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Comments (34)

Jun 1, 2007

the stress is present but different for different products...there is a stress associated with trading anything illiquid, that you wouldnt get trading flow. and there is a stress that comes from high volumes in flow, that you wont get in illiquid stuff.

the thing is when an illiquid book blows up, it really blows up and there ain't much you can do.

also, trading floors incorporate many different types of products...so i have heavy flow desks near me, more exotic stuff too, but it's not like there's an 'exotics' floor where everything is nice and quiet and cerebral.

what do you do/hope to do currently and why?

Jun 1, 2007

Thanks Jimbo
I am currently at a hedge fund working on credit arbitrage systems (modeling CDSs and CDOs) ...i am going to a top quant heavy school in the fall to get my MBA and am trying to figure out career options afterwards - two things i have heard as negatives of trading as a career are high stress and limited exit options - however, in structured stuff - CDOs and the like - there seems to be enough transferable skills - i was wondering abt the stress part

Jun 1, 2007

which bschool?

the stress is definitely there.

Jun 1, 2007

Also, from what i've seen on correlation, there is stress in terms of managing the innovation of each product, controlling risk, pricing, and just plain coming up with something new that clients want. Structurers especially are pressured in this way -- not that it's overly heavy-handed, but it's part of something so exotic/illiquid.

Kind of like a software company, i guess?

Jun 1, 2007

quanty heavy school: MIT or Stanford???:P

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Jun 1, 2007

ignore my post

Jun 1, 2007

chicago gsb actually

Jun 1, 2007

fangoria ,
u mentioned structuring - whats the risk return profile like for structuring ? is the upside as much as being a structured products trader for example ? how much of a front office job is structuring ? i am wondering coz very few MBAs seem to go into structuring vs S&T

Jun 1, 2007

chicago is a great school. i have some friends who went there. well represented on the street.

you asked:
"fangoria ,
u mentioned structuring - whats the risk return profile like for structuring ? is the upside as much as being a structured products trader for example ? how much of a front office job is structuring ? i am wondering coz very few MBAs seem to go into structuring vs S&T
"

not sure what you mean by risk/return. not as much upside. it's a front office job, it works with sales and trading.

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Jun 1, 2007

jimbo,
thanks for the comments. I meant the chances of things blowing up and u losing ur job subsequently are lower in structuring vs trading ? that wld lead to lower bonuses as well i suppose

Jun 1, 2007

no, if the desk blows up, it's gonna hit trading and structuring both. but the bonuses are lower for other reasons, but still fine in absolute terms.

Jun 1, 2007

If the risk is about the same for both traders and structurers , why are the bonuses lesser for structuring ? how do the bonuses compare with investment banking bonuses at the lower levels which are generally consistent ?

Jun 1, 2007

structurers don't have p&l that's the issue. we're still talking about large absolute numbers.

how do you like chicago? are you learning much there?

Jun 1, 2007

i am actually joining chicago in the fall so trying to do some due diligence before joining school
the first two quarters are supposed to be intense but lets see how it plays out

Jun 4, 2007

i am finishing my first year at Chicago (this is finals week), so welcome to the school. once recruiting starts in mid october it is pretty hectic until after interviews in late january. but, you sound like you are already WAY ahead of the curve in terms of knowing what you want to do and what the jobs consist of. don't worry too much about research right now, you actually don't need that much specific knowledge to get the s&t internship and all the jobs are for generalists anyways. i was in your shoes last year and hopefully will get to do structured products work during one of my rotations this summer.

good luck!

Jun 1, 2007

cool. good luck with that. v good school

Jun 1, 2007

Maverick,

to add to Jimbo, I think that since structuring is such a quant-heavy function, and MBA wouldn't add value to that (as much) since the mba is typically a less scientific/technical degree. I.e. a couple of the structurers i met in correlation had MFEs vs MBAs, since the former is so much more technical.

Also the bonus is lower than the trader b/c the workload of managing the risk of the position is NOT on the structurer, it's on the trader. meaning, the guy in structuring creates the product, but if there's massive exposure to, say, equity vol, the trader's job is the manage that, not structurers.

Jun 1, 2007

Jimbo - thanks for the info and thanks for the wishes

regicide - Thanks for the welcome, if u dont mind , which bank will u be working for ? i actually am reading up on credit derivatives in the latest version of Hull to get some technical perspective. Do you think this will be useful in interviews ?

fangoria - thanks for the response , seems like structuring is somewhat like product engineering in the sense that you are given a bunch of specifications for which you create the product. But true responsibility of generating profits using that product remains in the hands of the trader which results in higher payouts for successful traders. Is this more or less the case ?

Jun 1, 2007

structurers take no risk. they also have no clients. hence they have no p&l to point to. P&l is what gets you paid. does that make sense?

Jun 4, 2007

But there's something else to consider. Structurers, at least on my desk, get a number next to their name similar to what the sales people get. It comes in one of two ways. Either they build in a structuring "fee", for lack of a better word, when pricing a structure, in which case they get all the credit. In addition often times the structurers do joint marketing with the sales force, in which case I've seen profit split in some proportion between sales and structuring.
I've seen some structurers on my desk pull in monster deals, and when they do, they get the full profit to split amongst themselves. I think it's very feast or famine. If they do a few huge deals (especially if they orginate the deal and market it themselves), then they can pull in more than than anyone else on the desk. But if not, then it can also swing the other way.
And just to clarify, I'm talking about the actual structurers. The most complex structures aren't actually "traded" at all. The associated trader simply hedges the banks exposure to the structure. All of the profit is built into the pricing of the structure.

Jun 1, 2007

yup - thats pretty much what i thought
i guess not too different from a quant role developing models

Jun 1, 2007
maverick1983:

yup - thats pretty much what i thought
i guess not too different from a quant role developing models

It is extremely different from a quant role building models.

Jun 4, 2007

Agreed with Jimbo. Structuring is completely different from a QA modelling group. QA modelling builds what you ask them to build. Structurers actually originate products. Huge, huge difference.

Feb 17, 2008
skins1:

Agreed with Jimbo. Structuring is completely different from a QA modelling group. QA modelling builds what you ask them to build. Structurers actually originate products. Huge, huge difference.

I thought a sales guy would just tell a structurer the client wants X,Y,Z and the structurer goes ahead and builds some product? Do you mind expanding on the huge, huge difference?

Feb 17, 2008

I work on a structuring desk - a client will ask us to securitize their loan portfolio (for example). Between the time that we get the mandate for the deal and the time it closes, the loan portfolio will be on our balance sheet, and we work with our syndicate desk to track/manage the risk.

Our desk structures the deal, prepares the docs, generates the marketing material, and gets the deal rated by the agencies. Our syndicate and sales guys do most of the work pulling in investors. We take a slice of the deal proceeds as our fee.

We have a secondary trading desk that buys some of the bonds we underwrite, but any unsold bonds in a deal are held on our syndicate desk's books.

The base model we use for these deals was built by our quant group, but any deal-specific modifications are done by our group.

Jun 5, 2007

Are there any big CDO trading desks out there or is that all run through the Structured Products Desk? I interned this summer on the structuring desk, we had very few traders. I know the secondary market is not that large--but curious. Merrill, Citi, or JPM maybe?

Jun 1, 2007

"I thought a sales guy would just tell a structurer the client wants X,Y,Z and the structurer goes ahead and builds some product? Do you mind expanding on the huge, huge difference?"

well, when i think of quants building models, what they are building is the actual math that underlies the pricing tools. so they are putting together the mathematical framework to price credit or rate correlation or whatever.

structuring is a bit ambiguous and is more closely aligned with sales at some shops, and with trading at others...

Jimbo

Feb 19, 2008
Jimbo:

"I thought a sales guy would just tell a structurer the client wants X,Y,Z and the structurer goes ahead and builds some product? Do you mind expanding on the huge, huge difference?"

well, when i think of quants building models, what they are building is the actual math that underlies the pricing tools. so they are putting together the mathematical framework to price credit or rate correlation or whatever.

structuring is a bit ambiguous and is more closely aligned with sales at some shops, and with trading at others...

To build on Jimbo's explanation: structurers tend to use pricing tools that have been built by the quants and just fill out the details for the particular deal at hand (as opposed to building the pricing engine for each deal from scratch). They therefore usually don't need to know the machinery behind the models (stoch calc, monte carlo simuls), they just need to be aware of the uses and limitations of the models. I'd argue that successful structurers get their edge from superior commercial creativity (e.g. coming up with a deal that clients find appealing even with a fat profit margin for the bank and that at the same time helps the exotics traders unload a large shitty correlation position...) rather than quant skills.

The above is based on a couple of rotations at various structuring desks I did as an intern at a BB, not on deep industry experience, so do take it with a grain of salt if you want.

Jun 1, 2007

"I'd argue that successful structurers get their edge from superior commercial creativity (e.g. coming up with a deal that clients find appealing even with a fat profit margin for the bank and that at the same time helps the exotics traders unload a large shitty correlation position...) rather than quant skills."

this is actually very close to the definition of a good structurer.

Feb 19, 2008

I have a couple of friends who trade structured products, sell them and structure them. If you want to get their contact details PM me.

The Prince of Wall Street

http://www.princeofwallstreet.com

Jun 1, 2007

"I have a couple of friends who trade structured products, sell them and structure them. If you want to get their contact details PM me."

you sure they're cool with you giving out there details to random people on the internet? i wouldn't be.

Feb 19, 2008

I know them pretty well and I don't think they would mind if I gave out their contact details to someone who was genuinely interested in learning more about what they do. Besides, it may be advantageous to them because it may turn Maverick on to working at the firms they work at.

The Prince of Wall Street

http://www.princeofwallstreet.com

Mar 5, 2008
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Mar 5, 2008