What are they exactly? I don't understand what kind of shop they are, what kind of pay guys there get, how prestigious it is, etc...
There was a thread on them a couple months ago but I read it and still didn't know what they did.
Jane Street Capital Overview
Jane Street Capital is a proprietary trading firm in NYC. This means that they trade with the firm's internal assets. This is not technically a hedge fund.
Jane Street describes their business below:
On an average day, we trade over $13 billion in equities worldwide. We are also very active in the markets for options, futures, currencies, commodities, and fixed income. We are active participants on more than 200 electronic exchanges and other trading venues in about 40 countries around the world. We traded over $4.8 trillion across all products in 2016.
@Brady4MVP" explained that:
In terms of the work, they use quantitative methods to take advantage of an arbitrage situation. To put in the simplest terms, this means they take advantage of a situation where the relationship between two instruments is out of sync, thereby providing an opportunity for arbitrage. Jane Street trades a wide variety of products, but if I'm not mistaken, their largest activity is on stock and index options.
Prop Trading Interview Experience
@Brady4MVP" commented on the interview process:
It's very tough to get a job there. There are around five rounds of interviews, each one getting progressively harder. You will be tested on math, economics, probability and statistics. To put it simply, you have to be really sharp to land a job.
@kadgeratnum" explained their experience interviewing in a detailed post about the final round:
Before the interview I went through five(!) phone interviews before they invited me down, and I think they would have kept going except that I had an exploding offer coming up so I told them its final round or nothing... When they say 'we aren't looking for the right answer so much as how you think about a problem', they mean it. At the final round itself you are given 100 poker chips at the start of the day. Over the course of the next 4-6 hour long interviews (I only had four, but I think that's because I got cut after four - there were still people interviewing as I left) you have to use the chips to make bets on scenarios given to you. Some sources claim these scenarios can be as simple as 'make a market on the temperature in the room', I didn't get these questions and I'm guessing that they are reserved for internship interviews. I got much more difficult ones, that require a decent amount of math. You will need to use the trading terms to bet on the results you get.
@eecs" explained their summer analyst interview experience:
Their 4th round interview for a SA gig (yes 4th round for a summer internship) was almost like a Math Olympiad. Game theory, FORMAL proofs and some conditional probability.
Jane Street Prestiege Level and Salary
Jane Street Capital is a well regarded prop trading firm on Wall Street.
User @PowerInTheMoney" explained in a seperate post about the starting salary:
For the summer analyst role: the Jane Street Salary is 125k prorated, or 25k for 10 weeks (as of 2014)
@trdr1" explained their perception of Jane Street:
JSC has a reputation for paying very well and having high retention rates. This is why kids who get BB offers take jane over them.
@Brady4MVP" explained his perspective:
The training they give you may not be as comprehensive as what you would get at a BB trading floor. If you had the option, you should take GS, MS, ML trading or a top hedge fund over Jane Street, without a question.
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Jane Street Capital is a proprietary trading firm in NYC. This means that they trade with the firm's internal assets. Since there are no clients, they are NOT a hedge fund.
In terms of the work, they use quantitative methods to take advantage of an arbitrage situation. To put in the simplest terms, this means they take advantage of a situation where the relationship between two instruments is out of sync, thereby providing an opportunity for arbitrage. This is the type of trade which made tons of money for the guys at Long Term Capital but also led to their demise when spreads continued to diverge. Jane Street trades a wide variety of products, but if I'm not mistaken, their largest activity is on stock and index options.
It's very tough to get a job there. There are around five rounds of interviews, each on getting progressively harder. You will be tested on math, economics, probability and statistics. To put it simply, you have to be really sharp to land a job.
If you start off as a junior trader, you will get paid a base salary of around 45-50K. This is a paltry amount, especially for NYC, so you'll struggle at first. However, if you do well at Jane Street, you'll easily make six figures. The partners make seven figures.
I personally don't think Jane Street is that prestigious. The fact of the matter is, proprietary firms are small and have limited resources. The training they give you may not be as comprehensive as what you would get at a BB trading floor. If you had the option, you should take GS, MS, ML trading or a top hedge fund over Jane Street, without a question.
You pretty much lost all credibility when you compared what LTCM did to what these high caliber prop firms do (susquehanna, jsc, drw). Because A) LTCM didn't make markets (HFs can't make markets...the ones that do (aka Citadel) have external MMing units) B) not all "quantitative arbitrage" situations are the same. I am guessing you read "When Genius Failed" and pretty much equated arbitrage with that.
I suggest the OP read this topic which lists the areas jane street trades: http://nuclearphynance.com/Show%20Post.aspx?PostIDKey=92247&PageIndex=1
JSC also has a reputation for paying very well (which is why kids who get BB offers take jane over them) and high retention rates.
Read this topic: http://elitetrader.com/vb/showthread.php?s=&threadid=72233&perpage=6&highlight=jane%20street&pagenumber=1 And notice how the industry veteran on that NP thread laughed when some dude was "concerned" about the "low capital base". Once again, know what you are talking about.
excuse me my friend but LTCM had nothing fundamentally wrong...they were just a bit unlucky (a country does not default every day) and just a bit arrogant...you all read waaayyy too much of Liar's poker, When a genious failed etc....reading those books without understanding the fundamentals is disastrous.
Jane Street Capital - Do they pay more than street? (Originally Posted: 03/09/2008)
What is the DL on this firm? Do they pay more than street? A lot of people from my school end up there over BBs and they definitely seem to drink the Kool Aid.
Just a bit unlucky? Oh please, there is sucker born every minute i suppose...
very good firm. do you go to MIT or something? most if not all traders at Jane pretty good with functional programming and seem to know their way around OCaml or similar
Yeah, I go to a school very similar to MIT.
caltech?
actually based on your posting time, i'll go with imperial/
Kids at MIT like schools do not sleep much.
well, i'm not saying Jane Street exclusively recruits from MIT, but they seem to value mathematical aptitude like none other, so I thought it was a pretty good guess on my part
good school...course 15 is where it's at
Definitely course 15.
They recruit at a few other ivys too..they recruit at mine (Penn). I'd agree that they value mathematical aptitude (they interview a lot of engineers).
If you start at junior trader level, which position will yield higher return expectation?
haha never thought i would hear someone laud course15 on the board. ive heard decent things about jane st., but literally interview consisted of the following: what is 63^2, give u a series of operations what do you come up with: 6*7 -4 +17 /3 kind of a waste of time.
I did not know there were that many people on this board who should or would even know what course 15 is. Wow, I guess I am not alone.
college for me was a matter of deciding between wharton and mit, so course 15 isn't a huge mystery to me haha. zonk: i've always heard that Jane Street interviews were more complicated than that with questions involving algorithms, geometry problems, and whatnot.
and which did you choose devin?
wharton. was in the management and technology program before bailing and am now going for a double concentration in finance and statistics.
maybe 2nd rounds it gets more complicated. i basically stopped after i got a series of just plain multiplication and addition. not how i want to think. know people there though that do well.
i had a second round with them... terrible;
it was exactly like the first round except 10x harder; they asked me 0 fit questions round 1 and a grand total of 1 fit question round 2. the guy didn't really seem to care about what i had to say but just went on to the quantitative questions
yea i got dinged
that sounds like it would be a good interview for a complete quant junkie though.
I
.
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as far as i can tell this firm is baller.
The firm is pretty good, but I would not consider it on par with Shaw or other very large funds. The amount of money they manage simply cannot allow as much upside.
lol, no you're quite wrong here
the bottom line is, it seems like these guys rock based on what i've heard from interns and the general (finance) public. i respect the firm and anyone good/lucky enough to get in. that being said, what does "well capitalized" mean in terms of this firm? anyone have any idea how much capital they're really playing with?
I was talking to a recruiter from Jane St. and he said that you can put some of your own money up for trading after the 1st year. He said they started w/ $2 million in 1999 and now have about $150 million (this was back in Nov 07).
"lol, no you're quite wrong here"
Are you honestly telling me you would take a position here over Shaw? If so, I think you are quite dull witted. I know people working at Jane who say it is "near the level of shaw"
isnt deshaw a hedge fund? Why are you comparing Hedge funds to prop firms?
Lets work out profit per capita to get an idea of what I am talking about. Shaw = 1300 employees, 35 billion under management. Lets say they return a very conservative 10% per annum. That would be 700 million from the 2% of assets and 700 million from 20% of profit, so on average 1.1 million per person.
Jane has 100 employees and 150 million under management. Even giving them the astronomically high return of 50% per annum (which I am certain they cannot achieve consistently), the average comp is substantially lower (0.75 million per person).
Large funds also temper down volatile to manage pension fund and extract their alpha thru fees.
If Jane was returning 61% per year on their capital (minus tax) and compensation then the real pre tax returns are likely around 200% a year.
There was a guy name Igor around Chicago for a while who came out of sig and I’m guessing did similar strategies but smaller firm. He had 20 million in real estate after a few years at the Waldorf.
But what you fail to realize is that their in inequality. At shaw your general partners will a greater % of the compensation than at Jane Street. Since Jane Street is a prop firm it is likely that their distribution of income is more normally distributed compared to Shaw. I would argue that median income is potentially higher at Jane Street assuming the average return. Furthermore if Jane Street has grown from 2mm in 1999 to 150mm now in 2008 thats average annual rate of return of 61%. yeah, bottom line your average person at Jane Street is likely better off than your average person at Shaw. But your superstars at shaw clearly are way better off than Jane Street.
+1. Great Post!
Their 4th round interview for a SA gig (yes 4th round for a summer internship) was almost like a Math Olympiad. Game theory, FORMAL proofs and some conditional probability.
Needless to say I wanna work there now even more!!
You're talking about Jane Street , right ?
Actually, 61% would be underestimating their annual return by probably a significant margin. A big chunk of annual P&L goes to the employees. Admittedly though, capital can also be put in by the partners
For those computing fee figures at Shaw you should be using 3%/30% vs. the standard 2%/20%. Despite charging fees well above average, Shaw still generates above average returns and raises big $$$ from investors. And, of the 1300 employees, ~500 of them are based in India and even the best over there probably get paid a fraction of what people on this board would consider reasonable. This leaves a much greater pool of dollars to pay everyone else.
I don't know Jane Street and can't help with the per capita calcs that were being done above but I find it hard to believe that the ratio would be higher at Jane Street vs. Shaw.
As Steve Tyler of aerosmith once sang "Janie's got a gun", well if what i just read is correct, "Janie's got a put" would be more correct. Not sure long or short puts but this trade could really make or break them.
"Jane Street Capital LLC, a New York-based trading firm, had the biggest exposure to Bear Stearns's put options at the end of last year, according to regulatory filings, though it isn't clear if the firm held on to those positions through last week. "
CNBC reported that they bought them...
I did have proofs in my 3rd interview. Some questions on distributions and game theory too.
what kind of proofs are we talking about? Mathematical induction?
FYI, Jane Street currently has 2 bil + under management. They had their best year ever in 2008. Since their founding, they always used about 10% of revenue for insurance such as buying extremely out of the money puts on the S&P and counterparties along with CDS on counterparties. The purpose of the insurance was so that they could survive a meltdown of the financial markets. Turns out that their normal business wasn't significantly impacted by the events of this year but their insurance still made them ridiculous amounts of money.
I am a bit stressed. How difficult are the later rounds?
Still hirering? Still growing?
I am graduate student ( doing Ph.D. ) from a premier mathematical research institute in INDIA. The focus of my research is mathematical finance and its applications in stock-market, derivative pricing,hedge funding,and like. So, I also started doing CFA ( to gain more insight from pure finance persepective ). I have completed LEVEL 2 of the exam. I heard about JSC during one of the examinations of CFA. I wanted to know that can I apply for this company? I have already spent enough on my studies and now have support my family ASAP. So,what do you guys think - should I apply for this job? If yes, then tell me frankly about my chances of being selected and how much money will I be making?
I was hedge funding the other day and ended up with enough money to pick up a tub of Scott's and revive the foliage in my front lawn
Jane St firm (Originally Posted: 09/30/2011)
how can i get into the jane st training program without a college degree, is it possible to pay them to train me and than if i have potential to hire me?
HAHA "just a bit unlucky". Their fault was discounting tail risks. They did have something fundamentally wrong....the distribution they used to base their decisions was false (just use excel and look at the distribution of returns...its fattailed).
However, when I said that he had no idea what he was talking about it was because the type of trading LTCM did is just absolutely different from what shops like Jane Street do. The type of "arbitrage" LTCM did isn't actually arbitrage. They placed relative value bets based on fair values generated by their models (which were flawed as they used the normal distribution as the basis). On the other hand, these prop firms often derive a lot of their income from making markets. In any market, the real value lies somewhere between the bid and the ask price. Therefore, market makers are compensated for providing liquidity to the markets (and have a quantifiable edge-the spread).
Of course, the large prop firms run a gamut of strats (which are outlined in that NP thread). Susquehanna even branched into banking and equity research.
It's evident that you're completely oblivious to what jane st. does. The answer in one word: Impossible.
you don't have the potential. gg.
sir are you out of your mind?
Yea, just start your own alg market making firm, and build a good pnl.
They will then hire you
Trdr1,
You must feel so smart because you know a little bit about arbitrage. Of course, I know that LTCM is different from Jane Street. The OP wanted to know the basics of what Jane Street does, and I didn't feel like writing an essay on quantitative arbitrage. By the way, LTCM did lose most of its money on spreads when they diverged from fair value and didn't come back. It's fair to say that LTCM's methodology was more sophisticated, but the basic concept of "spreads" is the same anywhere. My guess is you work at a back office in Bear Stearns and fantasize about trading for a big shop one day. Good luck with that.
The very fact that you tried to pigeonhole quantitative arbitrage with what LTCM did shows your naivete.
All trading can be considered to be a "spread". All traders can be considered to be "arbitrageurs". A value investor exploits the spread between the purchase price and the fair value (determined through whatever fundamental process s/he is using). A relative value strategy take advantage of the spread between two instruments. A market maker takes advantage of the spread between the bid and ask prices.
So no, not all "spreads" are the same. Some spreads are inherent in the market. For example, a market maker has a real quantifiable edge in the marketplace- the spread between the bid and the ask. There is no fudging this issue. They act as risk transfer agents and therefore, are paid for this service through the spread. The "spread" LTCM tried to take advantage of is much more abstract and based on assumptions (which turned out to be wrong). One example, is that they tried to exploit the "spread" between historical vol and implied vol. Unlike a market makers edge, the edge in this trade is less concrete and you must make several assumptions about the market place (for example, markets are not fat tailed and therefore, there is a low probability of the market from diverging from historical levels).
The fact that you think the spread a market maker exploits = spread firms like LTCM exploited shows, you have no idea wtf you are talking about. I will give you some time to digest that although I am guessing you will try to comeback with some more drivel. Whatever, this back office worker at Bear Stearns needs it ;).
ok...you must be so smart...!!!!!a news scholes has been born!!!my friend, i don't need to look on excel to see what is fat tails....i know very well what it is all about. But lots of models just make some assumptions, which more or less lose something. The problem with LTCM was their unluckiness+arrogance+predatory trading(I suggest you read the article by brunnermeier if you want to know more about the latter)--->They pumped up their leverage to hell and they got screwed.
so, since you know so much about HFs and etc, and you are in a position to evaluate their strategies, you must be very comfortable with basic models...so to get your hands dirty a bit: why are short rate models inefficient in pricing swaptions? And since you know about fat tails as well, how one "replicate" the effects of the fat tails of a t-student copula model in pricing CDOs in the normal copula Li model?
and also: from my point of view the guys at NP are cool, they are in the quant industry, but they are not the creme de la creme...(if they were they wouldn't have time to spend in a forum...)
Why thank you. I haven't blown up yet though (although I hear he has a new shop now).
Obviously models will make assumptions...they are models. However, no successful trader follows the models blindly. LTCM's mistake was that they did not take into account the probability of their assumptions being wrong (which most traders do). My experience is in building predictive systems. When I build something, I use a model for generating my prediction, and then controls to factor in the probability that my forecast might be bs. For pricing LTCM may have had nothing fundamentally wrong, however, as traders they did as they did not put in controls which led them to play a -EV game.
As I said my experience is with predictive modelling with next to no FI experience. But just to humor you I will take a stab at the first question (which I remember faintly from some required reading book):
Short rate models are inefficient in pricing swaptions as its difficult to calibrate the mean reversion parameter. I remember in a book they gave an example of using the parameter as prices in the cap/floor market but that is inadvisable (IMO) because the two are different markets (swaptions being options on a portfolio while the other being a portfolio of options).
I do not know how to replicate fattails in a CDO model because....well I have never had to price a CDO. I can assure you that the quant traders I know involved in stat arb (which is the category I would fall under) wouldn't know that either. What they do know is that successful traders must account for the probability that their assumptions are wrong. They did not factor in several tail risks (extended drift from convergence, liquidity risks (they were absolutely illiquid in some of their positions)). So yes, before you break out that textbook again, LTCM did have it wrong. And I do not know of any successful market participant who would say that they were NOT fundamentally wrong in discounting that.
As for NP> I showed that thread because the guy that posted about jane street there actually seemed to know wtf s/he was talking about unlike the one that has posted here. And no, there are some pretty big heavyweights that lurk (sometimes post) on those forums. Its a decent portal for info...certainly better than this one).
i sent you a pm.
Can we try to keep this on topic? The issue at hand is Jane Street, not quant trading in general.
Any other views on the place?
Why are the responses so long? He only asked 3 questions. 1. Prop Trading Firm 2. Entry Level: Around 50K + Bonus (based entirely on your performance) 3. No Comment on their Prestige
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