FX vs RATES trading desks
Pros and cons? Am i right in saying that fx guys work more hours? Am right in saying that rates is less macro at 360°?
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my 2c:
1) rates vol is perhaps the most mathematically complex product to trade.
2) SPG guys had the longest hours
3) G10 FX desks are usually based in London.
If you want a good mix, I'd advise you to get on an EM desk where you trade both the currency and local interest rates.
Is FX vol a good desk to join?
Of course it is. It is way more math oriented than the others rather than macro oriented. In fact, they usually take people with math, physics, engineering backgrounds.
Which one is more macro oriented if I may ask?
can you please explain why rates vol is the most mathematically complex product to trade? Also, is this a good desk to join as an analyst, what are the exit ops like? Thanks!
Take a swaption for example (a vanilla/basic product in rates vol space), the underlying (interest rate swap) has convexity (or 'gamma' in options terminology) which is not typical of most other asset classes (e.g. a stock doesn't have gamma) - this adds a layer of complexity to how the product behaves as the underlying itself is non-linear. Another quick example, draw the pay-off diagram of a payer swaption and you can see that the time-value of money needs to be accounted for in the payoff - this is not really something to be considered in the payoff profile of other vanilla vol products in other asset classes. This is before we get to the exotic side, which has midcurves and other products (I don't trade rates exotics, so someone else may be better placed to answer). Hope those two quick examples help to start showing why rates vol is viewed as the most mathematically complex (note: you don't need to have a PhD to trade these products, but that is a different topic all together).
pretty much. Rates is the original staging ground for modern mathematical finance
At my previous bank, the non-external people who succeeded at that desk were phd quants who supported the rates vol traders and got promoted. The new grads who got placed onto that desk all washed out in 2-3 years unless they had at least a masters degree (usually French ecole polytechnique folks)
can you please explain why rates vol is the most mathematically complex product to trade? Also, is this a good desk to join as an analyst, what are the exit ops like? Thanks!
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