Interview with Rosie Rockley

RR: Finance seems to be filled with jargon and abbreviations…

NH: We love TLAs (three letter abbreviations). Here’s a few TLAs that are often used in finance but can be difficult to pin down..

• IPO: Initial Public Offering. This is when a company “goes public” and is listed on a stock exchange.  It’s not the start of a company’s life. One of the biggest recent IPOs was Facebook… but Facebook was around for 10 years before it IPO’d
• CDS: Credit Default Swap.  Invented by JP Morgan in the 1990s, the CDS was intended to protect against risk.  Notably, it was described by Nassim Nicholas Taleb as “buying life insurance from a fellow passenger on the Titanic”.
• YTM: Yield to Maturity. To accurately value a bond, we need to look at all the future cashflows we might receive as investors, then apply some discounting to arrive at the YTM.  An essential TLA in bond valuation.

RR: You have another abbreviation, CFA after your name. It’s an investment qualification isn’t it?

NH: CFAs can be found anywhere in the wide field of finance. We often find them working as fund managers – working out how to make money on behalf of others, in hedge funds – working on complex risk versus return computations or in investment banking – trying to work out exactly how much a company is worth and maybe helping one company acquire (take over) another.

RR: You mentioned investment banking. What does an investment banker do?

NH: Investment bankers are in the business of helping corporations and governments to raise capital (cash) through a variety of means. They may help a company issue a bond (borrow money), they may help the company “go public” on the stock exchange for the first time, or they might advise a company on how much to pay to acquire another company, or maybe how to spin off a subsidiary they don’t want to own any more.

RR: How do students shine when they arrive at a finance house for their Summer Internship?

NH: Once you have secured your internship, that is just the beginning of the story.  When you arrive, you’ll certainly help to stand out by knowing how financial markets work, at least a little bit about the different asset classes we find in finance like equities, fixed income, derivatives, commodities, etc. Understanding the language of finance can also be a big help.  It can seem like a foreign language sometimes (with some tricky maths thrown in for good measure), and knowing what all those TLAs mean will also help you secure an invite to return.

RR: Are there any books you might recommend for a teenager thinking about a career in finance?

NH: My favourite all time finance book is “Liars Poker” by Michael Lewis. It’s semi-autobiographical, and includes a fair amount of humour.  Set at Salomon Brothers in the 1980s, it introduces some semi-legendary figures such as John Meriwether (who later co founded LTCM). Mr Lewis describes the culture and the mechanics of the financial world in an era of great change. Set in (broadly) the same time period, Barbarians at the Gate tells the true story of the LBO (leveraged buy-out) of RJR Nabisco. Going much further back in time, Reminiscences of a Stock Operator by Edwin Lefevre was published in 1923 and is inspired by the story of Jesse Livermore, who is still now considered one of the pioneers of Day Trading.