May 20, 2013 § Leave a comment
I remember my first interview at KKK Bank (as I like to call it now, though it doesn’t exist anymore).
There I was 23, straight out of St Andrews, wearing my Armani overcoat, the hope still shining bright in my eyes. For those were the days when bankers could actually walk around and tell people to “Get out of the way, I’m a banker.”
Sadly those days are long gone, for all the great professions– from lawyers to politicians, we are too scared to admit it, but they no longer care. Far be it to say that I go out and kill people for my profession! But no I am the subhuman scum!
So I went in my shiny shoes and polished back hair, looking every bit like Alec Baldwin c. GGarry GRoss, up to the 13th floor. I walked in to find this nerd, all spectacles and front teeth, couched behind the desk reading his copy of the FT. At first I thought about of doing the old Oxford joke and setting fire to his paper as he read, but then decided better of it. After a few seconds he put it down and grimaced at me.
“Tell me about the Greeks,” he said.
Of course I thought he was joking so replied – “Erm swarthy?”
He was silent.
Still no reply.
“Doesn’t like to pay tax?”
The man didn’t laugh. He said “Don’t waste my time telling me this. Tell me about the Greek alphabet?” “I said are you crazy I don’t speak Greek.”
Soon I was escorted out. What I didn’t know was that that guy, apart from being a Geek, was also fluent in the Greeks. He was also Greek (I should’ve checked his card, Eugene Papaphilippopulous). So what are the Greeks and why should we care? Well here is a simple guide for grads, care of my good friend Wannop.
Explaining the Greeks–
Alpha: the word we use when we make money.
Beta: When we don’t make any money, but nor does anyone else
Charlie: A trader’s ex-best friend
Gamma: Second order derivative. A measure of convexity. Curvature. Makes me think of the bird I met at Maddox the other night. Her name might even have been Gamma. Wait that can’t be right
Delta: the first derivative. How the price changes with respect to changes in the price of the underlying. Used colloquially by derivatives geeks to refer to the probability of something happening. Like what’s the delta on me hooking up with Gamma tonight?
Theta: The rate of decay of the asset with respect to time. Some assets decay away very rapidly. Like Gamma. Her value rapidly disappears after I’ve taken her home. It’s always the way with these eastern European chicks. On the other hand, French birds look after themselves. Much less theta there.
Rho: Sensitivity to interest rates. Like the lease on that Ferrari that I can’t afford. Rates go up and I’ll be slinking back to the dealer with keys in hand begging for mercy.
Vega. Not actually a Greek letter. Nevertheless referred to by Geeks as a Greek. Sensitivity to volatility.
Vanna: Sensitivity of the sensitivity to volatility with respect to the asset. Or sensitivity of the delta to the vega.
Vomma: sensitivity of the sensitivity to volatility with respect to volatility. What most, right thinking people do after reading that sentence last sentence. What I did last night in the men’s room at Roka after too many Flaming Ferraris
you get the idea.
Greeks? I don’t know! The point is who cares?! You don’t need to know. We have computers to do all these things for us now. We have quants like Eugene
So the next time someone ask you to define the Greeks in an interview punch him in the stomach and walk off. There are better things for us all to be doing.