Area of work
Fixed Income Trading, FX Interest Rates, Hybrid Risk
Studied
Masters in Mathematics, PhD in Theoretical Physics, Cambridge
Joined
July 2007
Working in
London
I had heard that BNP Paribas were specifically looking for a graduate to work in hybrid options who had a maths research background. I studied maths and physics to quite a high level, so wanted to work somewhere that I could use my mathematical knowledge, but also I've always been attracted to trading, so this opportunity seemed perfect for me.
It has really lived up to my expectations. There's a great combination of quite technical academic stuff, and then the specific pressure of getting the price right and beating the competition. The job is a combination of making client trades, whereby we trade specific structures with clients like banks or hedge funds, and then eliminating the resulting complex risk exposures as much as possible through hedging. I learn a lot from the people I work with; they've been in the business a long time and have developed a strong intuition for the way the markets will behave.
Not many people come straight onto the Hybrid Risk desk from university; a more usual route in is through research and structuring. This particular field moves very quickly, people don't really have time to write things down and if they did it would go out of date so quickly that learning on the job is really the only way. It was very difficult for the first couple of months, a bit of a trial by fire, but it got much easier very quickly after that. It's immensely satisfying when things start making sense and you can see yourself contributing to the team.
I think the learning curve was particularly steep for me because I'm working in such a technical area of the bank. Many teams tend to price structures with only one asset class, whereas with the hybrids desk we're judging much more complex structures with many different asset classes, so our models need to be more sophisticated. Within my area we tend to price more advanced structures than other banks, rather than trying to be ultra-competitive with large flow trades.
The most sophisticated area I'm working in at the moment is strategy derivatives. We've developed some indices that are based on a trading algorithm which trades 20 or so currency pairs together, to get as good a return as possible. The structure is very complicated and the modelling behind it is even more complex. We sell forwards and options on these indices and we get up to 10% returns. We are starting to see more strategy products like this appearing lately, in the last couple of months we've seen similar products being traded by four or five other banks. They're becoming more and more popular in the current climate, because if you can show a client a steadily increasing graph of earnings, with low risk, then they're likely to go for it. I've also been doing quite a lot of work in emerging markets recently, especially Turkey and Brazil. Our clients want to take advantage of the high interest rates in these areas, so we've been building carry trades into more complex products.
Working on the trading floor is different to how I imagined it would be. I thought it was going to be more stressful, but it hasn't worked out that way at all. You're constantly surrounded by people talking, making deals, or laughing and there's always streams of information coming in for you to analyse. We all get on together and there's lots of banter, obviously we work long hours and it can be intense at times, but I very much enjoy working on the trading floor.
