Karin Bergeron | Derivatives Trader
XVA Trading, Scotiabank
Department: Global Banking and Markets
Education: B.A. Music, 2000, Queen’s University, Canada; B.A. Mathematics, 2001, Queen’s University, Canada;M.A. Mathematics, 2003, York University, Canada; Graduate Diploma in Financial Engineering, 2003, York University, Canada
Career stage: Mid—16 years post Bachelor’s
What She Does
Karin runs the XVA trading desk at Scotiabank. Her team is responsible for making sure all derivatives are correctly valued, quantifying the Valuation Adjustments (VAs) necessary to take them from pre-crisis traditional derivatives valuation to post-crisis standards of pricing derivatives which account for more risks and managing all the risks inherent in these VAs.
Traditional derivatives valuation relies on pretty complicated mathematics. The math behind modern derivatives valuation, which prices in all the VAs, is even more complicated as it needs to look at expected values over the lifetime of the portfolio of trades.
Karin is currently sponsoring a project to rewrite the bank’s XVA models to be faster and more coherent. This will put together some cool mathematical methods such as using adjoint algorithmic differentiation as well as leveraging some relatively new technologies such as using GPUs and cloud computing.
Pros and Cons of Her Job
Being able to use models to make smart trading decisions, (and make money!) and being involved in exciting new projects like this one are some of the most rewarding aspects of Karin’s job. Running a trading desk is stressful as you have a very high level of accountability, and are expected to make money, and optimize your use of the resources given to you all while providing top level customer service. However, it is a very measurable job since metrics are usually very transparent and provide an easy way to get fast feedback on your success.
I was surprised about how emotional the job of a trader can be. Making money feels amazing. Losing money feels terrible. Learning how to manage these emotions was as an important lesson that did not come easily for me.
Karin has always had an interest and an aptitude for problem solving and playing with numbers. She knew she would end up doing something quantitative, but was not sure what that would be, so her undergraduate studies were very unfocused. She took a variety of math courses with no particular goal in mind—just what seemed interesting at the time. With some timely mentoring she realized that there were lots of opportunities for mathematicians in capital markets and that this was something that interested her, so she took a highly specialized Master’s program that focused on quantitative finance.
Karin’s first job after graduating was as a “quant” (quantitative analyst). She was part of a team responsible for developing the derivatives pricing models for Scotiabank. One of the models she became involved with was the one that was referred to at the time as Credit Deferral— a way to adjust derivatives valuations to take into account the possibility that counterparties may default (which was an early example of a Valuation Adjustment). Through the aftermath of the financial crisis of 2008, the market changed the way it thought about derivatives valuation and in particular counterparty credit risk. So, as someone with a strong quantitative background who understood how these risks were modeled, Karin moved to the trading side to help the bank build out their capabilities and modernize their platform.
Career Expectations and Advice
“As a trader, you have to learn to manage your emotions.”
Think of your career as long term. Try always to think beyond the problem as it is presented to you. People will often ask you to solve a problem that does not make sense or does not really accomplish what it is they are looking for. The best interns and students take the time to think about what the correct and full problem should really be before looking for the solution, rather than actually doing the work as it is asked for.
Salaries vary widely based on demand for your skills and experience, as well as the current market conditions. Compensation is usually composed of a base salary, a bonus that is linked to your individual performance and that of your desk and business line as well as the institution as a whole.
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