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The Jim Gatheral Effect: How This Top Quant Has Changed Baruch College

Published March 2012 Bookmark and Share


Jim Gatheral is one of those people who really “gets” numbers. A native of Scotland, he attended the University of Glasgow as an undergraduate, where he majored in Mathematics and Natural Philosophy. He later delved further into the world of science by pursuing a PhD in Theoretical Physics at Cambridge University. Proving -- and, in his case, disproving -- scientific theories interested him enough to pursue and complete that PhD. However a brief peek into the banking world in his final year of undergraduate work continued to creep back into his mind as he neared the end of his studies. It was an on-site visit from international banking industry professionals at Glasgow, his first real look into the business world, that planted the seed of possibility.

Fast-forward to August 2010 – when Gatheral joined Baruch College as a full time professor, straight after 17 years as Managing Director at one of the world’s leading investment banks, Merrill Lynch. Previously, his work spanned the trading and banking worlds, working out of London, Tokyo, and finally New York.

Now, as a professor in Baruch College’s math department and Masters Program in Financial Engineering (MFE), he is a dedicated and highly knowledgeable resource, not to mention a well-known and connected figure in the “quant” world.

What does it mean to be a top quant? Gatheral considers with a smile. “That they put my picture on the flyer for big quant conferences.”

Though he jokes about his recognition in the field, his achievements and, in turn, acknowledgment, has been hard earned. He is a well-known figure on the financial market speaker circuit and author of The Volatility Surface: A Practitioner's Guide, a best-selling and widely respected work among fellow quants and academics. He remains an active and cited researcher in the field.

Recently, his research focus has turned to market microstructure – asking questions like, ‘How much do you push the price when you trade stocks?’ and ‘What’s the optimal way to trade stocks?’ – to more theoretical questions around finance and economics. Gatheral’s no-nonsense reasoning for this focus? “Anybody who trades large amounts of an asset is interested in understanding exactly how the mechanism works so that they can trade better.”

It is also why he sees programs like Baruch’s MFE growing in value. Following the U.S. credit crisis, a career in finance might seem as a shaky ambition, but quantitative analysis has opened doors to areas of function well beyond Wall Street, says Gatheral. It’s also one of the reasons Baruch College MFE graduates remain in-demand. “It’s not just the financial world; every part of the world is getting more quantitative. So even though employment has fallen, the proportion of employment in the financial industry that requires fairly advanced training in quantitative techniques is growing.”

According to Baruch’s MFE Program Director Dan Stefanica, Jim Gatheral has enormously bolstered the MFE program’s credibility, curriculum, and student opportunities. “Jim literally put a face to the program. When prospective employers ask, ‘Tell me about someone in your program,’ he is that person. We’ve added eight new courses that he’s suggested since he arrived, two of which he teaches himself. Our curriculum is now cutting edge,” he says.

In February of 2012, two Baruch College MFE teams came back first and fourth place winners from The Rotman International Trading Competition, one of the world’s largest simulated trading competitions. Baruch MFE alum and now instructor in the program, Eugene Krel, helped prepare the team with the advisement of other department faculty, including Prof. Gatheral, who took part in strategy sessions. “As a former trader who also managed traders, Jim knows how to figure out who the best traders are. Further, when Jim speaks it’s like a direct conduit into our students’ minds. He improved their trading instincts so they could be more successful,” says Stefanica.

Gatheral sees one of his key contributions as being his ability to help students digest difficult material while stressing practical applications. With each new class, he selects references from the latest research that will be useful to students in their later careers. “It’s almost a privilege to be able to get people excited about financial engineering and be able to expose them to new ideas for the first time,” he says.

Although Gatheral has the business savvy, ambition, and range of interests to be a qualified leader in many fields, the pull of his research – and what the academic world is able to offer in support of it – has always been there. “When people say investment banking is rewarding, they mean two things: you can have fun and you can make lots of money. Well, you can’t make a lot of money as an academic but you do have more freedom,” he says. That freedom, to do “interesting calculations with results that are relevant to practice” is a thrill that he enjoys sharing and developing in his students, perhaps the next group of great quants.

Adrienne Preuss