Week 2: From Word to Reality

Week two of the internship marks the transition from words and formulas on papers to the example applications. I was really excited for this transition since I have always been passionate about working on real things (with materials, ingredients, or with data/numbers). I have to admit that the previous long reading times were sort of boring, but I did obtain basic knowledge regarding the focus of the company. I really need to check out the movie or the book “The Big Short”, which is recommended by my supervisor and some other interns. As I learned more about this industry, I became more interested in its value and function, and its place within the society and the world. It has been my belief that finance is a tool for people to “cheat” in acquiring more money. After all, money is something sought after by most people, and it is what keeps big financial corporates/areas like Wall Street going. And, on the other hand, it is also what harms the society and the world in some aspects. Anyway, it’s still too early for me to make such comments, and I hope to learn more in the field before I can really say a word about it.

 

For this week, the emphasis was on the understanding of deals and calculating CE (credit enhancement), EL (expected loss), ratings, etc from the information given in the offering circulars. It was quite interesting to go over a 1999 deal as an example. Other than this, all interns also received a lecture on an important aspect called average life, presented by one of the owner, who is a professor in Baruch College teaching financial engineering. It was an inspiring lecture where I could see his passion and value in what he is doing—to correct the fakeness and cheating culture in this industry. The concept of average life is not tricky, but the derivation and steps of the formula is complicated. I realize that there’s still a long way to go if I want to dig deeper in the Finance world. But I really admire the company’s ultimate goal—to do the right thing with the deepest knowledge.

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