Higher Education and Professional Practice Committee


Johanna Duncan-Poitier


Carnegie Mellon University, M.S., Computational Finance: Renewal of Permission to Operate in New York State


August 7, 2006


Goal 2






Issue for Decision (Consent Agenda)


Should the Board of Regents renew permission for Carnegie Mellon University to offer its Master of Science (M.S.) degree program in Computational Finance in New York?


Reason(s) for Consideration

          Required by State statute


Proposed Handling


The question will come before the Higher Education and Professional Practice Committee at its September 2006 meeting, where it will be voted on and action taken.  It will then come before the full Board at its September 2006 meeting for final action.


Procedural History


On July 21, 1995, the Board of Regents authorized Carnegie Mellon University to offer its M.S. degree program in Computational Finance in Manhattan.  The Department registered the program.  The period of authorization ended July 31, 2001; however, the program registration was continued and the program is presently registered.  It may be that the Department’s continuation of registration after July 31, 2001 led the University to believe that permission had been renewed.  However, on May 2, 2006, Carnegie Mellon requested that the Board renew its permission to offer the program in Manhattan.  



Background Information


Education Law §224(1)(a) provides, “No individual, association, partnership or corporation not holding university, college, or other degree conferring powers by special charter from the legislature of this state or from the regents, shall confer any degree . . . unless the right to do so shall have been granted by the regents in writing under their seal.”


Carnegie Mellon University is an independent institution awarding degrees through the doctorate.  Its main campus is in Pittsburgh, PA; it has branch campuses in Silicon Valley, CA, and Doha, Qatar.  In 2005-06, it enrolled 9,663 undergraduate and graduate students and employed 1,404 faculty members.  It is accredited by the Middle States Association of Colleges and Schools.  Since 1995, the Department has determined that Carnegie Mellon’s M.S. degree program in Computational Finance has met the standards for registration as set forth in the Regulations of the Commissioner of Education.    




I recommend that the Board of Regents renew the authorization granted to Carnegie Mellon University on July 21, 1995 to offer in Manhattan its Computational Finance program leading to the Master of Science (M.S.) degree, retroactive to July 31, 2001, for a period ending September 30, 2011.


Timetable for Implementation


If the Board of Regents renews Carnegie Mellon’s permission to operate, the Department will continue the registration of the Computational Finance program and the University will continue to enroll students at its Manhattan location.  

Information in Support of Recommendation


Academic Review


A. Institutional Information.  Carnegie Mellon University is an independent, not-for-profit, research-intensive institution authorized by Pennsylvania to award degrees through the doctorate.  Its main campus is in Pittsburgh, PA; it has branch campuses in Silicon Valley, CA, and Doha, Qatar.  Carnegie Mellon was formed by the 1967 merger of the Carnegie Institute of Technology (founded in 1900) with the Mellon Institute for Research.  It is composed of seven schools: Carnegie Institute of Technology, the Colleges of Fine Arts and of Humanities and Social Sciences, the H. John Heinz III School of Public Policy and Management, the Mellon College of Science, the School of Computer Science, and the Tepper School of Business.  In 2005-06, it enrolled 5,389 undergraduate and 4,274 graduate students and employed 1,404 faculty members.  It is accredited by the Commission on Higher Education of the Middle States Association of Colleges and Schools. 


The Tepper School of Business, home of the Computational Finance program, is accredited by AACSB--the Association to Advance Collegiate Schools of Business.  The School’s mission statement says:


The Tepper School of Business at Carnegie Mellon is committed to improving the leadership and problem-solving capabilities of individuals so as to enhance their value to organizations and society at large.  The Tepper School of Business strives for excellence in the creation and dissemination of knowledge that is grounded in scientific principles and directed toward improving the practice and profession of management.  The Tepper School of Business achieves its mission through the creation and implementation of both general management programs, and also through conducting, publishing and transferring to society research that is of value and importance.      


Tepper has approximately 1,100 students and 193 faculty members.  In addition to the Computational Finance program, through Tepper the University offers baccalaureate study in business, M.B.A. programs, and Ph.D. programs in accounting, behavioral science/organizational behavior, and computer information systems management.  It has offered the Computational Finance program on campus since 1994 and in Manhattan since 1995.  Instruction in Manhattan is by live, interactive video to the University’s facility at 55 Broad Street.  In addition, regular Tepper faculty travel to Manhattan to teach twice in each seven-week mini-semester.


          Twenty-three students in Manhattan received M.S. degrees in each of 2003 and 2004, and 24 received them in 2005.  


          B. Curriculum.  The purpose of the Computational Finance program is to educate investment professionals to integrate sophisticated mathematical techniques with financial theory and computer technology.  Entering students learn C++ to prepare them to create software in subsequent courses.  The curriculum comprises 24 courses, covering the institutional issues of finance, traditional financial theories of equity and bond portfolio management, the stochastic calculus models on which derivative trading is based, the application of these models in both fixed income and equity markets, computational methods including simulation and finite difference approximations of partial differential equations, statistical methodologies including regression and time series, statistical arbitrage, risk management, and dynamic asset management.  It concludes with courses in financial computing and financial engineering. 


          In both Pittsburgh and Manhattan, courses are offered in seven week mini-semesters.  A full-time student may complete the program, including a summer internship, in six mini-semesters over 17 months.  Part-time students take one-half of the full-time load and need 12 mini-semesters to complete the program over 32 months.


          C. Students.  Manhattan enrollment has grown from about 25 half-time students in its first year to 20 full-time and 50 part-time students today.  They come from New York, Connecticut, and New Jersey.  (In Pittsburgh, there are 35 full-time students.)      


For admission, applicants need an undergraduate degree in a technical discipline, such as mathematics, computer science, engineering, or economics, with at least two semesters of differential and integral calculus (and preferably strong performance in courses beyond that level, such as linear algebra and differential equations), proficiency in calculus-based probability, and fluency in a general-purpose programming language such as C.  (Applicants lacking fluency may be admitted conditionally upon achieving fluency prior to entering the program.)  Relevant professional experience is preferred but not required.


Applicants must submit either GMAT or GRE scores, unless they already hold Ph.D. degrees.  (Eight percent of the fall 2005 entering class held Ph.D. degrees.)  The mean GMAT score of the 2005 class was 692 total; the mean GRE scores were 571 verbal and 784 quantitative. 


About half of each entering class are non-citizens.  International students must understand rapid, idiomatic English, read English with ease, and express themselves orally and in writing in English as demonstrated on the TOEFL examination.


Carnegie Mellon reported that 38 percent of the fall 2005 entering class (Pittsburgh and Manhattan combined) had degrees in engineering, 20 percent in economics or business, 16 percent in computer science, 16 percent in mathematics, and ten percent in one of the sciences.  Their average age was 27 and they averaged six years of work experience.  Seventy-two percent were men and 27 percent were women.


For 2006-07, full-time tuition is $41,900 per year.  Part-time tuition is $2,766 per six-unit course.  Since Carnegie Mellon is not a New York institution, students are not eligible to apply for TAP.


          D. Faculty.  Tepper has 98 full-time and 95 part-time faculty.


Twenty-one full-time faculty teach the 35 students in Pittsburgh and the 70 in Manhattan.  They come from the mathematics sciences department, the department of statistics, and the Heinz School of Public Policy and Management in addition to the Tepper School of Business.  Nine are finance faculty, of whom eight hold doctoral degrees.  (The ninth has an M.B.A. degree and Wall Street experience.)  Two are information technology faculty, one of whom holds a Ph.D. degree. Six are mathematics faculty, five of whom have Ph.D. degrees.  (The sixth is a visiting professor from Denmark.)  Four are statistics faculty, all with Ph.D. degrees.  Doctorates were earned at such institutions as Chicago, Connecticut, Cornell, Illinois, Minnesota, Pennsylvania, Stanford, Lausanne (Switzerland), Toulouse (France), University of British Columbia and Queens University (Canada), Stecklov Mathematical Institute (Russia), University of London (UK), and the University of Melbourne (Australia).


          According to Carnegie Mellon, between 1978 and 2004, five of its faculty have been awarded the Nobel Memorial Prize in Economics: Herbert Simon, Franco Modigliani, Merton Miller, Robert Lucas, and Fynn Kidland.


          A Friday lunch-time Speaker Series in Manhattan brings practitioners to speak in person to New York students and via live, interactive video to those in Pittsburgh. 


          E. Resources.  Carnegie Mellon’s main campus is on 103 acres just east of downtown in the city of Pittsburgh.  Its Manhattan facility is at 55 Broad Street, near the New York Stock Exchange.  It includes two large classrooms, offices, conference rooms, and a lobby.  In addition to equipment for the live, interactive video, the Manhattan facility includes a Carnegie Mellon FAST (Financial Analysis and Securities Trading) Iaboratory that uses workstations, proprietary software, and real-time data feeds from international exchanges.  The facility is staffed by a technician to operate and maintain equipment and two administrative staff to forward and distribute hard-copy communications between Pittsburgh and Manhattan, proctor examinations, and provide general oversight of the students and facility.


          All Computational Finance students are required to have access to laptop computers, which are available for purchase from the University.  Faculty use electronic softboards to put all written notes on the laptops.  The live video is also captured digitally and posted on the Internet for student use.


          F. Program Registration.  The M.S. program in Computational Finance has been registered since 1995 as meeting the standards set forth in the Regulations of the Commissioner of Education.


Planning Review


G. Need.  The securities industry had 489,000 professional employees in 2004, according to the 2006 edition of the U.S. Labor Department’s Occupational Outlook Handbook.  The Handbook states, “Wage and salary employment in securities, commodities, and other investments is projected to rise 16 percent from 2004 to 2014, compared to the 14 percent increase expected for wage and salary employment across all industries. Employment growth will be driven primarily by increasing levels of investment in securities and commodities in the global marketplace, as well as the growing need for investment advice. In addition to the many new job openings stemming from this growth, a large number of openings will arise as people retire or leave the industry for other reasons.”


According to Carnegie Mellon, it created the Computational Finance program in 1994 to fill a need in the financial services industry for graduates with more mathematical preparation than those coming out of the nation’s top business schools.  The program prepares graduates to work exclusively in the financial services industry.  Their careers “usually revolve around derivatives pricing and trading, financial risk management, structured products, analytics software development and quantitative portfolio management.  Some develop proprietary trading strategies for the hedge funds.  Some start their own financial software firms.”


The Tepper School reported that 62 percent of the program’s class of 2004 had been placed by graduation and 81 percent had been placed within three months after graduation.  It indicated that firms recruiting program graduates, either in Manhattan or Pittsburgh, in 2005-06, included American Express, Bank of America, Bank of Tokyo, Bear Stearns, Citibank, Credit Suisse First Boston, Deloitte and Touche, Deutsche Bank, Ernst & Young, Fannie Mae, Freddie Mac, Goldman Sachs, Lazard Freres, Lehman Brothers, J.P. Morgan, Merrill Lynch, Sungard Capital Markets, and UBS Warburg.  It states that the mean base salary of 2005 graduates was $89,061, with a range from $60,000 to $106,000 (not including bonuses).    


H. Effect on Other Institutions.  In New York City, 7 institutions offer 27 master’s degree programs in banking and finances or financial engineering:


Bernard M. Baruch College, CUNY

Fordham University

New York University

Pace University

Polytechnic University

Touro College

Wagner College


          Carnegie Mellon believes that it was the first institution in the nation to offer a master’s degree program in Computational Finance when it introduced this program in 1994.  In 1995, the Department’s planning review of the University’s request to offer the program in Manhattan concluded that, while some New York institutions’ master’s programs in finance included some work in computational finance, none offered a full program in that subject.


Since then, Polytechnic University has registered such a program; it appears to be the only other program in Computational Finance in the City.  However, Carnegie Mellon states that the program is distinguished from other quantitative finance programs in the nation by the level of information technology education it includes.  “To understand the mathematical underpinnings of today’s financial models and be able to build such models give our graduates a real advantage in the workplace.”  It sees North American institutions its students may consider as including Columbia University, Florida State University, Georgia Institute of Technology, New York University, Princeton University, Stanford University, the University of California at Berkeley, the University of Chicago, the University of Michigan, and the University of Toronto.   


          Because the Carnegie Mellon program has been operating in Manhattan for 11 years, its continued operation should have no further effect on other institutions.