This is where the growth, money and stress can be found. Actuaries working for the broader financial services industry are put to use in the broadest variety of ways imaginable, and the stakes are often valued in the billions of dollars. The stresses are atypical of the actuarial field as a whole, but the compensation is, too.
This work is an extension of the insurance and pension management actuaries have done for generations. In insurance and pensions, actuaries are often called upon to measure the risks and rewards of investments that pension funds use to ensure they can pay benefits to their clients. The same principle applies to this, except they're being called upon to provide the best risk-reward ratio possible for maximum profits.
Of course, banks and credit issuers have used actuarial models for years. The credit scores used to measure individual creditworthiness were developed in part through the hard work of actuaries. Everyone knows that a person in debt will have a harder time managing more debt. But actuaries can look at that debt and determine formulas for just how much debt a person can manage, what kind of debt is appropriate and what interest rate is appropriate for the bank to charge in order to mitigate the credit risk.
Actuaries are also being used by proprietary trading desks, mutual funds and hedge funds to study potential trades for unforeseen risks and to help mitigate the risks involved through hedging strategies. Whether the investment involves stocks, bonds, currencies, commodities, even options and futures strategies, there's always risk, and more and more, companies believe actuaries can help minimize those risks. Investing is nearly always a gamble, of course, but it's wise for a gambler to know the odds and play the game to the best of his or her ability. The actuaries in the financial services industries do just that.
Actuaries are also called upon to help construct investment vehicles for sale to institutional and public buyers. A major broker won't build a new hedging product for its high-net-worth clients without having an actuary on hand to crunch the numbers and determine the risk profiles.
Even investment banks use actuaries to help determine the risks and benefits of merger and acquisition deals. Though this is still rare, a handful of actuaries have been called upon to help crunch numbers and come up with risk-reward situations for a variety of factors in a given merger.
More and more investor assets are being put to work in the global marketplace every day, and everyone in the game wants to make sure each trade is worth the risk. Actuaries will become an increasingly important part of the investment and financial industries for years to come.
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