The derivatives market is currently valued at $1.2 quadrillion. Even in the world of finance, where larger numbers are the norm, this is a massive sum. With so much money changing hands, a career in derivatives can be quite appealing. It is a wide-ranging field, with a plethora of different career options. For those interested in a career in derivatives, understanding of a few basic concepts and becoming familiar with the main areas within the field can help narrow the search.
What are Derivatives?
Derivatives, also known as joint contracts, are a bunch of accounts and finance. They get their name from the fact that they derive their value from whichever instrument they’re based on. Essentially, they transfer credit risk from a borrower to a lender. Though this may sound complicated, you’re likely already familiar with some of the most common derivative instruments, including futures, swaps, and options.
Career Avenues in Derivatives
Derivatives are part of the sell-side of finance. Most careers in the sell-side of finance can be approached from one of four avenues. Finding a career in derivatives should begin with picking one of these four career avenues and drilling down from there.
Sales
When imagining a career in derivatives, a sales role is often what comes to mind for most people. Much like a sales role in any other field, the underlying goal is to bring in new clients and their assets. Though those working in sales need to know enough about derivatives to secure new clients, they do not need to have a detailed understanding of all aspects of derivatives, since they normally are not involved in the more complec areas of trading or analysis. Derivative sales roles fall under two main categories – retails and institutional. The burnout rate of retail investors is often quite high, while institutional investors tend to be long term clients.
Trading
Traders are the people carrying out the trades. These trades may be made on an exchange floor or over the counter, depending on the derivative being traded. Trading derivatives can be quite complex. Derivatives are a form of speculative trading, which can be highly volatile. They do not involve trading assets, in the typical sense. Instead, traders working with contracts that relate to an underlying asset.
Analytics
These roles are often the most technical within the field of derivatives. The roles of an analyst is to forecast future events as well as keep up with current events that may have an impact on events in the area in which the analyst focus. For example, an analyst may look at how different sectors of the market interact and the financial implications of this interaction on an underlying asset.
Back-Office Support
Many careers fall under the umbrella of back-office support, including compliance officers and accountants. Careers in this field can vary greatly in the type of education, personality, and experience that are required.
Education and Skills
The exact level and area of education required for a career in derivatives will depend on the role, though an undergraduate degree is almost always required, ideally in a business-related field. For those working in a trading or analyst role, an MBA will likely be required. At the larger banks and financial institutions, a degree from a well-known and prestigious university can also be helpful.
Derivatives is a complex field that changes rapidly. Investors are often hesitant to invest in such a potentially volatile industry so those working especially in a sales role, must be able to gain the trust of clients. The field of derivatives also tends to be quite competitive, and those looking to make a career in it must be hard working and ambitious to move forward in their career path. Since it a massive field, with so many niche areas, hands-on experience is often necessary before choosing a career path. Often, only once you begin working will you have the information you need to choose an area of the derivative market to focus on.
Salary
A career in derivatives can be quite lucrative. Salaries in derivatives will vary depending on the role, location, company, and educational background, but the average salary is $79,000 a year. Those who continue up the ladder in the derivative field will likely go on to make six figures.
Is a Career in Derivatives Right for You?
A career in derivatives is not for everyone. It often takes time and experience to ris through the ranks. But if you enjoy a fast-paced, challenging work environment that can be quite lucrative, a career in derivatives may be right for you.
About The New York Institute of Finance
The New York Institute of Finance (NYIF) is a global leader in professional training for financial services and related industries. NYIF courses cover everything from investment banking, asset pricing, insurance and market structure to financial modeling, treasury operations, and accounting. The New York Institute of Finance has a faculty of industry leaders and offers a range of program delivery options, including self-study, online courses, and in-person classes. Founded by the New York Stock Exchange in 1922, NYIF has trained over 250,000 professionals online and in-class, in over 120 countries.
See all of NYIF’s training and qualifications here.
Follow NYIF on Social Media
