Wednesday, January 30, 2008

Job Description for Rogue Trader

Job Description for "Rogue Trader"

URL: http://www.wilmott.com/blogs/satyajitdas/index.cfm/2008/1/30/Job-Description-for-Rogue-Trader
Job Description – Rogue Trader

Position Title (Rogue) Trader. (The “rogue” term is generally not to be used explicitly especially with senior management, directors, shareholders and clients for fear of misunderstanding.)

Reporting Line

The position reports along “functional’ and “geographic” lines to the Head of Trading and Head of the Region. (Nobody, really. A multi-dimensional matrix structure is currently in operation so that everybody reports to several people allowing a total absence of accountability.)

Location Optional. (Some candidates may have a preference for working in head office where total confusion and chaos reigns facilitating successful rogue trading. Other candidates may prefer a remote location where benign neglect and absence of supervision may provide rogue trading opportunities.)

Organisational Environment

? A leading edge investment bank with a global brand, presence in key financial markets, superb product range and unparalleled client list. (Our PR firm told us this.) ? A global trading team trading in a wide variety of cash and synthetic instruments, including a number of “proprietary” structures. (You can lose money pretty much any way you like. There are some trades that even we don’t understand but the models say we are making money). ? Supported by a world class risk management team (they are readily identifiable by their guide dogs) and operational staff and systems (they have been specially chosen for their total ignorance.) ? Excellent career prospects (We have sinecures for everybody who has failed to perform.)

Key Responsibilities

? Trading with the bank’s capital to achieve targeted risk adjusted returns on capital under the bank’s unique Economic Capital Allocation system. (If you are half as smart as you think you are then you will be able to game the system from day 1. Everybody else has.) ? Developing innovative trading strategies. (You need to be able to come up with hare brained trading schemes based on the relationship between the El Nino cycle and market prices.) ? Closely managing trading positions. (You need to be able increase your bet when your position shows losses until you bankrupt the firm.)

Major Challenges

? Develop proper models and valuation procedures (You need to ensure that all pricing models are impossible to understand and give the valuations that you want by simple unverifiable changes in model inputs.) ? Risk management of positions (You will need to fudge all the Greek risk measures. We suggest you start to report risk data in an ancient Nubian dialect that is purely oral. You will ensure that your risk always appears miniscule irrespective of market conditions. People have a tendency to panic otherwise.) ? Monitoring (You will need to be able to disguise breaches by not booking the trades or taking advantage of systems deficiencies.) ? Control losses and volatility of earnings (You must disguise losses either by recording them as amounts owed to you (the Leeson gambit), undertaking off-market trades such as deep in-the-money options (the Rusnak variation) or incorrect valuations (Rogue Trading 101).) ? You need to be able to take the trading function to a new plane. (You need to show larger losses than the last rogue trader the firm employed.)

Selection Criteria

? Detailed knowledge of financial markets and trading techniques. (You should wax lyrically about obscure markets (the Zambian Kwatcho and Islamic finance techniques) and complex mathematics (field theory; neural networks; fractals; Frank copula models). Everybody will think you are a genius or a fool but will be unsure of which.) ? Detailed knowledge of derivatives, including exotic and non-standard structures. (Everybody knows that derivatives allow highly leveraged positions that are impossible to understand or value accurately.) ? No minimum formal educational qualifications or direct previous experience in a similar role is necessary. (Nobody believes your CV. It is merely a statement of your aspirations. Nobody will believe you if you said that you had rogue trading experience.) ? Ability to communicate and work closely with senior management. (You will need to make sure that you generate enough “phantom” profits to make sure their bonus expectations are met.) ? Ability to work closely with operational staff (You must bully them or cajole them into concealing limit breaches and losses.) ? Strong leadership qualities (You will claim all profits are the result of your perspicacious skills. All losses will either disappear or if found will be hedge losses offset against gains in other positions.)

Desirable Criteria

? Preferred age – under 30 years. (Have you ever heard of an old rogue trader? There is an exception for Japanese rogue traders who are generally older.) ? Strong personal qualities. (You will have “attitude”. A year round sun tan and a wisp of beard underneath your chin is good. You will treat everybody around you as idiots incapable of understanding the complex nature of your trading strategies.) ? Highly motivated. (You will need to be able to hide losses and limit breaches. The Japanese rogue traders never took holidays.)

Remuneration

Negotiable including a strong performance linked component. (You don’t need to be paid as it is assumed that you will defalcate ample amounts.)

Social Responsibility Statement

We are proud to be an equal opportunity employer. (We do not discriminate on any basis. How else can you explain the calibre of Directors and Senior Management not to mention risk managers and auditors that we have?)

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The above is an extract from Satyajit Das Traders, Guns & Money: Knowns & Unknowns in the Dazzling World of Derivatives (2006; Pearson Education) © 2006 Satyajit Das

Note: The idea is based on a column published by Trevor Sykes (writing as Pierpoint) of the Australian Financial Review [see “Indispensable Guide For Rogue Traders” (30 January 2004) Australian Financial Review] However, the text is different.

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