Trading Desks That Don't Require Quant/CS background
Hello,
I am getting ready to pref desks for Sales and Trading at a BB bank. The program rotates around sales and trading, however, I was told that most of the trading desks require a computer science/quant background, or at a minimum, to have strong programming skills.
I come from an Econ/Finance background. I am good at math, but I am wondering if there are any areas of trading that do not require programming skills and would be more suitable for my skill set. My interests lie in the macro space, as well as credit.
Any insight would be greatly appreciated.
old school just doesn't exist the way it used to...it takes many years to develop "market feel" and in the meantime, without quant skills, you will just be dead weight to a trading desk.
My suggestion is, start learning Excel VBA....immediately. Get a VBA for dummies book, start watching youtube videos...try to solve a problem using excel (something that involves linear regression)....and then code a function to semi-automate the worksheet functionality into a macro function.
You'll need to learn basic programming skills to do this. Anybody can learn this...its just logic, and in a specific language syntax. VBA is probbaly the easiest programming langiage to learn (because you have access to the Excel object model, and the actual excel worksheet/calcuation grid is given to you for free. You just need to learn the basics
in excel, master the following vlookup, hlookup, transpose, sumif max, min, average linest slope normdist stdev correl
most seems like basic stuff right?...easy to learn
then learn how to code in VBA
datatypes, variables & arrays loops (Do While, Do Until, For Each) condition (if/then/else) statements function vs sub routine
Then you can do some basic programming. Pick a simple problem with some logistical challange to setup .....then build it in excel...take a few columns of input data, transform it into a usable form, and then perform calcs to solve the problem. The code a VBA function to automate what you just built in the worksheet.
If you need a sample problem....(for example, given the strip of eurodollar futures and their prices, and the next 8 FOMC meeting dates, calc what the market is pricing into each fed meeting)
Thanks. This is very helpful.
solid advice from ironnchef.
Think about this from a different perspective. You were smart enough to land a S&T job at a BB; you are smart enough to learn some programming languages.
Plus, wouldn't you rather face the challenge than run from it (i.e. look for a group that isn't as quant based until they become quant based in 3 years?)
It's a good skill to have that may come in handy. Look to learn some programming rather than looking for a less quant group IMO.
Correlation between trading desks and quant requirements (Originally Posted: 10/12/2009)
There are a wide variety of opinions on here about what level of math is needed to trade. For those here who are traders, how would you rank the various desks (Equity, FI, Commodity, FX, exotic derivatives, etc) on how quant intensive they are? That is all.
Damn. I had a feeling that I was being too vague. I guess what I'm asking is to generalize each category without getting into sub-categories too much. I feel like that takes away any sort of accuracy to the answers but I think this could get way too far in depth than what I imagined. If anyone wants to dive into sub-categories, by all means, do so.
From Least to Most (---- used to show my definition of a large step up of complexity) in my opinion...
FX: Spot
Forwards
Vanilla Options Flow Exotic Options (Digitals, Correlation Swaps, RKOs, KOs, etc) Exotic Options (2nd Generation... Option Baskets, etc)
Rates:
Cash Market (Treasuries/Agencies/Repo)
FRAs
Swaps
Swaptions Exotic Swaptions
Equity: Cash Market
Listed Options
Structured/Exotic Options
Structured Products (Mortgages):
Passthrus/Specified Pools
CMOs IOs/POs IIOs (I'm not even going to list ABS and CDOs and synthetics... I don't know enough)
Commodities: Spot Market
Forwards
Swaps
Vanilla Options Exotic Options
The same general pattern applies to most products in terms of least complicated/mathematical to most complicated/mathematical (ex. Spot/Cash, Forwards, Swaps, Vanilla Options, Exotic Options). It should also be noted that being a math/engineering major is not necessary, even for options trading, though it does help you understand the models and risk better in my opinion. Its really impossible to generalize across entire asset classes without being specific. For example, rates are generally considered to be more complicated because of the inherent convexity. However, if you're talking about cash treasuries, its hard to make a case that it would be more mathematical than most other products.
If I had to pick the most mathematical overall, I would say Exotic Swaptions hands down.
FX: Spot Forwards/Swaps Non-deliverable Forwards Vanilla Options (We're talking G10 calls and puts, which I would say don't take as much knowledge as cross-currency swaps) Cross-Currency Swaps (generally sits in between FX and rates) Flow Exotic Options (Digitals, Correlation Swaps, RKOs, KOs, DNT, OT, etc) Exotic Options (2nd Generation... Option Baskets, etc)
Rates:
Cash Market (Treasuries/Agencies/Repo/STIRs)
FRAs
Swaps/Spreads (including asset swaps)
Swaptions Structured Rates
Also, there is a clear difference between G10 and emerging markets in both rates and FX, with EM products being more exotic than each of the comparable G10 products.
Really, though, most (vanilla) options traders don't fully understand the math behind options. They understand how to trade them, but very few of them could derive black-scholes either in the discrete case or from the heat equation using Feynman-Kac. In terms of 'complexity,' swaps (because most swaps dealers trade all swaps) might take more knowledge than vanilla options (in FX). In rates, swaptions are pretty hardcore, so I wouldn't make the same claim.
"Really, though, most (vanilla) options traders don't fully understand the math behind options. They understand how to trade them, but very few of them could derive black-scholes either in the discrete case or from the heat equation using Feynman-Kac. "
This is true. But then to drive a car, do you need to know how to build it? Only if it breaks down, and then you really just need a mechanic (ie a quant).
And swaptions really aren't that hardcore.
If it was a WSO car, you would have to be a mechanic from HYP mechanic school to drive it.
Corporis recusandae nihil quidem ipsum. Nihil dolores in asperiores doloremque impedit voluptatum sint dolorem. Qui iste qui consectetur consectetur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...