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Proprietary Trading

Trading is one of the most exciting jobs. There is no lack of action. Every day brings new surprises, new information. A good understanding of the market, quick reactions, analytical skills and the ability to withstand pressure helps.
Non-linear thinking (therefore, multi-dimensional) and being aware of difference between correlation and causation makes a good trader. My favorites for role models in trading are George Soras, Victor Niederhoffer, Nassim Nicholas Taleb. Their books also are must-read for aspiring traders. "Alchemy of Finance" by Soros, "Education of a Speculator" by Victor Niederhoffer, "Fooled by Randomness" by Taleb are all-time classics to be read and re-read by financial market students.

Proprietary Trading is a term used in investment banking to describe when the firm's traders actively trade Stocks, Options, Futures, Bonds, Commodities, Currencies with its own money as opposed to customers money, so as to make a profit for itself. Large banks like Goldman Sachs, Lehman Brothers, Salomon Brothers, Deutsche Bank, UBS employ multiple desks of traders devoted solely to proprietary trading. There are also rogue traders like Nick Lesson who took down Barclays Bank with unauthorized proprietary trading positions.

Financial Engineering

Quantitative Finance is becoming the rage with new financial products being introduced often. In India also, new products like currency futures, volatility indexes, long-term options are announced. Derivative markets have become pivotal for economics around the world. Aaron Brown of Morgan Stanley compares poker players with major players in financial markets. The book "The Poker Face of Wall Street" by Aaron Brown is an excellent read on risk management, financial markets, and the psychology behind poker and finance.

To excel in the field of financial engineering requires quantitative ability and derivatives knowledge. This field involves understanding risks that financial instruments create, and strategies to hedge these instruments. Financial engineering encompasses the design, analysis and construction of financial contracts to meet the needs of enterprises. There is an increasing demand for professionals in this field, trained in both the underlying mathematics / computer technologies and finance.

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Prof. Gangineni Dhananjhay holds B.Tech., MBA, NCFM (CFA) qualifications, and is currently Assistant Professor - Finance in the M.B.A. Department at Vivekananda School of P. G. Studies (VSPGS), Hyderabad.