Trading Desks That Don't Require Quant/CS background

riptide989's picture
Rank: Monkey | banana points 47

Hello,

I am getting ready to pref desks for Sales and Trading at a BB bank. The program rotates around sales and trading, however, I was told that most of the trading desks require a computer science/quant background, or at a minimum, to have strong programming skills.

I come from an Econ/Finance background. I am good at math, but I am wondering if there are any areas of trading that do not require programming skills and would be more suitable for my skill set. My interests lie in the macro space, as well as credit.

Any insight would be greatly appreciated.

Comments (10)

Best Response
Feb 27, 2017

old school just doesn't exist the way it used to...it takes many years to develop "market feel" and in the meantime, without quant skills, you will just be dead weight to a trading desk.

My suggestion is, start learning Excel VBA....immediately. Get a VBA for dummies book, start watching youtube videos...try to solve a problem using excel (something that involves linear regression)....and then code a function to semi-automate the worksheet functionality into a macro function.

You'll need to learn basic programming skills to do this. Anybody can learn this...its just logic, and in a specific language syntax. VBA is probbaly the easiest programming langiage to learn (because you have access to the Excel object model, and the actual excel worksheet/calcuation grid is given to you for free. You just need to learn the basics

in excel, master the following
vlookup, hlookup, transpose, sumif
max, min, average
linest
slope
normdist
stdev
correl

most seems like basic stuff right?...easy to learn

then learn how to code in VBA

datatypes, variables & arrays
loops (Do While, Do Until, For Each)
condition (if/then/else) statements
function vs sub routine

Then you can do some basic programming. Pick a simple problem with some logistical challange to setup .....then build it in excel...take a few columns of input data, transform it into a usable form, and then perform calcs to solve the problem. The code a VBA function to automate what you just built in the worksheet.

If you need a sample problem....(for example, given the strip of eurodollar futures and their prices, and the next 8 FOMC meeting dates, calc what the market is pricing into each fed meeting)

    • 4
Feb 27, 2017

Thanks. This is very helpful.

Array
Feb 27, 2017

solid advice from ironnchef.

Think about this from a different perspective. You were smart enough to land a S&T job at a BB; you are smart enough to learn some programming languages.

Plus, wouldn't you rather face the challenge than run from it (i.e. look for a group that isn't as quant based until they become quant based in 3 years?)

It's a good skill to have that may come in handy. Look to learn some programming rather than looking for a less quant group IMO.

Feb 27, 2017

Damn. I had a feeling that I was being too vague. I guess what I'm asking is to generalize each category without getting into sub-categories too much. I feel like that takes away any sort of accuracy to the answers but I think this could get way too far in depth than what I imagined. If anyone wants to dive into sub-categories, by all means, do so.

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Feb 27, 2017

From Least to Most (---- used to show my definition of a large step up of complexity) in my opinion...

FX:
Spot

Forwards

Vanilla Options
Flow Exotic Options (Digitals, Correlation Swaps, RKOs, KOs, etc)
Exotic Options (2nd Generation... Option Baskets, etc)

Rates:

Cash Market (Treasuries/Agencies/Repo)

FRAs

Swaps

Swaptions
Exotic Swaptions

Equity:
Cash Market

Listed Options

Structured/Exotic Options

Structured Products (Mortgages):

Passthrus/Specified Pools

CMOs
IOs/POs
IIOs
(I'm not even going to list ABS and CDOs and synthetics... I don't know enough)

Commodities:
Spot Market

Forwards

Swaps

Vanilla Options
Exotic Options

The same general pattern applies to most products in terms of least complicated/mathematical to most complicated/mathematical (ex. Spot/Cash, Forwards, Swaps, Vanilla Options, Exotic Options). It should also be noted that being a math/engineering major is not necessary, even for options trading, though it does help you understand the models and risk better in my opinion. Its really impossible to generalize across entire asset classes without being specific. For example, rates are generally considered to be more complicated because of the inherent convexity. However, if you're talking about cash treasuries, its hard to make a case that it would be more mathematical than most other products.

If I had to pick the most mathematical overall, I would say Exotic Swaptions hands down.

Feb 27, 2017

FX:
Spot
Forwards/Swaps
Non-deliverable Forwards
Vanilla Options (We're talking G10 calls and puts, which I would say don't take as much knowledge as cross-currency swaps)
Cross-Currency Swaps (generally sits in between FX and rates)
Flow Exotic Options (Digitals, Correlation Swaps, RKOs, KOs, DNT, OT, etc)
Exotic Options (2nd Generation... Option Baskets, etc)

Rates:

Cash Market (Treasuries/Agencies/Repo/STIRs)

FRAs

Swaps/Spreads (including asset swaps)

Swaptions
Structured Rates

Also, there is a clear difference between G10 and emerging markets in both rates and FX, with EM products being more exotic than each of the comparable G10 products.

Really, though, most (vanilla) options traders don't fully understand the math behind options. They understand how to trade them, but very few of them could derive black-scholes either in the discrete case or from the heat equation using Feynman-Kac. In terms of 'complexity,' swaps (because most swaps dealers trade all swaps) might take more knowledge than vanilla options (in FX). In rates, swaptions are pretty hardcore, so I wouldn't make the same claim.

Feb 27, 2017

"Really, though, most (vanilla) options traders don't fully understand the math behind options. They understand how to trade them, but very few of them could derive black-scholes either in the discrete case or from the heat equation using Feynman-Kac. "

This is true. But then to drive a car, do you need to know how to build it? Only if it breaks down, and then you really just need a mechanic (ie a quant).

And swaptions really aren't that hardcore.

Feb 27, 2017
Jimbo:

This is true. But then to drive a car, do you need to know how to build it? Only if it breaks down, and then you really just need a mechanic (ie a quant).

If it was a WSO car, you would have to be a mechanic from HYP mechanic school to drive it.

Feb 27, 2017
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