BB structured credit trading (FT) vs MM Derivatives Structuring (Internship)
Hi Guys,
As the title suggest, I have two offers, one is for a BB for structured credit trading (FT offer - analyst 2), the other one is for a french MM (think Natixis/Credit Agricole) for a 1year internship in Equity Derivatives Structuring (pay at BB is like 3x the french one).
I have a stem Phd and currently work as a quant at the BB (so first one would be internal move). The other is just an internship with no guarantee of a FT offer. Some people think I am crazy for even debating the choice, the thing is that I am a very quantitative person and derivatives seems much more math-heavy to me whereas structured trading doesn't really require much more than basic arithmetic. But I have a good network at the BB, trading seats are hard to get, I like the culture and could potentially move after a couple of years to exotics/derivatives here or even credit QIS, which is interesting to me.
What do you guys think? How difficult is it to move trading desks / products after 1-2 years on a desk?
I mean structured credit trading is probably going to be more interesting, make better use of your quantitative skills, is a Full Time offer, and makes more money. It is also a harder space to break into and get training for, and is in my view a much more interesting and probably lucrative market area. And its at a higher tier institution. An equity derivatives structuring gig is probably not as sophisticated as it sounds. So there's little doubt which I would pick. Good luck.
I mean, they let me sit on the structured credit trading desk for a day and it's really not rocket science in terms of the maths. It's just analysing bond cashflows for most of the time but the pricing is quite trivial. The hedging is also minimal (only credit risk is hedged). The derivatives offer is for exotics/hybrids, so I think as hard as it gets (much more interaction with quants, pricing is more challenging, and would also involve coding on the job). But I admit that the structured credit desk makes a lot of money at my BB (probably one of the best paid actually)
The maths for exo/hybrids looks funky but you get used to it and the job sooner or later becomes repetitive. The nitty gritty 20 factor stoch-vol modelling is usually done by quants, not structurers. Structurers obviously need to understand what's going on and the different inputs to the models and the risks they introduce on the traders' books so they can figure out what to pitch. However, often the job would just be continuously coming up with BS backtests to offload some risk that the traders don't want on their books that has come in via the retail franchise. Don't get me wrong there's a lot of room for creativity but exo trader is usually a more fun job than an exo structurer. Anecdotally, the top maths talent I've seen in exo desks is usually on the trading side or the quant side while in structuring along the mathematicians, engineers and physicists there are also a decent number of econ grads. Nothing against econ grads just using it as a measure of how quanty the structuring job is.
Don't let go of a BB trading job just because there's no stoch vol modelling. Structurers often work super hard to get trading gigs while I've never seen a trader actively try to become a structurer. I'd say you have to be at least 95% certain structuring is what you absolutely want to do to leave BB FT trading offer for MM structuring internship. Like if the internship ends in the middle of a banking crisis or a recession (non-negligible probability), they might not even have headcount to give you the FT offer. And as you say yourself, play around on the credit desk and given STEM PhD you should be able to shift to credit exo where there's heavier modelling around correlations. I'd personally be careful with QIS trading as in some banks it would be close to pure execution, so definitely at least research well what the job is like if you are considering moving there.
Thanks a lot for the insight. I always considered myself a better fit for structuring than for trading, and I also like the slower pace. I like the quant work, the only reason I want to move to FO is career trajectory (quants don't get paid at banks) and to get client exposure (I am a very social person). But I really like maths and programming. And the exo structuring role seems quite interesting (also there are many more products than in structured credit). The thing is that the likelihood of getting the FT offer seems rather low as they don't have headcount at the moment, so it would be hoping that in a year time they get it (in my opinion the probability is like 30%). Otherwise I would be unemployed and seems like there aren't many analyst spots for someone with 1 year of experience in equity derivatives.
How difficult do you think it is to switch desks to go to a more quantitative one if I join the structured credit trading desk? I think at my bank the policy is 12-18 months in a role before you can switch but I am wondering how often do you see people switching at the analyst level.
I've never been on a structured credit desk so I don't know in precise terms but people in markets move around all the time. Give it 2 years and having worked in a quant job + having actual trading experience would position you well for a variety of jobs. There are lots of structured products jobs across credit and equities (plus a few in rates/FX and commods) where the pace is slower, you do a new non-hedging trade once a week, and you have to spend a lot of quant + structurer + your own brain power on how to pitch the trade to a client, what hedging and transaction costs assumptions to make when pricing it, how shifts in correlations between different factors should be modelled, etc. There are lost of trading roles other than the ones where you quote prices all day long. I assume the structured credit job will be like that and that you should be good for other trading roles like that with a structured trading + quant background. And if you're still keen on designing funky payoffs or QIS strategies after doing trading for a while, I don't see why you wouldn't be able to get into a seat like that too especially given that you have a STEM PhD.
Again, structuring is a cool job that allows for lots of creativity and compared to it trading could be seen as more repetitive, especially if you're not that fascinated by the daily ebbs and flows of the market. So if you're super sure you want to risk not getting a full time offer in order to do structuring, go for it. But if you were that sure you probably wouldn't be asking for advice on the internet.
Again thanks a lot for the very valuable input! (btw are you in sell-side EQD?) I just want to do something quantitative where you also code/do some maths rather than just answering client requests, taking part in auctions, and looking at bond docs. I like QIS because in my view you get both the client exposure element of FO but you still do quanty technical work. So how long do you think I would have to stay in this desk if I jump to trading? minimum 2 years? How would you rank the various desks in terms of quantyness-complexity? From what I know now I would think: Equity Derivatives, Rates Exotics, Credit Exotics/CLNs, EM and Commodity Derivatives
Also, keep in mind that while BNP and (especially) SocGen are uber-cool places for equity exo, other French banks can suffer from a large exo related blow up here and there and decide that selling bizarre autocallable structures is just not worth it which could result in the rest of the business seeing less investment.
Also, I'm sure you've read about the below by now but just to make sure you know what you're getting into:
https://johnlothiannews.com/how-natixis-lost-300-million-on-options-liz…
BBs would have big exo PNL events too every now and then (although I haven't heard about recent ones that are this big) but since they're BBs it barely ever makes the news and have more staying power.
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