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How do I Become a Derivatives Analyst?

Carol Francois
Carol Francois

The skills required to become a derivatives analyst include data analysis, numerical skills, and financial training. Derivatives are a financial instrument used to invest funds and generate profit through a complex series of transactions and speculation. The rate of return for derivatives exceeds the average rate of return on other tools, but has a very higher level of risk. Many investment firms, pension funds, and private investors have lost and gained a significant amount of their portfolio through investments in derivatives.

People who have an analytical thought process, enjoy working independently, and are comfortable exploring multiple scenarios find the greatest satisfaction in this type of work. Attention to detail, discipline, and focus are all essential for anyone who wants to become a derivatives analyst. The potential to make and lose large sums of money in a very short time make this position very high in both profile and pressure.

Businessman with a briefcase
Businessman with a briefcase

All derivatives analysts must have completed a post-secondary education program. Although some firms will accept a college diploma in accounting, finance, or statistics, the vast majority of investment firms prefer a university degree at the master's level. The most relevant degrees are masters in finance, statistics, or mathematics. It is important to note that the analyst is expected to have the unique combination of practical and theoretical skills required to complete this job effectively and efficiently.

In order to become a derivatives analyst, most people have already obtained several years of experience in the investment industry. Related work experience includes investment analysis, derivatives broker, compliance officer, or other related position. All of these jobs require skills with numbers and data manipulation.

Once you become a derivatives analyst, there are certain types of software programs that you will be required to learn. These statistical and data analysis programs are able to absorb a huge volume of data and provide useful output. The tool itself must have a user interface that allows for a great deal of customization.

The type of people who want to become a derivatives analyst are comfortable working with numbers and are motivated to achieve a high level of financial compensation. These positions pay very well, but also have a high rate of job burnout. The correlation is due to the multiple sources of pressure and performance requirements that are associated with this position. The most successful candidates have an outlet or method of dealing with the pressure that is part of this job.

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