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Key Responsibilities and Required Skills for Derivatives Analyst

💰 $80,000 - $150,000

FinanceRiskQuantitativeTrading

🎯 Role Definition

A Derivatives Analyst is a finance professional responsible for pricing, risk-managing, validating and reconciling derivatives positions (OTC and exchange-traded) across rates, FX, credit and equity products. The role blends quantitative modeling, trade lifecycle operations, P&L attribution and regulatory reporting, requiring strong analytical skills, programming ability, market knowledge and clear stakeholder communication. The Derivatives Analyst supports trading desks, risk managers and middle-office functions by delivering accurate valuations, timely risk metrics and scalable process improvements.

📈 Career Progression

Typical Career Path

Entry Point From:

  • Junior Trader / Trading Assistant
  • Market Risk Analyst or Credit Risk Analyst
  • Quantitative Analyst (entry-level) or Data Analyst

Advancement To:

  • Senior Derivatives Analyst / Lead Analyst
  • Derivatives Structurer or Quantitative Structurer
  • Portfolio Manager / Senior Trader
  • Head of Derivatives, Senior Risk Manager

Lateral Moves:

  • Market Risk or Counterparty Credit Risk
  • Product Control / P&L Analytics
  • Middle Office / Trade Operations
  • Quant Developer or Model Validation

Core Responsibilities

Primary Functions

  • Produce daily valuation and independent price verification for a broad book of derivatives (IR swaps, swaptions, caps/floors, FX forwards and options, equity options, CDS and credit default swaps, structured notes), ensuring mark-to-market accuracy and timely dissemination to traders, risk committees and P&L owners.
  • Compute and analyze P&L attribution (PnL explain) across drivers such as market moves, time decay, carry, model adjustments and new trades; prepare reconciliation reports that support daily P&L sign-off and regulatory audit trails.
  • Build, validate and maintain Greeks (delta, gamma, vega, theta, rho) and first/second order sensitivities across multiple tenors and product types, enabling hedging strategies and intraday risk monitoring for trading desks.
  • Perform daily and intraday risk reporting including VaR, stress tests, scenario analysis and limit monitoring; escalate breaches and work with traders to remediate exposures and re-hedge positions.
  • Price and model complex OTC derivatives using analytical formulas and numerical methods (Monte Carlo simulation, finite-difference PDEs, tree methods), and maintain model parameterization and calibration routines for volatility surfaces, yield curves and credit spreads.
  • Support trade capture, confirmation, settlement and lifecycle event processing; investigate mismatches with counterparties and clearing houses, coordinate break resolution and ensure timely settlement and margining.
  • Calculate margin, initial margin (SIMM) and variation margin; implement and review margin models, perform margin simulation and provide documentation for counterparty collateral disputes and margin calls.
  • Prepare and submit regulatory and supervisory reports related to derivatives activity (EMIR/TR, Dodd-Frank, MiFID II reporting, SA-CCR exposure calculations, Basel metrics) and assist with ad-hoc regulatory data requests and audits.
  • Maintain and enhance risk frameworks and pricing libraries in vendor systems (Murex, Calypso), in-house engines and analytics tools; manage change-control for model releases and production deployments.
  • Implement model validation, backtesting and benchmarking processes; perform model governance tasks including sensitivity testing, model performance monitoring and documentation for independent validation teams.
  • Perform counterparty credit exposure calculations (CVA, DVA, FVA) and support pricing adjustments for credit and funding costs; integrate XVA outputs into trade-level analytics and P&L reporting.
  • Design, execute and maintain automated workflows for end-of-day and intraday processes using scripting and job orchestration, reducing manual interventions and operational risk.
  • Collaborate with quantitative developers and data engineers to define pipelines for market data ingestion, curve construction, volatility surface building and risk factor generation; validate data quality and resolve data anomalies quickly.
  • Build ad-hoc analytic tools and dashboards (Excel VBA, Python, Power BI/Tableau) for front office and risk teams to visualize exposure, P&L drivers and scenario outcomes in near real-time.
  • Support pricing and structuring of bespoke or exotics derivatives by preparing deal term sheets, assessing hedging costs and working with legal operations on ISDA confirmations and collateral documentation.
  • Execute stress test scenarios and reverse stress testing; translate macroeconomic and micro market events into desk-level impact analysis and remediation plans.
  • Liaise with traders, portfolio managers and counterparty relationship managers to provide product-level commentary, trade feasibility studies and pre-trade risk analytics.
  • Lead root-cause investigations into P&L attribution anomalies, valuation differences and model performance deviations; prepare remediations and process controls to prevent recurrence.
  • Assist with onboarding of new counterparties and products by defining booking rules, required confirmations and valuation/settlement workflows, ensuring compliance with internal controls and regulatory requirements.
  • Contribute to product and process enhancement projects: drive automation of manual processes, implement new risk frameworks and coordinate cross-functional testing and UAT for system upgrades.
  • Provide training and support to junior analysts, document best practices, create runbooks for daily processes and ensure continuity through thorough documentation and knowledge transfer.
  • Coordinate with external vendors and data providers (Bloomberg, Refinitiv, Numerix) to resolve pricing discrepancies, obtain reference data and negotiate service-level expectations.
  • Monitor market developments, legislative changes and competitor product innovations to proactively recommend model and process updates that keep the desk compliant and competitive.

Secondary Functions

  • Support ad-hoc data requests and exploratory data analysis.
  • Contribute to the organization's data strategy and roadmap.
  • Collaborate with business units to translate data needs into engineering requirements.
  • Participate in sprint planning and agile ceremonies within the data engineering team.
  • Assist middle- and back-office teams with operational process improvements and automation of reconciliation workflows.
  • Support internal and external audit requests; maintain evidence and documentation for controls around valuations and risk reporting.
  • Help craft and maintain knowledgebase articles, FAQ documents and internal training materials for derivative products and processes.

Required Skills & Competencies

Hard Skills (Technical)

  • Deep product knowledge: interest rate swaps, swaptions, caps/floors, FX forwards and options, OTC derivatives, futures, credit derivatives (CDS), structured products and exotics.
  • Quantitative pricing: familiarity with Monte Carlo simulation, PDE solvers, analytic pricing formulas, tree methods and numerical calibration techniques.
  • Sensitivity & risk analytics: computing Greeks, VaR, stress testing, scenario analysis, SA-CCR exposure and SIMM initial margin computation.
  • Programming and scripting: Python (pandas, numpy), SQL, Excel/VBA; familiarity with C++ or Java a strong plus for model implementation.
  • Experience with front-to-back systems: Murex, Calypso, Numerix, Bloomberg, Refinitiv, Markit or similar enterprise platforms.
  • Model calibration and validation: yield curve construction, volatility surface modeling, local/stochastic volatility, SABR, Heston and bootstrapping techniques.
  • Counterparty and XVA analytics: CVA/DVA/FVA computation, credit spread modeling and exposure profiling.
  • Data management: market data sourcing, time-series handling, data cleanliness checks and automating ingestion pipelines.
  • Regulatory knowledge: EMIR, Dodd-Frank, MiFID II trade reporting, Basel III/IV concepts and SA-CCR exposure methods.
  • Version control and development workflows: Git, CI/CD concepts and basic familiarity with Linux or cloud-based deployment environments.
  • Advanced Excel modeling: pivot tables, complex formulas, macros and sensitivity tables for rapid desk-level analysis.
  • Statistical and numerical skills: probability theory, stochastic calculus familiarity, regression analysis and model performance metrics.

Soft Skills

  • Clear, concise stakeholder communication — able to translate quantitative outputs into business decisions and executive summaries.
  • Strong attention to detail and commitment to high-quality documentation for audit and regulatory compliance.
  • Problem-solving mindset with the ability to prioritize under tight deadlines in fast-moving markets.
  • Collaborative team player who partners with traders, risk teams, operations and tech to deliver pragmatic solutions.
  • Proactive ownership of tasks and continuous improvement orientation for automation and efficiency gains.
  • Comfortable presenting technical topics to non-technical audiences and senior management.
  • Adaptability to changing market conditions and regulatory requirements; quick learner for new products and systems.
  • Time management and multi-tasking: manage daily production cycles while supporting project work and ad-hoc investigations.

Education & Experience

Educational Background

Minimum Education:

  • Bachelor's degree in Finance, Mathematics, Statistics, Physics, Engineering, Computer Science, Econometrics or related quantitative discipline.

Preferred Education:

  • Master's degree or PhD in a quantitative field (Financial Engineering, Mathematical Finance, Physics, Applied Mathematics) or professional certifications (CFA, FRM).

Relevant Fields of Study:

  • Financial Engineering
  • Mathematics / Applied Mathematics
  • Statistics
  • Physics
  • Computer Science / Software Engineering
  • Economics / Econometrics
  • Quantitative Finance

Experience Requirements

Typical Experience Range:

  • 2–5 years for analyst-level roles; 5+ years for senior analyst positions or product specialization.

Preferred:

  • Demonstrated experience pricing and risk-managing OTC derivatives and exchange-traded derivatives.
  • Prior exposure to trading environment, front-to-back platforms (Murex/Calypso/Numerix) and regulatory reporting.
  • Track record of automation projects, building pricing/risk tools in Python or C++ and delivering production-grade analytics.
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