What Math Skills are Typically Needed in Finance?Jocelyn2017-04-22T13:31:50+00:00
Many people automatically equate the world of finance with the many different academic disciplines involved in arithmetic, but most financial professionals lack a well-rounded mathematical education. The modern reliance on technological devices to do our number-crunching faster, and more reliably, than we could ever do it ourselves, has made individual mastery of a broad range of advanced mathematical skills unnecessary. Despite this, there are still a few areas of arithmetic which are widely seen as being useful within the financial industry. A sound mastery of, at least, the basic ideas behind each of these areas can make the difference between whether or not a newly-minted financial professional is able to secure work within their chosen specialty.
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Here are some of the most strongly supported mathematics skills for students hoping to find employ within the financial industry:
Mental Arithmetic
Most people understand what is involved in basic arithmetic, and would assume (correctly) that basic arithmetic skills are required for financial management. Some are surprised, however, to find out that mental arithmetic (or “fast math”) is still a commonly sought-after skill within the financial industry. Today, most people carry a relatively powerful computer in their pocket; we also have access to personal computers, laptops, and specialized devices in virtually every professional environment. Despite this, someone who understands basic mathematics well enough to crunch a few numbers in their head can save themselves (and those who employ them) a considerable amount of time.
Algebra
Many banking and investment financial models require a financial management professional to solve for variables. Today, programs like Excel take most of the work out of this process, but a sound understanding of the basic principles of algebra is still widely considered to be extremely helpful. If you understand the fundamental aspects of how the process works, even if you aren’t the one working it, you’re less likely to make a mistake in the process of entering data into an equation. When you find yourself in a position where you need to create or enter equations within a program personally, you are also less likely to make an error if you understand how and why the different symbols are arranged in the way that they are.
Trigonometry
Trigonometry is an advanced relative of geometry, itself largely unnecessary in the finance world. Trigonometry isn’t strictly necessary for all aspects of the financial industry, and many professionals are able to get by without it. Anyone who regularly engages in quantitative trading and other exceptionally analytical areas of financial expertise will want to have at least a basic understanding of its principles, however. As with having an operating knowledge of algebra, understanding trigonometry will be helpful in avoiding a range of otherwise common mistakes.
Statistics and Probability
This might be the most important area of mathematics which anybody in the financial industry (particularly if you regularly assist with communications between large corporations) ought to have a sound understanding of. Regardless of whether or not a given financial professional is a genius at arithmetics, they’re still going to be dealing with numbers, constantly, every day. A basic knowledge of statistics helps, not only to understand those numbers for the sake of one’s own functionality, but to make convincing explanations to which other affiliated professionals can relate. Having a basic knowledge of statistics and probability in the financial world is like having a large vocabulary in the educational world — even if you aren’t an English teacher.
Some areas of focus are obviously more crucial depending upon an individual’s chosen field; for example, if you’re going into quantitative trading, you might want to study stochastic systems, due to its usefulness in modeling random behaviors. Overall, what’s really important for an aspiring financial professional is that they’re able to handle basic math and statistics, at least as far as personal comprehension, without needing to keep a textbook on hand.
