Structured Products Group

Also depends on which credit structuring desk you're on--cash or synthetic. From what I've seen the cash guys work IB hours, every weekend, 10pm to 2am end times during the week, etc. (but they tend to start a lot later than S&T also, i.e. roll in around 9 like the IB guys).

Synthetic desks seems to have better hours, and the timing is more in line with the rest of S&T (i.e. come in btw 6:30 and 8). Probably 60 hrs per week like most of S&T these days.

I've only heard rumours on pay, but I've heard struturing can go higher more quickly, but then levels off and can't hit the same highs as sales, and therefore can't hit the same levels as trading either.

either CDOs or structured options in any asset class.

Can also refer to stuff like equity-linked notes, participation notes, etc for institutions and also private banks. Many combinations are possible - for example a bank in Asia issued a structured note whose payout is linked to the volume of trades done by 8 different exchanges done over a period of time.

In Asia at least, the most common structured products now would be Range accruals ( "hamster options" for the german-speaking amongst us ) and Accumulators.

http://en.wikipedia.org/wiki/Structured_product

Structured products are stuff like ABS, MBS...etc etc

It sounds like he is referring more to structured products as in capital protected market trackers etc. They basically are used to offer an element of market exposure, while reducing some of the risks of a direct investment.

A lot of the retail products are created by purchasing a zero coupon note with c. 80% of the original investment, with the remaining proceeds being used to buy various derivatives to give the desired effect. Obviously there are vanilla and more exotic products, the retail ones tend to be linked to indices, whereas more exotic stuff can be linked to a basket of equities/bonds. The more exotic stuff can have insane amounts of leverage. I seem to remember Gadaffi got stitched up with one, because the product is less transparent and comprised of multiple instruments they used to be a way of incorporating huge fees that banks couldn't otherwise get away with.

If you have a look at the website below it will give you a better idea of the different types of retail product and what they do; those structured by banks can be far more complex.

http://www.structuredproductreview.com/

abs, mbs, rmbs are securitized products which are different from structured products structured products can be developped on equity of FI underlyings, I was used to work with FX structured products. basicaly, structured product = bond (zero coupon or not, all depend of your structure) + vanilla or exotic option(s) or it can also be a combination of several options (buy zero strike call, buy a call, sell a put (or a knock in put) or other combination) hope it helps

Think about what the sell side does, and picture the buyside counterpart.

-Lots of distressed funds are looking to get involved in CDOs -Trading of any ABS asset is something the buyside participates in -CDOs will face some forced liquidations, making BWICs common for their underlying assets (i.e. get ready to see lots of ABS stuff floating around) -Portfolio mgmt used to be big with CDOs. For all the shops that went out of business, there's demand for OTHER shops to take over their market value deals -ABS/MBS securities still add juice to a fixed-income fund -Heggies like Citadel have bought mortgage issuers because they see some value in distressed MBS/ABS assets

so, to conclude, you got your pure trading, distressed value plays, and portfolio management. and you can do these at Pimco, DE Shaw, or TCW, for example, to see the gamut of types of funds.

BlackRock has a really strong CDO group ... its CDO deals were not hit as hard as most other CDOs during the summer write downs.

differentiating between a CDO banker / structurer?

they're the same thing.

and yes, numerous distressed funds hire people with origination experience. the alternative is people who did CDO secondary trading.

but people who work in origination/issuance can model out cash flows, and learn how to value (to whatever extent that is possible with this murky asset class!) cheap paper.

Does anybody have any thoughts on BB&T Capital Markets/Windsor Group IB? sign, salary, bonus, etc. Exit opps? Thanks.

I work in CDOs. Very complex, innovative, interesting stuff. Good future, but defaults will test the instruments. Somewhat to highly quantitative.

what kind of bonuses do the senior guys make? is it as much as trading? do you have exit opps to the top hedge funds?

CDO structures have been well tested. Doesn't mean people will like the results in a 6%+ default environment.

At the end of the day a CDO with decent quality assets is no different than a bank. Just through 12x debt on leveragable assets and you get ROEs of roughly 15% and and triple a rated paper with some stuff in between.

JPM is a key player in the issuance of such paper.

is JPM strong in debt stuff generally? cheers

Anybody know the best way to jump into this stuff? via S&T?

you guys are speaking my language.

how highly quant is it? how are the models? lots of calc or lots of stats?

which is needed?

pay scale would be interesting to know.

right...i hear you on the credit bubble that's in effect now...how long time defaults rise? 5yrs+

also, how does goldman stack up in CDO structuring?

Goldman has almost no CDO capability at the moment. I think they are marketing one deal. JPM, Bear, Citi are the big players.

In one sense there is a credit bubble, but at the same time public companies have zero net debt. Lots of talk about this right now how public companies are basically equity financed right now and PE firms are make a killing just fixing balance sheets. That being said there is a large skew.

You seem to know a lot about this. That's a bit surprising that Goldman and MS aren't big players in CDO.

Also, could you tell me more about what kind of roles are in Goldman's FICC Finance group and how it stacks up compared to other firms?

CDOs involve more stats than calc. correlation analysis, monte carlo simulation, etcetera. Deutsche is a big player in Europe and starting to get big in the US. The deals I work on right now are stuctured by UBS, Barclays, Lehman.

zfreshjive - did you learn all the CDO stats in your stats class or on the job?

are you working on the buy-side of CDO - i suppose HF or money manager that buys the bottom equity or BB portion?

buysideanalyst - your views seem very macro oriented, and less quant base. what do you think is most important for this position? stats or calc?

what are the post analyst opportunities? CDO fund? CDO trading? MBA? or no exits?

all - looking at the Thompson Financial 3Q06 CDO report - how come ML is at the top for Global CDO? am I missing something here?

I don't do the quant work. I do the admin work. Quants are all engineer types-- i am good at math but was a business major. I am on the sell side-- moving into the deal-making/structuing side. Eventuall i'll 'retire to the buy-side'

zfreshjive - we should talk offline.

we'll be in the same industry (i'm at one of the large firms listed above)- possiblity i will be doing the admin stuff as well.

[email protected]

I've heard having a legal background is good for structured products. true? and if so, why?

Technically the structuring isn't that difficult, at this point its just a template. I have no idea how many entry level positions are available in structuring CDOs. I can't imagine very many. The other major roles surround execution. I imagine the opportunities are limited. It wouldn't prepare you at all to work a fund that uses CDOs to raise capital in an analyst role. It would prepare you for a capital raising role however.

ML is a big player. It shifts from quarter to quarter. Also I don't know about the entire asset backed universe, I only know about the high-yield debt universe.

where do you buy these from? guessing that its through a full-service broker?

UBS PWM but i think any of the PWM shops have it but you need to have certain asset threshholds

Not to be a Debbie Downer, but I am not a fan of most of these types of products. The problem is that you are taking the credit risk of the issuer and you are not getting paid fairly for doing so. One of the tricks in most of these products is that you are not entitled to any of the dividends, which can be significant over a multi-year time frame. For the EURO STOXX index, the dividends will be close to 20% of the initial value over a five year period. If UBS (or whoever the issuer is) goes bankrupt, you lose everything. This happened to people who bought Lehman structured notes, so it can happen. Not to mention, if you need liquidity before maturity, you will get your face ripped off.

Also, relevant thread here: http://www.wallstreetoasis.com/blog/where-the-traders-at-market-linked-…

Interesting you brought this up. The endowment I'm working at had a few million invested in a HF specializing in this. It performed poorly and we pulled our money.

FT posted a good article the other day outlining the rise in SP and some of the drawbacks. They were pretty negative on their future potential.

i think there are some that are definitely pretty shitty and can be 'structured' on your own but at the same time i think there are definitely some that are worthwhile to look at -- just like picking any certain investment

My God!!! I can spot my banks structured product from a mile away! @Sirtradesalot: if UBS goes bankrupt? - client money diversification! brokers are now required to diversify clients fund for most of the structured products, so the default risk is reduced. Not eliminated but reduced.

The trick to structured products is to ask your self if you did it on your own how much value is at risk or to be gained? However seeing no average investor will buy a vix option latched on to a SPY and covered by a downside ETF (that actually pays dividend, which of course will not be passed on to the client most times) etc, this is the very reason you pay the broker to give you a simplified version for a little commission.

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lot of legal documentation and drawing up of options payout graphs

What part of structured products? S&T? Research? Origination?

From the S&T side there are some threads.