Mathematical whizkids and former physicists-turned bankers are now a dime-a-dozen in the financial world.And France, more than any other country, dominates among quantitative analysts.Business Insider recently published a ranking that showed there are seven French universities in the top 15 for best-paid financial graduates in the world.France's deluge of quants has led to the country being nicknamed"Quant Valley," with its capital subtitled "Paris the City of Quants."And it can all be traced back to one French mathematical genius 'Nicole El Karoui.On a basic level, quants usecomputers to tell them what to buy and sell. However, the programmes and analysis require a deep level of pure mathematics and algorithms that only a very small pool of professionals understand.French-TunisianEl Karoui is an architect in this field and has been instrumental in shaping France's academic institutions in the way they teach quantitative finance.French universities now rank amongst the top in the world for churning out the high-calibre and highest-paid finance graduates. For example, the average finance student from Ecole Polytechnique in France will earn around74,000 ($115,000)when they graduate.Famously, some ofworld's famous quants, and rogue traders, hail from a number of these universities.The woman that shaped France's reputation for quantsThose under the tutelage of professorEl Karouiare famously sought after in London's Square Mile and New York's Wall Street. The Paris-based professor came from a pure maths background. Sheteachesthe niche art of creating and pricing derivatives (complex financial instruments linked to stocks, bonds and loans). She is also theco-director, with Marc Yor and Gilles Pags, of the Master of Advanced Studies programme Probability & Finance (more commonly known as"DEA El Karoui"). The programme was the first of its kind to teach complex derivative pricing.It iscurrently jointly operated by cole Polytechniqueand the Pierre and Marie Curie University, and is now one of themost prestigious programmes in quantitative finance in the world.In 2006, just before the shine was taken off those trading in complex derivatives bythe credit crisis, the media highlighted what a huge deal it was for finance students to study under the famous French quant expert."When I talk about El Karoui's master's, everyone knows," said a French student at the timeXavier Charvet to the WSJ.Rama Cont, a former student and nowProfessor of Mathematics and Chair in Mathematical Finance atImperial College London, said El Karoui's name was"the magic word that opened doors for young people."At the time, the WSJ reported that banking headhunters sought after the 75 or so students that were being tutored inEl Karoui's "Probability and Finance" course. In the same report,head of BNP Paribas's US equity and derivatives department in New York,Amine Belhadj, even said thatEl Karoui "played a crucial role in finding interns when the bank began handling derivatives for clients in 1989."Rise and fall of French quantsElKaroui shaped the banking world from the outside-in, and with this, a plethora of French quants flooded the shores of the US and the UK.In the late 1980s she began helping banks find the right talent in the derivatives sector. Other French universities followed suit, developing programmes that used her teachings on focus on 'very, very" complex modeling of derivatives.Non-French universities were slow to notice how popular her graduates were becoming, as UK and European banks siphoned off the Frenchtalent.That talent came at a price. Like Frankenstein's monster,El Karoui'stheories and methods ended up beingmisusedby a small but infamous group of traders who lost a ridiculous amount of money and became household names.Goldman Sachs' one time wonder kid,Fabrice 'Fabulous' Tourre, came from the elitecole Centrale Paris. Unfortunately, he was dubbed the"face of Wall Street greed" by US regulatorSecurities and Exchange Commission (SEC) and was fined391,000 ($650,000) and told to hand back a 112,000 ($175,000) bonus for defrauding investors in the run-up to the credit crisis.Former trader Bruno Iksil ' dubbed "The London Whale" for his massive market bets ' was also a derivatives wizard that reportedly went tocole Centrale. He was at the centre of the $6.2 billion (4 billion) JP Morgan trading loss of 2012, when massive credit derivative bets went sour. Previously, he was a massive profit generator for the bank.And Jerome Kerviela former trader at Societe Generale,lost $5.8 billion (3.7 billion) in rogue trades. He graduated from the less prestigious "provincial" University of Lyon.Here's a taste of one of El Karoui's lectures, "Introduction to credit risk":Join the conversation about this storyNOW WATCH: This is how rapper 50 Cent made millions and then lost it
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