an internship in a bank in 2007...I crushed the portfolio competition by betting on leveraged financial instruments correlated to oil price (the biggest volatility investment at the time).
This is such a common failure mode of stock competitions. Like every time you read about one of those old highschool stock market contests, back when newspapers printed stock listings, the story is invariably some bright kid realizing that trying to be Warren Buffett is for suckers because you get nothing if you don’t come in first, and YOLOing it on the most volatile or meme stock they can find. Embarrassing to see a bank with actual traders make that mistake - ‘heads I win tails you lose’ is the last lesson you want to be teaching your prospective traders… (Now, I’m not saying that your bank caused the 2008 crash and worldwide recession, but you’ll admit that it’s suspicious that it happened right before!)
Apologies, I don’t often come to this forum and only now saw your response. Fair point on teaching the wrong lesson. But to BofAs defence they had a really good workshop for us interns on betting under uncertainty. We had to answer various questions like how long is the Nile. The answer has to be a range and we could set it ourselves. We could put 0 − 10^99 on every answer and get all answers correct. Nobody got more than half right (mostly top grade ivy League grads) or so which really made me humble to overconfidence. They really did try to hammer in proper risk adjustment. That said, how traders bonuses were tied to their profit and loss was not ideal i think—i am pretty sure there were no negative bonuses. The bonuses were like the portfolio competition!
This is such a common failure mode of stock competitions. Like every time you read about one of those old highschool stock market contests, back when newspapers printed stock listings, the story is invariably some bright kid realizing that trying to be Warren Buffett is for suckers because you get nothing if you don’t come in first, and YOLOing it on the most volatile or meme stock they can find. Embarrassing to see a bank with actual traders make that mistake - ‘heads I win tails you lose’ is the last lesson you want to be teaching your prospective traders… (Now, I’m not saying that your bank caused the 2008 crash and worldwide recession, but you’ll admit that it’s suspicious that it happened right before!)
Apologies, I don’t often come to this forum and only now saw your response. Fair point on teaching the wrong lesson. But to BofAs defence they had a really good workshop for us interns on betting under uncertainty. We had to answer various questions like how long is the Nile. The answer has to be a range and we could set it ourselves. We could put 0 − 10^99 on every answer and get all answers correct. Nobody got more than half right (mostly top grade ivy League grads) or so which really made me humble to overconfidence. They really did try to hammer in proper risk adjustment. That said, how traders bonuses were tied to their profit and loss was not ideal i think—i am pretty sure there were no negative bonuses. The bonuses were like the portfolio competition!