been doing in January as some of you will decide to stay at MIT during this period.

After the finals and Christmas I decided to spend some time at New York in order to welcome 2012 from the Times Square. The experience was incredible, hundreds of thousands of people from all over the world on the streets singing, dancing, talking laughing and enjoying the warm weather of the day. I was able to get close enough to see the famous ball drop which was accompanied by fireworks, music and lots of confetti! 

The big celebration ended and I returned to Boston to start working in the Research Practicum. Since Rafael has described it pretty well in his previous post I will focus on the other things I did during the IAP.

Last weekend I went to Maine for a three day ski trip organized by MIT's graduate student council, during three days more than 600 graduate students went to the eight mountains at Sunday River to enjoy the snowy weather and hit the slopes.As you can see in the below pictures, the place is beautiful. Furthermore, there are a lot of trails for all levels of skiers and snowboarders, for beginners there are also classes that teach you the basics on these two sports. Be prepared to fall on the snow, practice is the only way to learn and to realize what NOT to do! I have to confess that I fell many times, but that didn't prevent me of having fun!

During the IAP I was also taking a course on Poker who is being taught by Will Ma, a poker professional who is now studying a PhD at MIT. There are around 200 people enrolled in the course and it meets 3 times a week. We are studying many concepts related to Poker like card counting, bet sizing, credible bluffs, folding good hands, statistics and variance, risk management and many more. We also practice in private tournaments that happen every day at certain times, it's fun to see your classmates getting excited for stealing all the chips! As cool as it sounds it has also caught the attention of outsiders as you will be able to read in this article.

During the last week of IAP, I will be also attending some lectures related to French cinematography during the 19th century in which we will be discussing twenty of the most influential and successful films. As you already know there are tons of activities during January, be prepared to have a hard time trying to decide what to do!

Classes for the Spring Term are at about one week to start, I better enjoy the last week of IAP!

Thank you for reading us and have a nice weekend!

Cheers,

IAP

So the fall semester is over. We all had some very intense and challenging months, constantly multitasking and giving our maximum to what was, for me and certainly many others, a life-changing experience. Never before had 24 hours fit so many activities. As the fall semester ended, one could think we might deserve the winter break. And that's true! But not for relaxing! Winter time is IAP time, MIT's Independent Acitivities Period, which runs in the month of January. It is a month in which students are not required to take their regular courses, and have the opportunity to try out courses from all other departments. That's the time when we can see engineers take classes in philosophy, literature majors venture into math lectures, Sloanies reveal their passion for physics. During IAP, students can dig into subjects they have always been curious about, but somehow didn't follow that exact path of studies.

For MFins, specifically, IAP is also the chance to take part on the Finance Research Practicum, a special project designed to make students work in teams to solve a practical problem posed by one of the many sponsors. The Practicum is the opportunity for students to get in touch with the market, working on real, unstructured problems, using the various tools learned in the fall semester. In this sense, it is quite similar to the Proseminars. However, this time dedication is almost full-time and indeed some of the projects offer the opportunity for the team to work on-site. Again, as in almost anything at MIT, innovation is the key. Teams are assigned in such a way that its members have some of the required knowledge to complete the project, but not all! Therefore, group interaction and creative thinking are essential, and these two combined sum up for a very fun winter 'break'!

C-Functions

Hello everyone!

MFins are heading to the last week of the semester, we finished classes on last Wednesday and we are now preparing for our finals. The Fall Term would be officially over on December the 20th with the Analytics of Finance final (15.450). That would be the last time when my full class is meeting together in one classroom (this is the last required course for everyone). Eventhough the past weeks have been very busy between final papers, homeworks etc. we have been able to attend some social activities with the Sloan community. Today I would like to write about the C-Functions, which are very representative of our School.

As quoted from the Sloan website the C-Functions are "[...] weekly, student-organized celebrations [that] have been a much-loved staple of after-hours fun for years. C-Functions (short for Consumption Functions) are open to the entire graduate community (including faculty and staff) and are held both on campus and off, depending on the evening's agenda. Sometimes C-Functions are designed to celebrate the food and music of a particular culture and feature organized entertainment; other times they are informal opportunities to unwind and simply enjoy the company of fellow students." 

C-Functions are opportunities to share not only with your classmates but with the Sloan and MIT community in general. During the Fall Term I have been able to attend to the Korean C-Function and of course the Latin C-Function. Since words wouldn't be able to capture the joy of the C-Functions, I would like to show you some pictures:

Korean C-Function

Latin C-Function

And there is also a video posted in youtube that was used to illustrate the culture that our countries in Latin America share (Latin C-Function Video).

With that I go back to study!

Enjoy the Holidays!

Cheers,

Proseminar Delta

 

As we reach the end of the Fall semester, the already considerable workload is getting even more intense. Managing time and having a team-oriented mindset are crucial skills at this point. Besides the constant (and challenging) assignments, many students also have to dedicate time to their proseminars or project-based classes. Since some of you have requested more information on the proseminar, I will share some of my experiences so far.

The proseminar in financial engineering is a project-based class in which students have a workload that resembles a delta function, as described by Professor Mark Kritzman himself. Most of the times, students will attend classes to watch presentations by other students and their respective sponsors. However, for three weeks, three very intense weeks, each group has to go from a very challenging practical question to a useful solution. Students get their project assignments exactly three weeks before their presentation, and must start working immediately. Assignments are usually a practical question posed by industry leaders who expect us to come up with bright solutions to their often unstructured problems. This class is the perfect opportunity for us to apply our theoretical knowledge and get in touch with the reality in the markets, in which problems don't come in problem sets, and usually not well defined or have many possible solutions.

My team and I received our project last week. The problem was stated in one line. Come up with an optimal currency hedging strategy for the MIT Endowment. Professor Kritzman gave us a book and an academic paper. That was all. Now we should figure out for ourselves what to do next. We must come up with the relevant questions, decide which models to use, read the literature, get data, run the models, write the paper and present. All that while still studying intensely for 450 and other classes. What keeps us optimistic is the fact that we have access to numerous resources at MIT: great libraries, fantastic professors, meeting facilities. We can definitely use all of our energies to the thinking process itself. We have three weeks. Correction, two left now!

 

Review of the Fall Term

Welcome again to our blog!

MFins have just started the second half of the Fall Term of the MFin program. The autumn has transformed Cambridge and the former green-colored leaves are now yellow, red or orange... concerning the weather the temperatures are dropping (you might know that we had a snow storm a couple of weeks ago), it also gets dark much earlier.

As expected, the program is now much more challenging (that is one of the reasons you are applying to MIT, isn't it?) we finished our first midterms, 15.450 included (Rafael's favorite course) and in my case, my team and I have presented our 15.451 (Proseminar in Financial Engineering) project . To give you a better feel of what to expect in this course I would like to tell you a little more about it.

One of the things that you will learn from MIT is the stress that Professors put on learning by doing. The Proseminar is one of the courses in which a sponsor requests help in finding a solution for a problem not yet solved and in teams you have to use all your skills to succeed. The sponsor of my team was Pacific Management Investment Company (best known as PIMCO) and we were asked to study the dynamics of the term structure in a low rate environment and estimate volatility in developed markets sovereign debt.

During the three weeks that we are given to propose a solution, we worked really hard reading the new developments in the field and using our skills to effectively apply these models to our data. The interesting part is that you might not be familiarized with the topic or don't have all the information you need, therefore you put all your effort to learn by yourself and using all the resources at your hand try to solve the problem. At the end, it is very rewarding to see how your work is reflected in a report that solves a real life problem with the thecnical rigor you developed. In this challenge you learn a lot in a short period of time and realize that before doing it you didn't even know of how much you were capable of.

Changing topic, I was told that many of you just send your applications for the first round, I wish you the best of lucks!

Thanks for reading our blog!

Best regards,