Euroswaps Trading
Hi guys. I've got a SA offer and want to be placed on the Swaps trading desk, particularly Euroswaps. I will be meeting a trader from this team shortly.
Anyone have any experiences to share about working on such a desk? Also, what would be the best research to do/news to follow to prepare for such a role?
Thanks!
Definitely interested as well...as I am getting into something similar and I don't even know what a EuroSwap is?
You're trading swap contracts on Euros. Not that complicated?
Yea.... S&T shouldn't be too bad. The real difficulty is the valuation.
If you'd like you can PM me the exact products (as these aren't OTC) and I'll look them up on the Bloomberg and forward prices/general information.
For now just focus on plain vanilla interest rate swaps and how they are priced, don't make it too complicated for yourself by learning about the different kinds of swaps. Follow the fixed income market, particularly the bond market and sovereign yield curves. Have an idea/opinion on how the yield curves are going to steepen or flatten, the same holds for the swap curve and the spread between these yield curves and the swap curve. Read the book: The Handbook of Fixed Income Securities by Fabozzi. Another way to impress someone is to have an idea on what type of investors trade the different parts of the curve, e.g. pension funds and insurance companies mostly on the long end of the curve and why these investors trade swaps in the first place, how do they hedge and why! Know a few important 10 year sovereign rates by hart.
Thank you for your help, much appreciated.
With the current problems the Euro faces, aren't banks finding it difficult to succeed in Euroswaps?
I don't quite understand what you mean.
Great advice from CityRainMaker. I'd add a couple of things:
Pricing and Hedging Swaps is a good book to start with. A bit dated, but it's good for learning the basics, especially how to bootstrap the curve.
Read a bit on shatz/bobl/bund futures and how they are used for hedging swaps.
Try to get some info on coming auctions, or macroeconomic releases (CPI, Unemployment figures) and form an opinion on how that will affect the curve, and how would you trade it.
Learn some basic trades like Steepner/Flattener, Butterfly and what they are used for.
Thank you very much!
I meant, if the Euro currency fails, won't all desks trading such asset classes face problems?
^not if they're any good at their jobs.
Coud you elaborate on this please?
If there is severe volatility in the euro, there will be a dynamic market for euro-referencing derivatives, of which professional euroswap traders should be able to take advantage. Now, when I re-read your post, I see you wrote "not if the euro fails," and that is true - if the euro fails the market for euroswaps will cease to exist.
It may not quite qualify as a tail risk, but I am comfortable with the assumption that the euro will not fail. Therefore, there will continue to be a market for euroswaps. And since it will likely be a volatile euro, there will be a dynamic market for euroswaps. So the traders on the desk are good at their jobs, they should profit trading through this volatility.
Elements,
Can you PM me your e-mail address? I took a ton of swap related Bloomberg screenshots and downloaded several swap manuals.
I forwarded the OP some pics and am now interested in better understanding how these swaps work. Can a swap expert tell me how to structure the swap from this pic:
http://desmond.imageshack.us/Himg705/scaled.php?server=705&filename=swp…
I put EUR/GBP but didn't change anything else. I'm guessing the default interest rates are based off U.S. #s? I'd be really interested to hear how to structure such swap.
Also, why is the 5-yr Euro swap diff for these two pics (don't those pennies add up to big differences considering the notional amount):
Thanks
One of the prices is at 14:45, the other at 14:50, so it might be that.
You wouldn't use bloomberg to price a swap, you build and steer your own curve. That calculator is useful to get an idea of how they work, but I don't really get what you're trying to ask. You have different options to choose from in order to structure the swap to fit your needs, and it shows some info calculated from that, like the risk measures at the bottom. If you don't understand a particular field ask and I'd be happy to help if I can.
Thanks Maximus
Is there specific software besides Excel that helps to price these things? Do you also need to go beyond Excel if they're exotic? If you could recommend a book for the layman that would be great. I need to learn more about these type of derivatives.
People use excel and inputs from reuters, bbg and brokers. But it's all sort of programmed in excel with databases and vba or some kind of proprietary software.
Some people don't like it, but like I said above, I think Pricing and Hedging Swaps by Miron and Swannell is good to learn the basics, and you have examples on how to build a curve in different currencies. You don't need to read the whole book for that either, it talks about many kind of swaps, not only irs. The authors are/were traders at UBS if I remember correctly, so it's sort of written from that perspective.
That book is written in 1992 w/ no newer versions? Amazon doesn't even carry any copies (no used either).
On my search "Interest Rate Swaps and Their Derivatives" and Swaps and Other Derivatives is popping up... would you recommend either?
Elements, any updates?
In quia veniam eligendi sunt dolor. Et aut culpa molestias mollitia doloribus eos eos enim.
Cum temporibus voluptas voluptas sunt. Optio consectetur dicta voluptate numquam rem. Ut voluptates dignissimos voluptatum iusto non voluptatem quod.
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...