How to Ace the Capital Markets

Capital Markets is one of the most sorted out space for job seekers, especially for the ones who are passionate about finance and economics, the Capital Markets is one dream place to be. Naturally, because of such huge demand, getting a job in capital markets is rather difficult. This year I completed almost 2 successful years in fixed income capital markets, and often my friends, colleagues and students from my alma mater ask me as to how to be successful in capital markets, and how to best prepare oneself to be a part of it.

I have learned a lot from these 2 years of my experience in the US markets, and I am still learning. Every day the economy and the market behavior teach you something new, something intuitive, and something to think over. In these 2 years, I have gained insights about what knowledge and qualities one should have to be a successful player in the capital markets –

  • Mathematical Knowledge: Capital markets is completely mathematical. It always follows a logic, and almost every situation in the markets can be mathematically or economically explained. Yes, there can be a series of drivers to explain a change/event, but remember one thing, it hardly has a grey area. So, if you cannot find a logical explanation to back your analysis, probably you are doing something wrong. It is almost always ‘black and white’.
  • Knowledge on Economics: To successfully explain a change in the markets, it is imperative for you to understand and analyze the drivers of the change. The drivers of the economy can be politics, inflation, deflation, stagflation, risks, etc. You must have a strong understanding as to what effect these drivers can have on the economy, and how can you best prepare yourself to make the most out of the situation.
  • Bottom-Up Analytical skills: To explain a change in the market it is important to analyze each aspect that could have driven the change. It can be price, factor, rate, size, differential, behavior – anything quantitative or qualitative, everything needs to be properly placed mathematically to come up with the right reason.
  • Top-Down Inferential skills: Sometimes bottom-up analysis can project more than one reason behind the change. At that time, your top-down inferential skills should find the logical explanation. Your inference should be from the bigger picture narrowed down logically to the smaller bits that make the whole analysis strong.
  • Programming Knowledge: Capital Markets is all about data, patterns, and trends. Market analysis involves a series of repetitive actions that you need to carry out to clean and prepare the data to understand, reason, project and forecast trends. Programming knowledge significantly helps you for the same. You can build your own models, algorithms, and some easy macros to help you analyze your data. This not only reduces time, but also helps you reduce errors, and increase efficiency.
  • Communication Skills: It is important to have good analytical skills, but to explain your results you should have a great communication skill set. You would often talk to clients and counterparties, discuss results, strategies, markets pattern, etc. If you can’t explain what you think, it will be a hard job for you. You must be concise and effective.
  • Discipline: Working in capital markets can be very hectic, and stressful. You have to go through high volumes of data and information on a daily basis. One must follow a rigorous routine to stay fit, healthy and competitive.

So if you are really interested to work in the Capital Markets, slowly start building your skill sets, and you will be ready to ace it.   


2 thoughts on “How to Ace the Capital Markets

  1. I believe when it comes to capital markets, nothing is really fixed or anchored tight onto something.Let’s take blacks Scholes model for instance, the assumptions stated aren’t really realistic I suppose. Even the swaps , the LIBOR and MIBOR also have no fixed ground. So for capital markets I think the most important stuff you need to possess is ‘common sense’.
    Brilliantly written article nevertheless!

    Like

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