GUEST COMMENT: 10 things you need to know before you go into a trading interview
1. The news
Read the business pages. These days, read the front pages too. Have a rough idea of who is up and who is down and why. Know what quantitative easing is, for example, and have a view on government and/or opposition economic policy.
2. The language
Know the difference between the front, back and middle office functions. That the front office looks down on the back office, the back office is terrified of the front office and that no-one really knows what the middle office does. Learn the names of the asset classes traded by the firm you're interviewing with. Find out what a quant is. Know the difference between a corporate (a company), institutional (fund managers) and private client (private individuals) base and how the products offered to each differ.
3. The structure
How is the bank structured? Are they product based? Is there a derivatives/flow (vanilla products which aren't structured and are low margin, high volume) split? Is there a geographical element to the structure? All of these things have a massive impact on how many reporting lines you could (and your interviewer does) have and will provide a good question for you to ask if you can't find out in advance.
4. The business drivers
If you're interviewing for an equities role, understand the basic relationship between research, sales and trading. Know who talks to companies/corporates, who talks to clients and how that might lead to business. If you're looking at other asset classes, a little homework covering margining and spreads goes a long way. Have a view on when which type of investors might what to use which type of product and to achieve what.
5. Basic valuations
For equities: PE, EPS and ROE all good.
For other asset classes, be able to talk about cash flow, face value and investment grades, as well as the relationship between interest rates and bond prices and overall credit worthiness.
6. Risk management
Understand the concept of Value At Risk (VaR), and how it's used, both at desk level and higher up the tree. You don't need to go into this in depth, just understand the decision making process for accepting or turning down a trade.
7. Regulation
Be able to talk about how regulation has changed and why it is such a hot topic. Have a view on whether increased regulation can reduce the risk of another credit crunch or not.
8. The personalities
The credit crunch is on your side here as suddenly everyone knows who runs which bank and who used to run them. Have an opinion and know who is (and was) who.
9 The nasty questions
'How to' questions are particularly popular. For example, have an opinion how you would:
- Value a utility company vs. a computer peripheral manufacturer?
? Hedge a long position?
? Interest a client in a telecoms IPO your firm is underwriting?
10. The gossip
Remember too that bankers love to gossip. If you can get them talking about individuals, scandals, the government or, if you're struggling, RBS, then this will take their minds off the content of the interview (NB: this really doesn't work at RBS unless you can be sure the interviewer came from ABN).
