Pricing and Trading Interest Rate Derivatives: A Practical Guide to Swaps by J Hamish M Darbyshire

This one I've seen interns being thrown to get to grips with derivs.

Also have a google for Rates primers/explanations from banks that look 10+ years old. Give a brief overview in a pdf/ppt which you can google in more depth.


Twtr: @fedguy12,@fullcarry,@maroon_macro,@macroalf,@interestarb

Substack: I highly recommend monetary mechanics by maroon macro. The substack is currently on a hiatus but there's alrdy a lot of content there - the articles provide a relatively systematic macro framework through the lens of monetary mechanics. He also posts some trade ideas/thematic content from time to time.


To my best knowledge, I don't think it's a big concern because of the technical nuance of the these products. (unlike equity where shares are essentially homogeneous) Also you'd have nonlinear products like rates vol that aren't very liquid and you'll have to warehouse a certain lvl of risk - which makes automation harder cuz it requires u to take a view.

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Well maybe I can offer some advice. At your stage I wouldn't focus so much on trying to learn advanced technical stuff. I would focus on improving your understanding of how the products work by meeting and talking to people who trade them. You are not going to learn how to trade rates from reading a book. Why? Because technical knowledge of these products isn't the most important skill you need to make money trading them. You more need to demonstrate aptitude to learn them. In fact if you walk into an interview and say you read all these books and you know something about trading, it probably won't go well.

FWIW I end up reading treasury bond basis every few years, it is an awful read, but when certain moments come up where the treasury financing trades become important, then it becomes very interesting. It stays on the shelf for when I need to do a calculation. But I'm not sure how helpful it would be to read it in a vacuum.


Appreciate the input. I think treasury bond basis will be my next read.

But could you elaborate a bit more on why meeting/talking to ppl would give me a better understanding of the product?Do you mean it's better in terms of getting a more intuitive/philosophical insight on the product?I do feel just by reading it's hard for me to get a grasp of how different factors in the broader market/economy interact with the product and I'm often clueless when trying to formulate a view even given all the technicals I know.


When you're actually in a seat, a lot of details about modeling the the product aren't as important as they seem in a book, unless you're a modeler. Computers can do the calculations, and there are quants whose primary function is to develop and test sophisticated models for traders to use. They work all day on them, and have PhDs from fancy places, and that's an interesting career path that you may want to look at if you love working on models(which I do by the way, but I'm not a modeler). I'm not saying you don't need to know how it works, you absolutely do, because understanding how the models behave will enable you to find certain opportunities and avoid certain risks. 

But when you are in the position of making investment or trading decisions, there are many other things you need to think about that aren't in a book. Once all the numbers are crunched, you really are thinking about things like what people are going to do, what they're afraid of, what they don't understand, what you don't understand, what relationships exist between different markets and when they're going to change, risk, and many other things. And when I say risk, I don't mean VAR. I mean how do you decide how much risk to take, and how do you manage your risk. Do you bet your job on this trade? Do you bet the firm on it if they let you? Do you spend all day working on a great trade, but make next to nothing on it because you didn't bet enough?

There's no way I can cover this in a post, there's a million arguments and counterarguments to everything I'm saying. And that's why I think you should talk to people who do it for a living, and that will help you understand what you want to focus on as you prepare for your career.


I started in pure rates before moving into a more macro seat. You are correct in that it is a very good starting point. There are a lot of resources online that you can look at, but I would say get very comfortable with basic fixed income math and concepts like duration and convexity. An interesting exercise that might help is trying to price out a vanilla IRS on your own on excel to help give you an understanding of how it is priced and what it means; I actually did this during my sophomore year internship on a rates desk and it really helped. As a trader you're not going to be calculating these things, but it's important to have a very good understanding of what is being priced and how things move. It will also help to display interest in rates when you start interning. As for general macro, just start paying attention to central banks and what each part of the yield curve is sensitive to. 


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