How quantitative is Fixed Income?

LBL's picture
Rank: Monkey | banana points 33

Talkiing about Fixed Income as a whole, how quantitative is it? I know there are more quantitative products within it (cds, cdo) and less quantitative (high yielding), but on average, how much quantitative knowledge would a trader need? And on a daily basis, how do traders make use of this knowledge? (the more details, the better!)

I've read somewhere here that FI requites Multivariable Calculus, a little bit of Linear Algebra, Statistics, but my question is more about how this kind of knowledge is used by traders on a daily basis.

Thanks!

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Comments (8)

Feb 1, 2011

I'd be quite interested in this too.

Feb 1, 2011

It depends. I worked in credit analytics for a number of years and when it comes to corporate bonds, it can get heavily quantitative- moreso than many structured products. One of the main relative value comparisons- oas- depends on a lattice pricing model, and the traders constantly need to keep track of credit delta and rates delta to hedge their risk.

So in general, fixed income is more complicated in the traditional quant sense than equities. The catch is that fixed income derivatives tend to make things less complicated while equity derivatives tend to get more complicated on the math front.

Feb 1, 2011

IlliniProgrammer hits it on the head, in the exotics space, equities gets very math involved because there are so many different underlyings

Feb 1, 2011

Good question here. I'll intern in S&T this summer and I was wondering how quantitative was FI sales as I am more interested in sales rather than trading. Equity sales sounded more fun to me at first but now I think it would be good to get exposure to a more technical product (e.g. ABS, commodity derivatives).

Any ideas?

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Feb 1, 2011

You should probably go play LAX if you want to be on the FI desk. Get a bunch of Vineyard Vines ties and talk about Lax'in and your frat all day.

All joke aside, it depends on the desk and their use case. At a HF i would imagine its very quant, at a S&T desk i think it can vary

Feb 1, 2011

grab the education first; i would imagine fixed income trading is more pressure intensive but not as much as the equity side

Feb 1, 2011