If you want a trading job at an investment bank or a fund or hedge fund today, you'll need a strong interest in the markets. You will also need a deep understanding of and tolerance for risk, and an ability to get up at 5am most days. However, while these factors are still necessary for the aspiring trader, they're no longer sufficient.
Olivier Bossard is Professor of Finance and Executive Director of the MSc Finance at HEC Paris, which was ranked first globally by the FT this year. A former derivatives trader at SocGen and Lehman Brothers, he's been teaching aspiring traders full-time since 2012. Bossard says his students arrive with misconceptions about what it takes to get into trading now, and that his role is to help them understand what contemporary trading jobs involve.
For everyone who's not a student at HEC, these are the three insights Bossard imparts.
1. You're going to need to be a strong mathematician with an ability to withstand pressure
You're not going to get into trading if you're not a strong mathematician. "Strong mathematical skills, trading discipline and resistance to high pressure remain the key skills to land a job and be successful in trading," says Bossard. For this reason, he says candidates for trading jobs are often asked to solve complex problems during interviews - expect to be asked to solve mathematical questions, or even to complete a Rubik's cube under pressure.
2. You're going to need at least a basic understanding of coding
If you want to be a systematic trader developing the algorithms that underpin electronic trading strategies, you'll need to be able to code. For most other trading jobs, Bossard says you won't need to be a brilliant coder, but you will need to have a, "basic understanding of how oriented-object programming and functional/procedural programming work.' This can be acquired through an introductory course in C++, C# or Python, he suggests.
Bossard says your aim should not be to program like a technologist, but to understand how technologists think: "It is about being able to interact with technologists and to understand the challenges they face and the solutions they're creating. You need to be able to work across the implementation chain - from conceptualization to coding and then to validation."
3. You're going need to understand complex risk calculations
Lastly, Bossard says you'll need to understand technical risk calculations. Thanks to the Fundamental Review of the Trading Book (FRTB), which is being implemented in 2019, he says traders will need much greater understanding of (new standardized) methodologies for calculating risk than traders ever had in the past. "Previously, traders did not have to calculate their Expected Shortfall (ES), however now this must be calculated on a daily basis in addition to the conventional Value-at-Risk (VaR)," he says. It will also help if you understand what XVA exposure is - how it's computed, and how it can be hedged against. This too means you'll need impressive mathematical abilities (see 1).
Bossard says the most desirable students combine all of the above with (typically), a bachelors degree in maths or computing and a "high-level MSc in Finance programme." Of course, he might be expected to say the latter given his role heading the masters in finance at HEC....
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