Equity Linked Origination, IBD
Hello,
Can someone provide some background on how this group differs from M&A? What is the client interaction like? Day to day? Difference in salaries (i.e. NY bulge bracket)? How to prep for an interview?
Thanks.
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Quantitative interview. It's a very quantitative role where you'll be working on combining options, bonds, and different derivatives to create custom (bespoke is the term used in this industry) pay-offs and exposures to different asset classes. Example, if you combine a bond with a put option and a call option, you get an instrument where you're getting paid a coupon, and you get upside exposure as long as the underlying instrument hits the exercise price of the put or call option.
The interview will test you heavily on fixed income concepts. Duration, convexity, black scholes, volatility models. Recommend Hull - Early Derivatives.
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As said above, our EQL partners were always very sharp and good with numbers. I would say the majority of our clients hated the idea of their products due to the reporting complexity it can create and really lack of understanding of the instruments so they always needed to be able to dumb down the math so they could walk through how the instruments work and the benefits. To be honest, I would say the majority of our management teams were usually pretty vocal about not being interested in converts, etc.
Colloquially known as the Converts Desk in ECM at most banks
Converts is a great group to join currently. The market is record hot (all-time issuance record last year). The products themselves are very complex. You’ll work with call spreads and other derivative instruments as well. For an interview, expect to know basic finance and math, in addition to black scholes, options, and delta hedging. The converts groups are filled with very smart people, so you have to know your stuff when interviewing. Basically all of the deal activity is done by the top BB’s so try to join one of them.
Bump
Pay is going to be pretty much the same up to VP levels (where generally there is more variance). As others have pointed out, it’s been a crazy hot market due to Covid so most converts desk have been swamped a bit. Very deal oriented desk. Generally work a lot with other ECM/coverage groups, less so with M&A.
Anyone have any insights into the most commonly asked questions for an Equity Linked Capital Markets interview?
Agree with all comments above. EQL is quite a technical role but in London and Europe they’ve been making some serious P&L recently - simply due to the large Equity transactions been in the market including secondary sell downs which almost all the time included a exchangeable instrument element.
One best way to learn and understand is have a look at these kind of transactions recently and see from articles how it’s structured.
They also get involved in buy backs and that’s also been increasingly happening these days among big corporations. One other things you can’t miss is Margin loans against investors’ stake which is a big P&L event for EQL as Margin Loans are very profitable and they bring more business to other groups as well.
It’s technical, numerical and very much of financial engineering, but also extremely interesting and very very rewarding career. ( there is nothing to be intimidated about, it’s not exactly rocket science either, few months into the role you’ll pick everything up)
Thank you for the insight! Do you know if EQL interviews tend to be more focused on Options or Fixed Income knowledge? I have an interview coming up with a Converts desk and would greatly appreciate any advice on interview prep!
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