My second year in Banking

Gosh... I haven't been writing on my blog for almost a year now! This tells you how busy I am! I am still working in Investment Bank in Fixed Income Division and I enjoy it :). I was thinking that in this post I will tell you how my typical day looks like.

I wake up at 5.50 on every weekday. I live relatively close to the office - I commute on Docklands Light Railway. During my trip on DLR I review emails on my Blackberry - I check also the most recent analysts' reports. I am in the office at 6:45. First, I start with the review of the overnight risks of my trading book. Every night all the exotics and vanilla positions in my book are repriced, so I can see what are the risks first thing in the morning. I see current deltas, gammas, vegas etc. of each of my position in the trading book. If there are significant unhedged positions I put orders to neutralize them.
At around 7.30 we have a floor meeting on which all analysts provide their insight about the current situation in the market. They provide advice where we can expect to see flows in the markets and what are the key drivers of the market in a given day.
At 7:50 I am back into my desk and I review all incoming client orders (first I deal with Asian clients as their day is coming to an end, so I want to provide the with the indicative pricings). If I have any firm orders from the client I execute these orders and hedge resulting risk in the market. In the mean-time I am checking if my book prices correctly (if there are any problems with the book - I ask our excellent MO team to review the instruments that did not price). During the day I am also pricing complex trades that require additional analysis - I check if the models that we have are suitable for these complex trades.
At 12:30 I grab a lunch in a nearby restaurant and I am back on the desk after 5-10 minutes. At 13:30 - I have a risk meeting where I discuss with the head of the desk and the risk officer the risk exposure of my trading book. I need to explain why I hedge particular things in a particular way - for example why I hedged vega with short term options rather than with long term ones etc.
At 17.30 I have to "save the book" (I need to sign-off the end of day risk and end of day P&L). This usually involves some heavy interactions with MO - they are recalculating values of all positions for the end of day. After 19:00 till around 22:00 - when the trading floor becomes quiter I have a chance about RV strategies that we could try implement ourselves or we can recommend to our best clients. I am back at home at around 22.30.

Let me know if you have any questions.

Results of 14th Survey

It seems you are not very optimistic about the prospects of the industry. Big portion of you expects that banks will be not hiring this year. I wouldn't be so pessimistic - when I look around I see that there is big number of interviews happening - people are getting and changing jobs. The biggest number of opportunities are now on the corporate side.

My year in Banking... (Part 1)

Time really flies...

It's been almost a year since I started working in Investment Banking (BarCap Fixed-Income) - I didn't really have time to update my blog, but I will be now trying to write more frequently.

Probably you are wondering how is the life in Investment Banking in Fixed-Income. First - it's very, very chaotic. You have hundreds concurrent things to do and the most difficult part is to control and manage all these tasks so that everyone is happy.

People are really at the very high level. Everyone is from top school and present very good intellectual level. There are many guys from France from all Grand Ecoles and they are always working very closely together. On my desk (10 people) three people have PhD, two people have CFA, one person has FRM.

The pay is very good 60k pounds per year plus some possibility of the bonus (apparently this year will not be too good in this respect though), but there is some really though work to back this salary.

I next couple of days I will continue with my banking story.

Pick-up in hiring!

It seems that we are very close to good times of getting hired by financial industry. Many of my friends (and I - as you remember I started in BarCap) found good jobs in recent months (in CS, Sig, MS etc). Many companies are still very cautious (JPMorgan in particular), but the the situation is definitely getting better (especially in NYC)...
I definitely think that 2010 will be a good year to be hired in good job in Financial Services. For me really good hiring atmosphere will come if S&P500 goes up by10 more percent - people will then get confidence that the recovery is sustainable.
It seems that particularly good demand will be there for junior and mid-level hires. The season for MD hiring is already there - hiring at the junior end needs to catch up.
I also think that this is a very good time to start with MBA or CFA. If you do this at this stage of the economy you maybe almost sure that by the end of the program you will enter the hot job market and you would be able to get a decent return on your educational investment .

My (subjective) timeline of hiring:

1. 2Q-3Q 2010 - Hiring in M&A divisions of investment banks.
2. 3Q-4Q 2010 - Hiring in Equities in Banks that didn't rebuild their Equity Groups yet
3. 4Q 2010 - Hiring in Wealth Management Divisions
4. 2H 2010- Hiring for Emerging Markets roles
5. 1H 2011 - Restaffing of Hedge Funds and Private Equity Companies
6. 2011 - Poorer year for Fixed Income Markets

If you agree with this expectations or your don't please discuss in comments.

The V-type recovery of Investment Banking

It really seems that the Investment Banking is picking up. Number of companies (like Morgan Stanley, Barclays Capitals, Nomura, Goldman Sachs and some small investment boutiques) are hiring actively. At the moment hiring is mostly in the space of seniors and middle-ranks. The reason for this is a huge number of experienced people, who stay our of employment - firms are willing to take advantage of the state of the market to hire experience people at low cost. I expect that this hiring fever will soon spill to the junior job market as well - I believe that this year will give excellent opportunities to find a job in lucrative sector at the junior level. I don't believe that the financial industry could be hit again anytime soon.

My advice at the moment is: Don't be afraid of working in companies that performed badly during the crisis (like RBS, UBS, Citibank etc.). It's very likely that especially these companies will provide extremely interesting opportunities for all juniors. This organizations cut big part of their businesses and hence now they need to rebuild rapidly to remain competitive and profitable.

Yet another proof of the improvement of the business conditions in the investment banking is the fact that I got a job recently! I am soon finishing my PhD and I will be starting in Barclays Capital in their Investment Banking Division.

Usefulness of CFA in Managment Consulting

As you may see in the 13th Survey I just started on the blog, people are thinking that Management Consulting would be a next "place to be" after the crisis. I thought that it would be interesting to analyze how different financial credentials are applicable to management consulting job.

CFA - This credential is very well rounded. When you study for CFA you need to learn not only about the basics of financial mathematics, but you learn in depth about companies balance sheets and accounting in general. You learn about ethics, about rules of proper conduct etc. This knowledge and especially the breath of this knowledge may be a good preparation for the career in Managment Consultancy. In fact I know number of people, who got their charter and joined top consultancies (McKinsey, Bain, BCG). From what I hear, it seems that the knowledge they got from CFA is much more valuable than what they learned in their Masters degree for example.

FRM - Some of my friends with FRM work in Consultancies (like KPMG, Ernst) in risk departments. In fact these departments grew significantly in recent years and there is really quite a lot of hiring in these space.

CAIA - This certificate is very focused on alternative asset managment, and I haven't heard of anyone, who had it and worked in consultancy space.

PhD - There is some demand for PhD from Consulting Firms (mostly McKinsey), but from my observation PhD in Finance or Economics are not really prefared. It seems they like more PhD in "soft" sciences like PhD in Public Policy, PhD in Medicine etc. Companies like McKinsey attract PhDs to inject some non-standard thinking into the firm. However, PhD in Finance or Economics think very alike MBA students and CFAs, so they don't add much.

MBA - MBA has been the most standard way of getting into Managment Consulting. Companies like Bain or Booz Allen Hamilton recruit most of their employees from MBA students at the best universities. Some companies (like McKinsey) put so much emphasis on MBA business education that they tend to send majority of their non-MBA employees to MBA courses at Top Business School around the world.

Summing up, considering the costs of the degree CFA can be an interesting alternative to MBA for everyone interested in managment consultancy jobs.

Good luck to CFA delegates!

The date of CFA exam is approaching very fast. Although I am not taking my level III this year (because of my commitments at the university) I feel the excitement of the moment. At my university half of the library is filled with just people, who are reading CFA textbooks. Some of them use Schwesers, others are studying directly from CFA Textbooks (which is good thing, but maybe not really just before the exam as the CFA Textbooks are really heavy-weight).
This CFA exam is administrated at important time for the financial industry. It is soon to be decided if the finance industry recovers from ashes and would provide attractive employment opportunities not only for CFA Charterholders. Even if you expect the financial world to look bleaker now than some years ago, do not lose the fighting spirit before your CFA exam. Yes, there are less jobs, yes, salaries are lower, but still with CFA designation you will be able to find a job which would be better than average.
As you could see from the survey which was published yesterday CFA is expected to be the most desirable credential in the new finance world. I expect this is because of two important characteristics of CFA. First it provides really rigorous knowledge. The crisis was caused in fact by PhDs, who knew stochastic calculus, market microstructure theory, but they had real problem with taking the holistic view of the world. CFA with its broad curriculum, provides you with everything what is important to have a global overview of the situation. Second, I belive there is no other designation that puts so much emphasis on ethics and good standards and in fact lack of regulations and ethics is a root of the recent crisis.

All candidates, good luck!

Results of 13th Survey

The light for financial industry is even brighter...

After the word of Soros, who claims that the lowest point of the downturn is behind us, and number of other market practitioners there is now even more optimism in the financial industry.

The most notable signal I observe is the revival of the job market for graduates. In last two weeks I observed number of companies approaching students in London. Just to mention few, I have seen a private equity company (Blackstone) willing to find 4-5 interns for the summer, a management consultancy (Bain) willing to find 2-3 graduates for full time job from summer 2009.
It seems that companies are now expecting the worst to be over and they are preparing themselves for the possible recovery.
It seems that financial degrees and CFAs or CAIAs are not dead yet. It seems that people with these qualifications will probably be able to find a job really quickly, when the markets improve. This means that starting CFA or a Masters degree in a respected institution might be a good choice right now. When markets recover (and they surely recover sooner or later) graduates will be able to profit.

Results of twelveth survey