How Does Whole Process Work?

I'm an undergrad right now at a target (think Dartmouth, Columbia, Duke) set on a trading job after graduation. I'm looking for one of those jobs that pays a base salary and also a percentage of all profits.

Are prop trading firms the most apt for what I want? Which ones are reputable? I'm planning on double majoring in economics and math so I dont know if I would be considered a quant?

I've heard Goldman has a really good trading desk. Do they hire people out of undergrad? Do any other BBs still have functioning trading desks that hire out of undergrad? I am not at all interested in Sales. Which desks at banks have similar pay structure (base plus percentage of profits)

Given my goal, should I pursue prop trading firms or trading desks at banks?

I want to about the specifics of the recruiting process for these places (prop firms, IBs) for trading positions. If I have a 3.8 GPA (double major econ math), a HF internship and good ECs, am I at least guaranteed an interview at these places when I apply for an internship after my junior year? And after that, are you evaluated only on how well you perform in the interview? So basically all those who make it to interview round are considered on same plane and its now up to how well you perform in interviews?

 

Just FYI, your not "guaranteed" anything in this business. I'm defiantly not an authority on prop trading, but I was reading about Jane Street & it has that exact pay structure, but it's not a bank.

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if you can get a 3.8 in upper math classes at Dartmouth, Columbia or Duke, you're probably too smart for trading most products- IR exotics and flow derivatives (like swaptions) and of course, converts on the equity side are among the most sophisticated products to model (assuming CDOs/mortgages will continue to stay out of favor)...

I'm a bit skeptical of most prop firms like SIG or Jane Street- they interview a lot of top math/science students but the backgrounds of the principals are quite weak academically so I doubt one would learn a tremendous amount there unless you are a software developer. In addition, they don't have permanent funding, are incredibly overleveraged and don't have the transparency of reporting financials publicly.

Flow trading can be boring and the exit opportunities in all types of trading are fairly limited- systematic trading like PDT or Equitech/prop groups at BBs are a great path to hedge fund placement but I would look into more coursework in CS rather than econ, which is not valued much by quant recruiters.

 

...dude WTF are u talking about Hutchens? 3.8 undergrad at Dartmouth without a trading track record wouldnt even get him n interview trading the products you mention, let alone make him "to smart". How does an undergrduate degree from Dartmouth (or anywhere else) indicate that he is some kind of genius? And BTW I trade IR "exotics" as u call them and swaptions and they are not that difficult to model and anyway the modeling has very little to do with trading decisions...ie no one i know models a swaption, decides a dealer is a bp or two off the market and then trades it accordingly...the bid/ask is to wide. Swaptions are used to take rate or vol views and modeling has very little to do with it....its much more of an art then a quantitiative science.

 

Bondarb, perhaps I misspoke by saying "too smart." What I mean is that the abstract reasoning skills required for example to read Peter Lax or Walter Rudin will not be used when quoting CDS spreads on an IG desk.

Exotics like CMS spread options, tarns and snowballs have some very complicated modelling components as I'm sure you know... constructing models for the vol surface, price/rate dynamics, calibrating to market data and looking at out of sample is a challenge for anybody... not to mention other issues like the gamma trap in inversion products.

I agree bid/ask, liquidity is a major issue, and exogenous to most stochastic volatility BGM models, though some researchers are working on this by employing Bayesian Markov Chain Monte Carlo estimation.

 
Best Response

...I agree that these products may be difficult to model, but that is really a sell-side task and this guy wanted to work on the buy-side. There really are not to many hedge funds that try to create a model that is "better" then the sell-side ones and then pick off dealers for a bp here and there in OTC derivatives. CMS options, swaptions, etc. are just not liquid enough for that type of trading...and if dealers find out you are spivving around in this way they will make it even harder by not making you good markets. If you want to get into the nuts and bolts of modeling these types of securities you should be working for a market-maker not a hedge fund or prop trading firm.

 

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