A panel of headhunters gives its assessment of typical London pay packages. Base salary: 60,000; Bonus: 30%-60%
Structured this, exotic that... it seems sometimes that there are as many tradeable non-vanilla products in the financial world as there are twinkling stars in the night sky. And as banks look for increasingly exotic hedging products to provide a better, broader service to clients, banks have recognised they need decent market risk analysts: qualified individuals who understand just what is going on, and can tell what looks kosher and what looks dodgy.
"The development of innovative new-generation products on the trading floor has naturally created a demand for analysts able to evaluate and hedge the risk of what are technically very complex products," says Louise Young, a consultant for search firm Finance Partners, adding that a knowledge of derivative product lines has become a prerequisite to securing a position, at any level, within an investment bank. Hardly surprising, as it is derivatives that will occupy the majority of analysts' time.
Typically, a market risk analyst will sit on the trading floor and be closely involved in approving new products as they are put together, offering pre-trade advice to the trader responsible. He or she will also liaise regularly with quants.
Not surprisingly, such individuals are not exactly two-a-penny.
Andrew Cook of Imprint Search & Selection's risk management and quantitative analysis division says, "Market risk continues to be a changing world within the majority of investment banks: risk functions have evolved and this has been reflected in recruitment processes and client requirements."
What sort of person becomes a market risk analyst? Somebody with a good practical mind and keen analytical abilities and rather more than a pass grade in maths at GCSE, suggest headhunters.
"Candidates could be qualified accountants, graduates with highly quantitative degrees, product controllers in technical areas, credit professionals from technical areas - basically anybody comfortable with high-level maths," says Jamie Risso-Gill of recruitment firm Robert Walters.
Young at Finance Partners adds that entry-level candidates will be expected to have a very solid theoretical understanding of derivatives, gained from a minimum of an MSc level education in a quantitative discipline.
Assuming you have the mathematical qualifications, are willing and able and can secure yourself a position, how much would you be worth? Risso-Gill of Robert Walters says new recruits and those with up to two years experience are looking at a basic of 50,000-60,000 and a bonus of about 20%. Recruits with up to four year's experience, the basic rises to about 75,000 and the bonus to 30%. For those with four or more years in the field the base would be in excess of this but the bonus would come in over 50%.
Imprint's Andrew Cook broadly concurs, "Those with three years' relevant experience can command between 60,000-80,000 basic salary with bonuses of 40%-75% based on performance and institution," he says.
Young says that the majority of hiring is currently at the intermediate level. Institutions prefer individuals with business experience, at ease equally with quants and traders. Such people typically earn a base of 60,000-70,000, with 80,000 not impossible for the right candidate.
The demand for complex structured products and the market risk analysts to structure them is expected to increase, with pay rising accordingly. A good reason, then, to stay focused on those boring maths lessons.
Figures and commentary: Robert Walters, the Partners Group and Imprint plc