AC402 Financial Risk Analysis

This is an optional module in which I have chosen to write a dissertation instead. Just submitted my paper today...so I guess that's the end of my 10 months at LSE, well, i.e., if I pass.
Spent about a week or so working on the dissertation, so I have to say it's not a great piece of work. But I've learnt quite a bit on my topic (credit spread puzzle), read at least a dozen journal articles, though my final paper did not have much original contribution.

Exactly a week from now, I'll be starting work. I'm sure there'll be more exciting posts to follow (only if you find IB and quant work exciting). Since I will be blogging on my internship experiences here, I'm thinking I might as well write for eFinancialCareers too, maybe I can pocket some extra money (I'm poor and London is way too expensive).

AC413 Fixed Income Markets

This is an optional module that covers fixed income market organization, introduction to interest-rate products, pricing and calibration using tree methods, Ho-Lee model, securitization, credit risk.

Exam went well this morning, as expected since half units are supposed to be easier. My first internship assignment will be on FI research, so I hope what I learnt will be useful. I've found a website with very useful materials ranging from products introduced by IBs to internal research papers. I wonder how the guy managed to get hold of the soft copies.

Anyway, exams are over, just have to complete my dissertation by 18th June. Even if I get distinctions for all my modules, it will not be enough to condone the exam I failed on Tuesday. One exam has a big impact and I spoke to DC (a premier HH, if you're in the city you should know him) about my career plans. Though his words were encouraging, it still doesn't change the fact that I have failed in my goal of attaining a distinction. Which leaves me to ponder what exactly went wrong...how could I fail a module which I like so much (and I had a distinction for my mocks).

On a merrier note, I'll be celebrating end of exams with my coursemates tomorrow. A very much needed one. I ought to stay out and enjoy the sun more often.

AC436 Financial Economics

There's a reason why at the outset they said this is the hardest exam you'll ever take in your life. It's true. To squeeze discrete and continuous time finance into one course isn't easy, but the programme committee managed to do so. It isn't the best idea in the world, but I thought it's good that in a 10-month Masters you get to see different facets of the subject itself. However, my exam went bad, awful. Catastrophic. I'm certain I'm gonna fail this one.

I normally keep a cool head when it comes to stress, especially exam stress. Today I lost it, I was flimpsy. Racing against time, and with such a large stake on the table, I lost miserably. Everything went wrong, I couldn't even get the trivial things right. 6 hours spent on a cheat sheet that was never really used. The only positive I can take away is that almost everyone felt the same way.

I'll like to believe on any other day I'll be able to do much better. They say one bad day can change your life forever. Coming off a big setback last year, this one comes next. While you may think failing a module isn't a big deal, but it is...to me. My confidence has taken a large knock, and I need to sit down and rethink my career plans.

I'm sure I'm good at this subject, but my grades will be a counterfact. So much so for all those talk of being a quant. It's hard to swallow this, but I'll just take this as a bad day. Just disappointed at myself, really. I'm a slave of my own ambitions.

ps. sorry you have to bear this shit with me and listen to me whine and moan.

HJM

I need a better intuition of the HJM framework. I understand that it is different from equilibrium models in that it takes the entire forward curve as given to price interest-rate derivatives. But I'm not really sure of the implementation aspects, like how to incorporate randomness such that we get level and steepness effects. You can introduce two brownian motions to do that, but how?

I can embed simple equilibrium models into the HJM framework mechanically, i.e. following the steps in standard texts (which is just tedious calculus and algebra). But I can't really see how this is done in practice.

Exam is one day away. This is by far the most interesting module. Have been trying to solve the problem sets and I have to say I enjoy doing them. Various scenarious, various approaches. And everything boils down to the FTAP, and either using PDE or Feynman-Kac to solve. But it's those little tricks to begin with that eludes you. Will have a horrid time during the 3-hour exam. Not sure if I can finish all 4 problems.

Counting down

I'm already counting down the days to my internship, even though I'm not done with my finals. Have a rough idea of what the internship assessment is like, but only having 3 weeks at each desk renders you little time to learn much. Then of course there's a lot of networking involved, across desks and divisions. But I can't wait to get started, been eagerly planning for years to have a go at this.

I've been living in a cave for most of the last month or so, since everyone's too busy preparing for exams. Getting bored of this, going through lecture notes and problem sets over and over again...to the point I tell myself, fuck it, I don't need a distinction, just need to pass. Yesterday the weather was too tempting and I went down to the Tuns to catch England vs Brazil. It's good to see Beckham back.

Anyway, with only 3 days left to the hardest exam (Financial Economics), I'm beginning to feel restless. In the past, many people have failed this module, and I'm wondering what will happen to me if don't graduate this July. It's a real concern to all of us...we don't even want to book tickets for the graduation ceremony just yet. I should be worried, but I'm not? But all the martingale, markovian, diffusion, Ito, BS, EMM, HJM appear when I'm sleeping.

AC437 Financial Econometrics

This is another core module. The first part is taught together with the MSc Econ students, which covers classical econometric theory - linear regression, OLS, MME, MLE, GLS, IVE, hypothesis test framework, Wald, LR, LM, asymptotic theory. The second part focuses on applications to finance - random walk, event studies, CAPM, factor models, PV relations, volatility modelling, GMM.

The paper this morning was not too difficult, but I can kick myself now. I am embarassed to say that I got simple stuff wrong...calculation of power of a test! That's 10% gone! Shit happens. But I'm not the only duck, apparently many people got it wrong too. Other than that, I'll probably be penalised here and there for whatever reasons they might give. Hope I'll scrap through to get a distinction on this one, but not very confident either.

The next paper on Tue is gonna be a killer. The whole class is scared shit. And it happens to be the module I like most.

EC411 Microeconomics

This is a core module for MSc F&E, and it covers standard micro theory - consumer, producer, welfare, perfect competition, monopoly, oligopoly, product differentiation, game theory applications, signalling, bargaining and auctions. The structure of the exam is very much applied in nature, and questions "look" rather easy. But they can be extremely tricky, e.g. you don't see nice functions like CES or Cobb-Douglas. More often than not, you will have to solve for corner solutions rather than interior ones.

Sat for the paper this afternoon. I thought it was relatively harder compared to past years, but many people thought otherwise. Most of my classmates have an Econ background, so I guess it's easier for them (I didn't major in Econ). Besides, this is also a core module for the MSc Econ programme in arguably the most prestigious economics school outside of US (I see Oxbridgers shaking their heads in denial), so we have some of the best Econ students around (Vinayak calls them creme de la creme, but as in any programme, you have duds as well). Anyway, I was a little disoriented in a room filled with weirdos, and I skipped the game theory questions which requires more brain energy. In other words, I'm an airhead. I'm not sure if I chose the right options in part B of the paper. Not confident of a distinction grade for this one.

Oh well, 1 down, 4 to go.