Derivatives are financial instruments that derive their value from the underlying assets. Derivatives are traded either over-the-counter or are exchange-traded. OTC traded derivatives are high in volume but are very risky because of a lack of regulations. Stocks, interest rates, bonds, and commodities are the most common underlying assets.
Traders buy/sell the actual instruments, both over-the-counter as well as on the exchange. They make the market by making competitive bid quotes for clients who want to sell and offer quotes for clients who want to buy. To ensure liquidity in the market, they often hold an inventory of positions. They play an important role in profit-making for the company.
Derivative risk analysts evaluate risk factors in trading decisions. They formulate several trade strategies to control risk. Through the application of quantitative and analytical skills, these analysts identify the risk of possible losses.
This is one of the most critical trading jobs. These analysts provide support to the daily operations for derivatives and other products and provide post-trade support to the Derivatives dealing desk by ensuring executed trades are successfully captured, confirmed against the counterparty’s position, collateralized, and reported to the regulator. This involves internal operational processes as well as monitoring chosen outsourced middle and back-office provider to ensure desired service levels are followed. .
Technical and behavioral requirements:
Large Investment banking firms like Goldman Sachs, Morgan Stanley, Merrill Lynch, etc., Rating agencies, Hedge funds and Pension funds, NBFCs, Big four (KPMG, PwC, Deloitte, E&Y), regional banks, and broker-dealer firms.