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Roadmaps / Pricing and derivatives

Rates Quant

Builds the curves a rates desk prices from, produces risk by maturity and defends the marks.

The job

A rates quant works with a bank’s swaps and government bond desks, or a rates fund. They build the curves the desk prices from, produce risk by maturity (DV01 by pillar and key-rate risk), set and defend end-of-day marks, explain the daily P&L, and build pricing tools such as an automated quoter. Things go wrong when a curve has kinks or stale inputs, when a hedge is neutral only to parallel moves, and when a mark cannot be defended against traded prices.

Supports
Swaps and government bond desks
Stages
5 to learn, then proof of work
Two routes
Free resources, or SelfMadeQuant programmes and projects

The roadmap

The same stages either way. The free route uses university courses, lectures, books and papers that are free online. The SelfMadeQuant route maps each stage to our programmes and ends in projects on real market data.

  1. Stage 01 · Foundations

    Maths and markets foundations

    Calculus, probability and what bonds and swaps actually are.

    • Calculus and probability
    • Time value of money
    • Bonds, futures and swaps

  2. Stage 02 · Core

    Bonds, duration and the yield curve

    Pricing bonds and swaps off a curve, and measuring risk by maturity.

    • Bond pricing
    • DV01 and key-rate risk
    • Convexity
    • Bootstrapping and interpolation

  3. Stage 03 · Core

    Curve factors and numerical methods

    Level, slope and curvature, and fitting a curve that someone else can rerun.

    • PCA of yield changes
    • Root finding
    • Least-squares calibration

  4. Stage 04 · Specialist

    Interest-rate models

    Models of how the whole curve moves, for pricing options on rates.

    • Vasicek and CIR
    • Hull–White
    • HJM
    • Market models

  5. Stage 05 · Specialist

    Marks, liquidity and P&L explain

    What a print tells you about a mark, and defending it in writing.

    • Liquidity and bid–offer
    • P&L attribution
    • Tested, reproducible code

  6. Stage 06 · Proof of work

    Bootstrap the Treasury curve and test its three factors

    Build a daily zero curve from Treasury par yields, compute DV01s for a few bonds, and run PCA on daily curve changes. Answer whether level, slope and curvature explain the same share of risk across rate regimes, and how stable the loadings are.

    Free data to start with

Practise the interview

Questions this role gets asked, each with a hint and a worked solution.

  1. A five-year swap struck at par last year: rates are now 50 bp higher. What is it worth, and to whom?
  2. Short-rate models and market models: what is the difference, and when would you use each?
  3. You expect the curve to steepen. How do you put the trade on so that it does not care about parallel moves?

Start the SelfMadeQuant route free: a free account opens one complete topic from each primer and the interview question bank. No card needed.

Start free