Faculty Smackdown: Prof. Bandyopadhyay
GSB Professor on Finance, Investment Banks and Research
Kaushik Valluri , '07
Issue date: 5/25/06 Section: GSB Life
CB: Hello Professor Bandyopadhyay! Boy, that's a tough name to pronounce!
AB: Hello! Yeah, it is a pretty long name. Feel free to call me Akash!
CB: Sure. Let us jump right into the interview.
AB: OK. Shoot!
CB: Having a Ph.D. in Theoretical Physics, you certainly have quite a unique background compared to most other faculty members here at the GSB. Making a transition from Natural Science to Financial Economics and becoming a faculty member at the most premier financial school in the world in a short span of five years is quite an unbelievable accomplishment! Can you briefly talk about how you ended up at the GSB?
AB: Sure. It is a long story. In 1999, I was finishing up my Ph.D. in theoretical physics at the University of Illinois at Urbana Champaign when I started to realize that the job situation for theoretical physicists is absolutely dismal. Let alone UIUC, it was very difficult for physicists from even Harvard or Princeton to find decent jobs. As a matter of fact, once, when I was shopping at a Wal-Mart in the Garden State, I bumped into a few people who had Ph.D. in theoretical physics from Princeton and they were working at the Wal-Mart's check-out counter. Yes, Wal-Mart! I could not believe it myself!
CB: So, what options did you have at that point?
AB: When I started to look at the job market for theoretical physicists, I found that the top investment banks hire the very best of the fresh Ph.D.s. I started to realize that finance (and not physics!) is the heart of the real world and Wall Street is the hub of activity. So, I wanted to work on Wall Street - not at Wal-Mart! (laughs!)
I knew absolutely nothing about finance or economics at that time, but I was determined to make the transition. I got a chance to speak with Professor Neil Pearson, a finance professor at UIUC, who advised me to look at the 'Risk' Magazine and learn some finance by myself. There were two highly mathematical research papers at the end of an issue that caught my attention. Having a strong mathematical background, I could understand all the mathematical and statistical calculations/analysis in those papers, although I could not comprehend any of the financial terminology. As I perused more articles, my confidence in my ability to solve mathematical models in finance grew. At that point, I took a big step in my pursuit of working on the Street and e-mailed the authors of those two articles in the Risk Magazine, Dr. Peter Carr at the Banc of America Securities and Dr. Michael Kamal at Goldman Sachs. Dr. Carr (who, later on I found, is a legend in mathematical finance!), replied back in 2 lines: 'If you really want to work here, you have to walk on water. Call me if you are in the NYC area.'
CB: So, we presume you went to NYC?
AB: After some contemplation, I decided to fly to NYC; I figured I had nothing to lose. Dr. Carr set me up for an interview a few weeks later. Being a physics student throughout my life, I was not quite aware of the business etiquettes. So, when I appeared in my jeans, T-shirt and flip-flops at the Banc of America building at 9 West 57th Street, for an interview, there was a look on everyone's face (from the front desk staffs to everyone I met) that I can never forget. Looking back, I still laugh at those times.
CB: Did you get an offer from Banc of America?
AB: Not at the first attempt. After the interview, I was quite positive that I would get an offer. However, as soon as I returned home, I received an email from Dr. Carr saying, "You are extremely smart, but the bank is composed of deal makers, traders, marketers, and investment bankers. We are looking for someone with business skills. You will not fit well here." He suggested that we both write a paper on my derivation of Black-Scholes/Merton partial differential equation, or even possibly a book. He also suggested I read thoroughly (and to work out all the problems of) the book "Dynamic Asset Pricing Theory" by Darrell Duffie. In fact, Duffie's book was my starting point in learning financial economics. I assume your readers never heard of this book. It is a notoriously difficult book on continuous time finance and it is intended for the very advanced Ph.D. students in financial economics. But, it was the right book for me - I read it without any difficulty in the math part and it provided me with a solid foundation in financial economics. Anyway, I think I am going too off tangent to your question.
CB: So, what did you do after you received that mail from Dr. Carr?
AB: The initial set back did not deter me. I already started to become aware of my lack of business skills. So I offered Dr. Carr to work as an unpaid intern at Banc of America to gain experience and to learn more about the financial industry and the business. Dr. Carr finally relented and made me an offer to work as an unpaid intern in his group during the summer of 1999.
CB: What did you do during the internship?
AB: Upon my arriving, Dr. Carr told me that, "A bank is not a place to study. A bank is a place to make money. Be practical." This was probably the best piece of advice I could get. He gave me three tasks to help me get more familiar with finance and get closer to bankers. First, catalog and classify his books and papers on finance and at the same time flip through them. This way, believe it or not, I read tens of thousands of papers and other books that summer. Second, I helped test a piece of software, Sci-Finance, which would help traders to set and hedge exotic option prices. Thirdly, I answered math, statistics, and other quantitative modeling questions for equity, fixed income and options traders, and other investment bankers.
CB: Wow! That is a lot of reading for one summer. So, did you get a full time offer from Banc of America after your internship? What did you do after that?
AB: Yes, I got an offer for them, but then I had more than a year left to finish my PhD thesis, so I accepted an even better offer from Deutsche Bank next summer. I worked at Deutsche for three months in the summer of 2000. Then moved to Goldman Sachs for a while (where I gave seminars on finance theory to the quants, traders, and risk managers), then, after finishing my Ph.D., I took an offer from Merrill Lynch as the quant responsible for Convertible Bond valuation in their Global Equity Linked Products division in New York. I left Merrill after a few months to lead the North America's Equity Derivatives Risk Management division in Société Generale. So, basically, I came to GSB after getting some hardcore real-world experience in a string of top investment banks.
CB: Are there any 'special' moments on Wall Street that you would like to talk about?
AB: Sure, there are many. But one that stands out is the day I started my internship at Banc of America. As is the norm in grad school or academia, I felt that I had to introduce myself to my colleagues. So, on my very first day of internship, I took the elevator to the floor where the top bosses of the bank had offices. I completely ignored the secretary at the front desk, knocked on the CEO and CFO's door, walked in, and briefly introduced myself. Little did I know that this was not the norm in the business world!!! Shortly thereafter, Dr. Carr called me and advised that I stick to my cube instead of 'just wandering around'! In retrospect, that was quite an experience!
CB: What made you interested in teaching after working for top dollar on Wall Street?
AB: You mean to say that professors here don't get paid top dollar? (laughs)
I always planned to be in academia. To be totally honest with you, I never liked the culture of Wall Street. Much of the high profile business in Wall Street heavily relies on the academic finance research, but, after all, they are there to make money, not to cultivate knowledge. One must have two qualities to succeed well in this financial business: First, one must have a solid knowledge on the strengths and limitations of financial models (and the theory), which comes from cutting edge academic research, and second, one must have the skills to translate the academic knowledge into a money-making machine. I was good in the first category, but not as good in the second.
CB: For you what is more important: Making more money or having a more satisfied life?
AB: For me that is a non-question: Lead a more satisfied life and still be able to impact the world.
CB: What courses do you teach at the GSB?
AB: I am teaching the Investments class BUS 35000 this year. It looks like I will be teaching an advanced class BUS 35130: Fixed Income Asset Pricing next year (in addition to Investments). I taught BUS 35100: Financial Instruments in the past, and I may teach other advanced finance classes in future.
CB: Is teaching and doing research more fun than working on Wall Street? How so?
AB: In my experience, I found that one needs a dying hunger for money and a dream for power to succeed well on Wall Street. For people who want to make money, there can be no better place than the Street. Working there for a few years made me realize I am not that type. I see myself as an academician. Finance and Economics are evolving fields and there are tremendous opportunities to make original contribution. I love teaching and doing research. I consider it a privilege to be a part of this great institution. There cannot be a better place for academicians doing Finance or Economics other than Chicago GSB!
CB: Is there anyone in particular who has helped you in your career?
AB: Throughout my career in finance academia, I have always been very grateful to Professor John Cochrane and Dr. Peter Carr (currently at Bloomberg and NYU). Professor John Cochrane brought me to Chicago GSB. Dr. Carr not only opened my door to Wall Street, but also provided me the exposure to finance research and academics. Those thousand papers and other books I read in that summer of 1999 built my way up to finance academia. Finally, I would like to acknowledge Dr. Fischer Black. Although I never meet him in person, his work and his hallmark line of "problem solving approach" have had a great influence on my understanding of finance.
CB: What area of research are you working on?
AB: I am working on a lot of interesting problems. One of the problems that I am currently trying to figure out is related to the "Equity Premium Puzzle". This deals with risk averseness of people who invest in risk free bonds and equities. General utility-based theories of asset prices have difficulty explaining why the historic rate of return of risk free bonds is so low (~1 -2 %) and that of equity is so high (~ 6- 7%). I am trying to develop a theory of the consumption volatilities and why historically investors have not rejected the low-returning bonds in order to buy stocks. The research is quite fascinating! I am also trying to develop a general option pricing model that incorporates both over-reactions and under-reactions in underlying asset prices.
CB: What piece of advice do you have for students at GSB looking to progress in their careers?
AB: Ah, yes. I can talk about this because I have recruited MBA students at HBS and MIT Sloan (while I was with Merrill) and witnessed their day-to-day activities. Here a few pointers.
(1) Soft Skills: It is imperative that you develop good soft skills while you are here at the GSB. Dealing with people is an art. When you start as a summer intern or a full time associate, your primary job will be to interact with people. Building positive relationships with these people alone will help you progress in your career (at least the 1st two years ). I have seen interns do menial jobs just to make their bosses happy. So, if you are looking for a fat bonus check at the end of the year, go along with the flow and please not only your boss, but also other senior people in the group.
(2) Hard Skills: Being a student at the GSB, you possess these by default. Brush up on your Accounting concepts. The hard skills will help differentiate you from others, especially those from HBS , Stanford, and Kellogg! One piece of advice: It always works to your advantage if you take on more work. However tired (or bored) you are, try to keep your eyes and ears open for expanding your work horizon. Since you all are quant whizzes, you will not get bogged down by crunching a few additional numbers, will you? Also, to keep yourself up-to-date on the latest tricks of the trade, read the 'Risk' magazine. Reading the WSJ alone is not enough.
(3) Team Play: This is related to #1. In the financial environment, you not only have to be a team player, but also be an individual contributor. It can sometimes be difficult to switch between the two, but it can come with practice.
(4)Long Hours: I do not have to tell you about this, everyone knows this. Goldman's work culture is 18 hours a day everyday of the week!
(5) Progression: Typically, you start as an associate. In an ideal world, you get prompted to VP after two years, four years later to Principal/Director and four more years later to the Managing Director. In order for you to be in this ideal world, make sure you execute diligently on points 1 through 4 above. The short term goal should be to be a Managing Director as soon as you can make it.
Good Luck on all your future endeavors!!! I hope to see your names in the WSJ some day!!!
AB: Hello! Yeah, it is a pretty long name. Feel free to call me Akash!
CB: Sure. Let us jump right into the interview.
AB: OK. Shoot!
CB: Having a Ph.D. in Theoretical Physics, you certainly have quite a unique background compared to most other faculty members here at the GSB. Making a transition from Natural Science to Financial Economics and becoming a faculty member at the most premier financial school in the world in a short span of five years is quite an unbelievable accomplishment! Can you briefly talk about how you ended up at the GSB?
AB: Sure. It is a long story. In 1999, I was finishing up my Ph.D. in theoretical physics at the University of Illinois at Urbana Champaign when I started to realize that the job situation for theoretical physicists is absolutely dismal. Let alone UIUC, it was very difficult for physicists from even Harvard or Princeton to find decent jobs. As a matter of fact, once, when I was shopping at a Wal-Mart in the Garden State, I bumped into a few people who had Ph.D. in theoretical physics from Princeton and they were working at the Wal-Mart's check-out counter. Yes, Wal-Mart! I could not believe it myself!
CB: So, what options did you have at that point?
AB: When I started to look at the job market for theoretical physicists, I found that the top investment banks hire the very best of the fresh Ph.D.s. I started to realize that finance (and not physics!) is the heart of the real world and Wall Street is the hub of activity. So, I wanted to work on Wall Street - not at Wal-Mart! (laughs!)
I knew absolutely nothing about finance or economics at that time, but I was determined to make the transition. I got a chance to speak with Professor Neil Pearson, a finance professor at UIUC, who advised me to look at the 'Risk' Magazine and learn some finance by myself. There were two highly mathematical research papers at the end of an issue that caught my attention. Having a strong mathematical background, I could understand all the mathematical and statistical calculations/analysis in those papers, although I could not comprehend any of the financial terminology. As I perused more articles, my confidence in my ability to solve mathematical models in finance grew. At that point, I took a big step in my pursuit of working on the Street and e-mailed the authors of those two articles in the Risk Magazine, Dr. Peter Carr at the Banc of America Securities and Dr. Michael Kamal at Goldman Sachs. Dr. Carr (who, later on I found, is a legend in mathematical finance!), replied back in 2 lines: 'If you really want to work here, you have to walk on water. Call me if you are in the NYC area.'
CB: So, we presume you went to NYC?
AB: After some contemplation, I decided to fly to NYC; I figured I had nothing to lose. Dr. Carr set me up for an interview a few weeks later. Being a physics student throughout my life, I was not quite aware of the business etiquettes. So, when I appeared in my jeans, T-shirt and flip-flops at the Banc of America building at 9 West 57th Street, for an interview, there was a look on everyone's face (from the front desk staffs to everyone I met) that I can never forget. Looking back, I still laugh at those times.
CB: Did you get an offer from Banc of America?
AB: Not at the first attempt. After the interview, I was quite positive that I would get an offer. However, as soon as I returned home, I received an email from Dr. Carr saying, "You are extremely smart, but the bank is composed of deal makers, traders, marketers, and investment bankers. We are looking for someone with business skills. You will not fit well here." He suggested that we both write a paper on my derivation of Black-Scholes/Merton partial differential equation, or even possibly a book. He also suggested I read thoroughly (and to work out all the problems of) the book "Dynamic Asset Pricing Theory" by Darrell Duffie. In fact, Duffie's book was my starting point in learning financial economics. I assume your readers never heard of this book. It is a notoriously difficult book on continuous time finance and it is intended for the very advanced Ph.D. students in financial economics. But, it was the right book for me - I read it without any difficulty in the math part and it provided me with a solid foundation in financial economics. Anyway, I think I am going too off tangent to your question.
 |
CB: So, what did you do after you received that mail from Dr. Carr?
AB: The initial set back did not deter me. I already started to become aware of my lack of business skills. So I offered Dr. Carr to work as an unpaid intern at Banc of America to gain experience and to learn more about the financial industry and the business. Dr. Carr finally relented and made me an offer to work as an unpaid intern in his group during the summer of 1999.
CB: What did you do during the internship?
AB: Upon my arriving, Dr. Carr told me that, "A bank is not a place to study. A bank is a place to make money. Be practical." This was probably the best piece of advice I could get. He gave me three tasks to help me get more familiar with finance and get closer to bankers. First, catalog and classify his books and papers on finance and at the same time flip through them. This way, believe it or not, I read tens of thousands of papers and other books that summer. Second, I helped test a piece of software, Sci-Finance, which would help traders to set and hedge exotic option prices. Thirdly, I answered math, statistics, and other quantitative modeling questions for equity, fixed income and options traders, and other investment bankers.
CB: Wow! That is a lot of reading for one summer. So, did you get a full time offer from Banc of America after your internship? What did you do after that?
AB: Yes, I got an offer for them, but then I had more than a year left to finish my PhD thesis, so I accepted an even better offer from Deutsche Bank next summer. I worked at Deutsche for three months in the summer of 2000. Then moved to Goldman Sachs for a while (where I gave seminars on finance theory to the quants, traders, and risk managers), then, after finishing my Ph.D., I took an offer from Merrill Lynch as the quant responsible for Convertible Bond valuation in their Global Equity Linked Products division in New York. I left Merrill after a few months to lead the North America's Equity Derivatives Risk Management division in Société Generale. So, basically, I came to GSB after getting some hardcore real-world experience in a string of top investment banks.
CB: Are there any 'special' moments on Wall Street that you would like to talk about?
AB: Sure, there are many. But one that stands out is the day I started my internship at Banc of America. As is the norm in grad school or academia, I felt that I had to introduce myself to my colleagues. So, on my very first day of internship, I took the elevator to the floor where the top bosses of the bank had offices. I completely ignored the secretary at the front desk, knocked on the CEO and CFO's door, walked in, and briefly introduced myself. Little did I know that this was not the norm in the business world!!! Shortly thereafter, Dr. Carr called me and advised that I stick to my cube instead of 'just wandering around'! In retrospect, that was quite an experience!
CB: What made you interested in teaching after working for top dollar on Wall Street?
AB: You mean to say that professors here don't get paid top dollar? (laughs)
I always planned to be in academia. To be totally honest with you, I never liked the culture of Wall Street. Much of the high profile business in Wall Street heavily relies on the academic finance research, but, after all, they are there to make money, not to cultivate knowledge. One must have two qualities to succeed well in this financial business: First, one must have a solid knowledge on the strengths and limitations of financial models (and the theory), which comes from cutting edge academic research, and second, one must have the skills to translate the academic knowledge into a money-making machine. I was good in the first category, but not as good in the second.
CB: For you what is more important: Making more money or having a more satisfied life?
AB: For me that is a non-question: Lead a more satisfied life and still be able to impact the world.
CB: What courses do you teach at the GSB?
AB: I am teaching the Investments class BUS 35000 this year. It looks like I will be teaching an advanced class BUS 35130: Fixed Income Asset Pricing next year (in addition to Investments). I taught BUS 35100: Financial Instruments in the past, and I may teach other advanced finance classes in future.
CB: Is teaching and doing research more fun than working on Wall Street? How so?
AB: In my experience, I found that one needs a dying hunger for money and a dream for power to succeed well on Wall Street. For people who want to make money, there can be no better place than the Street. Working there for a few years made me realize I am not that type. I see myself as an academician. Finance and Economics are evolving fields and there are tremendous opportunities to make original contribution. I love teaching and doing research. I consider it a privilege to be a part of this great institution. There cannot be a better place for academicians doing Finance or Economics other than Chicago GSB!
CB: Is there anyone in particular who has helped you in your career?
AB: Throughout my career in finance academia, I have always been very grateful to Professor John Cochrane and Dr. Peter Carr (currently at Bloomberg and NYU). Professor John Cochrane brought me to Chicago GSB. Dr. Carr not only opened my door to Wall Street, but also provided me the exposure to finance research and academics. Those thousand papers and other books I read in that summer of 1999 built my way up to finance academia. Finally, I would like to acknowledge Dr. Fischer Black. Although I never meet him in person, his work and his hallmark line of "problem solving approach" have had a great influence on my understanding of finance.
CB: What area of research are you working on?
AB: I am working on a lot of interesting problems. One of the problems that I am currently trying to figure out is related to the "Equity Premium Puzzle". This deals with risk averseness of people who invest in risk free bonds and equities. General utility-based theories of asset prices have difficulty explaining why the historic rate of return of risk free bonds is so low (~1 -2 %) and that of equity is so high (~ 6- 7%). I am trying to develop a theory of the consumption volatilities and why historically investors have not rejected the low-returning bonds in order to buy stocks. The research is quite fascinating! I am also trying to develop a general option pricing model that incorporates both over-reactions and under-reactions in underlying asset prices.
CB: What piece of advice do you have for students at GSB looking to progress in their careers?
AB: Ah, yes. I can talk about this because I have recruited MBA students at HBS and MIT Sloan (while I was with Merrill) and witnessed their day-to-day activities. Here a few pointers.
(1) Soft Skills: It is imperative that you develop good soft skills while you are here at the GSB. Dealing with people is an art. When you start as a summer intern or a full time associate, your primary job will be to interact with people. Building positive relationships with these people alone will help you progress in your career (at least the 1st two years ). I have seen interns do menial jobs just to make their bosses happy. So, if you are looking for a fat bonus check at the end of the year, go along with the flow and please not only your boss, but also other senior people in the group.
(2) Hard Skills: Being a student at the GSB, you possess these by default. Brush up on your Accounting concepts. The hard skills will help differentiate you from others, especially those from HBS , Stanford, and Kellogg! One piece of advice: It always works to your advantage if you take on more work. However tired (or bored) you are, try to keep your eyes and ears open for expanding your work horizon. Since you all are quant whizzes, you will not get bogged down by crunching a few additional numbers, will you? Also, to keep yourself up-to-date on the latest tricks of the trade, read the 'Risk' magazine. Reading the WSJ alone is not enough.
(3) Team Play: This is related to #1. In the financial environment, you not only have to be a team player, but also be an individual contributor. It can sometimes be difficult to switch between the two, but it can come with practice.
(4)Long Hours: I do not have to tell you about this, everyone knows this. Goldman's work culture is 18 hours a day everyday of the week!
(5) Progression: Typically, you start as an associate. In an ideal world, you get prompted to VP after two years, four years later to Principal/Director and four more years later to the Managing Director. In order for you to be in this ideal world, make sure you execute diligently on points 1 through 4 above. The short term goal should be to be a Managing Director as soon as you can make it.
Good Luck on all your future endeavors!!! I hope to see your names in the WSJ some day!!!
Viewing Comments 1 - 7 of 7
Anonymous
posted 7/20/06 @ 2:30 PM CST
Great article!
John
Anonymous
posted 7/24/06 @ 5:09 AM CST
Thats truly what i call "Right fuel" for the young business graduates around the globe. Being brought up in a devaloping country i.e. Pakistan, and going through an educational system which is not considered good enough by the top institution in the world, how can i let the top business schools know that even being a part of an underdevaloped community i have all the flair of a successfull business leader once i get my chance to hone my skills at a top institution like Chicago GSB. (Continued…)
umairahmed
umairahmed
posted 7/24/06 @ 5:15 AM CST
Thats truly what i call "Right fuel" for the young business graduates around the globe. Being brought up in a devaloping country i.e. Pakistan, and going through an educational system which is not considered good enough by the top institution in the world, how can i let the top business schools know that even being a part of an underdevaloped community i have all the flair of a successfull business leader once i get my chance to hone my skills at a top institution like Chicago GSB. (Continued…)
Holly Colburn
posted 2/24/09 @ 6:16 AM CST
Thank you for writing the article, I am very pleased with how it came out.
Eleanor Cook
posted 3/09/09 @ 1:41 AM CST
That looks like lots of fun. When I was in college we didn't had so many fun activities.
Linda Marcoe
posted 4/19/09 @ 4:55 AM CST
Hello! first I want to send my best regard for all of you,and hope your sucsees in this area your site is very usiful for all of us.
Dinse Wissmann
posted 6/20/09 @ 12:07 PM CST
Indeed an informative article.
Post a Comment