Which broad topic is more close to real industry?

[liangj]

Hi, everyone. I am a Phd student in Economics. My research interest is in financial econometrics. My plan is to do something close to real industry, since I kind of get more fulfilment in seeing the usefulness of my research than just getting the pure theoretical results. At present, I choose 3 broad topics:

1. Volatility Model;
2. Econometrics of Option pricing;
3. The estimation of Conditional VaR

Could you please kindly share with me your insights, since I know there are many real practitioner in this forum? Your comments and suggestions are really appreciated. Thank you very much.

 

[Ken Abbott]

Number 3 is most topical now, but you'll have a hard time getting companies to tell you what they actually do. You could explore GARCH-based approaches (Carol Alexander was looking at this a few years ago) as well as exponential decay techniques. A seasonal add-on might be interesting - commodities, obviously are highly seasonal and their VaR models aren't.

 

[DominiConnor]

Vol modelling is classical quant work, but I suspect the Econometrics will give you the best chance of a decent job.

VaR will be with us always and represents the least risky choice since it will make you attractive for risk jobs.

Ken is right about the current situation, but you shouldn't care too much about that, you have the tougher task of guessing what will be in demand in a few years time, I can't call that with any great precision, but I' go for the Econometrics because it gives you the broadest spread of options.

This begs a tougher question, how likely are you to directly use the topic of your PhD in your work ?
In general, you should expect not to do X as a topic then be hired to do X

For the majority of PhD level entrants, the PhD is basically a badge that says :
I'm brighter than most undergrad level people
I can work for years without having my hand held
I can work on problems that have no solution that I've been taught and may not have one at all without crying.
I can do a,b,c,d,e,f,g,h,i and j where a..j are things that undergrads can 't.
I can convince people who care about a hard subject that I can master a hard subject.
I can stick at a task with no well defined goals for years if necessary

Some people did PhDs in Credit Derivatives completing their studies as the bottom fell out of that market.

That's why I counsel people to do a PhD that they are genuinely interested in and rarely say "do X because people want X".

Anyone who gives a detailed forecast on the job market for when you complete is not your friend/

 

[liangj]

Thank you very much for your kind reply, Ken and Domini. Very instructive suggestions. I can't agree more with Domini on doing a PhD most interesting to myself.

By the way, is the topic "Realized Volatility" hot in the real industry? I know that it is hot in the financial econometrics literature.