How to Get a Job at an Investment Bank


Written By: Ehsan Jahandarpour

why investment bank trading

Functions of investment bank trading

Investment banks are businesses that raise money through the capital markets. This means that they are not shy about trading for their own benefit. However, they are also not shy about making a profit from their trading activities. To do so, they hire different kinds of employees and offer different types of services. Here are some of the types of jobs available at investment banks.

Investment banks can be divided into two main divisions: buy-side and sell-side. The buy-side division of investment banks helps companies raise capital by offering debt and equity financing. The sell-side division, on the other hand, engages in trading of liquid and publicly traded securities, commodities, and currencies. It also serves a vital market-making function.

Clients

Investment banks are in the business of trading and they earn money through commission. This money is earned when the bank buys or sells a security at a lower price than it originally quoted. These transactions are also known as hedging. Essentially, these traders are selling and buying securities on behalf of their clients to minimize their risk.

Investment banks have a variety of types of clients. They can include individuals or institutional investors. Some types of clients are hedge funds, pension funds, and asset managers. They typically have several trading desks.

Bonuses

The Wall Street industry is preparing to cut investment bank trading bonuses this year, according to a new study by compensation consultancy Johnson Associates. Incentives for underwriters of deals will shrink by 40 to 45 percent, while compensation for advisers is expected to stay roughly flat. This is in reaction to a decline in dealmaking, a decline in equity markets, and slower fundraising. Meanwhile, the rate of inflation is projected to rise to the highest levels in 40 years, a factor that could negatively impact investment bank trading bonuses.

The base salaries for investment bankers are higher than those of private equity analysts and traders, and they haven’t changed much in the past few years. In addition, analysts and associates begin working at the beginning of the calendar year and are eligible for stub bonuses. These are usually a very low percentage of base salary, but they can be as high as 50 percent at some firms.

Skills required

Investment banking positions require a diverse set of skills. An investment banker should be able to analyze complex problems and devise innovative solutions. Broad-mindedness and an interest in different cultures are also important. In addition to being able to speak multiple languages fluently, an investment banker should have a strong work ethic. This will help them build relationships with clients.

Strong communication skills are essential, since investment bankers spend a large portion of their working day presenting complex financial information to clients and stakeholders. Strong communication skills will help you advance in your career, and they will help you write professional emails and powerful presentations.

Interview process

The interview process for investment bank trading consists of a series of questions. The interviewers will ask you questions about valuation modeling, economics, multiples, and corporate strategies. You will be expected to have a strong knowledge of the financial markets, as well as the company’s products and services.

The first question involves company valuation, and is meant to gauge your knowledge of the concepts behind equity and enterprise value. As an investment banker, you’ll be expected to understand this concept, and it’s an essential skill. If you have a solid understanding of it, you’ll be well-prepared for the interview.

Many business students aspire to get into investment banking, but many freeze when faced with some common technical questions. The interview process can be very difficult, and it’s crucial that you’re prepared for the most common investment banking questions. These include questions about the value of a company, advantages and disadvantages of raising funds through bonds, and the impact of a $100 increase in the current depreciation account.

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