I recently spoke to a guy who sells swaps for a major investment bank.
The basic idea is that he comes up with some trading strategy, and writes the code that computes the profit/loss associated with that strategy if it was executed at market fixing prices (typically the market open or close each day).
The bank sells a total return swap on this strategy, which means that in return for a fee from the client, they pay the client the stream of profits (or losses) each month that would have resulted from trading this strategy. Behind the scenes, the bank trades the strategy (or something like it) in order to hedge the risk associated with the swap, so that they can earn the fee approximately risk free.
There's an obvious problem with this, which is that the client basically has to take the bank's word for what the profit/loss of the strategy is. To counter that, the guy who came up with the strategy now has to write a 100+ page document in legalese, which outlines exactly how the profit/loss on the strategy is calculated. This has to be sufficiently detailed that someone couple re-implement the code themselves to check it. The guy I spoke to said that this documentation takes up >50% of his time.
I'm sure everyone here will appreciate how incredible it is that a bank will pay someone six figures every year to spend more than half their time writing documentation that literally does nothing more than reproduce a piece of code, except about 50 times more verbosely.
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I recently spoke to a guy who sells swaps for a major investment bank.
The basic idea is that he comes up with some trading strategy, and writes the code that computes the profit/loss associated with that strategy if it was executed at market fixing prices (typically the market open or close each day).
The bank sells a total return swap on this strategy, which means that in return for a fee from the client, they pay the client the stream of profits (or losses) each month that would have resulted from trading this strategy. Behind the scenes, the bank trades the strategy (or something like it) in order to hedge the risk associated with the swap, so that they can earn the fee approximately risk free.
There's an obvious problem with this, which is that the client basically has to take the bank's word for what the profit/loss of the strategy is. To counter that, the guy who came up with the strategy now has to write a 100+ page document in legalese, which outlines exactly how the profit/loss on the strategy is calculated. This has to be sufficiently detailed that someone couple re-implement the code themselves to check it. The guy I spoke to said that this documentation takes up >50% of his time.
I'm sure everyone here will appreciate how incredible it is that a bank will pay someone six figures every year to spend more than half their time writing documentation that literally does nothing more than reproduce a piece of code, except about 50 times more verbosely.
Different symbols, but it doesn't mean anything.