Derivatives Jobs and Professionals

Here you can find information on the qualifications and responsibilities of derivatives jobs and derivatives professionals.

What are Derivatives Jobs? Who are Derivatives Professionals?

As the name implies, a derivatives professional is someone who creates trades or sells derivative financial products. There are three aspects of an individual that would make them suitable for derivatives jobs:

  1. Educational background
  2. Personal background
  3. Potential for growth

There are three kinds of firms that are involved in the use of derivatives:

  1. Investment banks
  2. Commercial banks
  3. End-users (mutual funds, corporations, hedge funds, floor traders, etc.)

Qualifications for Derivatives Jobs

Educational Background

There are many people who believe that the only candidates who should be considered for positions as derivatives traders are those individuals who have graduated from MBA programs. Having an MBA, especially one from a good school, is a signal to the rest of the world that a well-respected institution has screened you and determined that you have the capacity necessary for the work of derivatives jobs.

Often, the people who hire derivatives professionals are unskilled when it comes to making decisions. More often than not, the people who rise to management positions in derivatives products groups come from a technical background in which they have no previous responsibility for other people. They are placed in these leadership roles because of their understanding of the product. The MBA acts like a “tell” or market signal.

They do not have to be able to reproduce the mathematics behind the Black-Scholes equation. They should be able to intuitively understand the implications of the Black-Scholes model and the logic underlying the set up of the computer applications upon which derivatives practitioners rely. They cannot be people who are easily bamboozled. They can explain difficult technical concepts in easy-to-understand language.

Sometimes, a derivatives professional’s strongest asset can be a keen “street sense.” On the face of it, many people would be surprised that some of the most sophisticated derivatives professionals in the world are not that well-educated. These are men and women who have obtained, through years of application, an intuitive understanding of the behavioural characteristics of their product. They can look at a structure and instantly know how to break it down into its components, assessing the riskiest components first.

Any academic background is good preparation for derivatives jobs if its end result is an individual who can think independently, quickly, and rationally on his or her feet.

As in all things, balance is the best solution. A solid derivatives desk will have people from a variety of backgrounds whose strengths can complement one another and who can compensate for each other’s weaknesses.

Personal Background

Investment banks and commercial banks also look at one’s personal background. Walking into these dealing rooms, you will meet some very impressive people. People want interesting colleagues, ones with whom they feel some commonality. Personality and charm are essential attributes of the derivatives professional.

Cynically, there are those who will suggest that personal connections are the thing to get you in the door. Sadly, this is true in many of the middling shops that trade and sell derivative products. There is a great deal of money to be made in this business. Sometimes the franchise (or the previous experience of the firm) is what makes the money. Other times, it is the individuals who bring in the profits. At many unsophisticated institutions, deciding upon the breakdown between the two is an arbitrary affair. Firms that believe that the franchise makes the money place less emphasis on the importance of human capital in their hiring (and, more importantly, their bonus allocation) decisions. Those are the places that are susceptible to nepotism and favoritism. Being a friend of the chief executive officer might carry more currency, literally, than an individual’s profit and loss. It pays to perform due diligence on prospective employers before investing in derivatives jobs.

Potential for Growth

This is the most difficult characteristic to assess when considering a potential candidate. The manager must decide if this individual is committed to putting in the “legwork” required to be at the leading edge of the market and establish that this person is bright enough to be able to compete as the markets evolve.

There is no hard and fast rule for establishing one’s credibility in this respect. If you can show that you have grown where others have not or that you have progressed faster than others, this is a start. But, as they say, historical performance is not indicative to future performance.

Overview of Derivatives Jobs and Derivatives Professionals

The great derivatives players are looking for two things when hiring for derivatives jobs: excellence and motivation. They do not care in what endeavour this has been achieved. They want people who are the best at what they do. It is an intensely competitive arena.

Anyone can be a good derivatives professional if they work hard and learn from the best people. After all, it’s not rocket science. It’s sales and trading.

– Article by Chand Sooran, Point Frederic Capital Management, LLC

Twitter: @csooran


6 years ago