Life as a Derivative Investment

The other day, I spent a good half hour talking to a Berkeley PhD candidate about her desire to transition from academia to the private sector, specifically for a career in finance. She participates in the same professional association that a friend of ours does and it was as a favor to our friend that I fielded the call. Much of our chat involved her picking my brain as to how the financial services industry was structured, i.e., who does what and why. At a particular point in the conversation, I brought up alternative investments and financial risk management, including derivative instruments, primarily because I am currently working for a derivatives sales and trading group. Invariably, I had to distinguish a derivative from a security, i.e., a derivative "derives" its value from that of an underlying security. In my mind, I ruminated over the irony of working in derivatives. My entire life is a derivative. It has very little intrinsic value per se. Its primary value is derived from its relationship to and the worth of its various underlyings, whether that be my fiance, family, friends, or accomplishments at work or in business school. This fact of life will be ever more evident as marriage and parenting enter the mix. Bolster the value of the underlyings, increase the chances that the derivative (my life) will not expire worthless.