Sales & Trading interview guide – quantitative topics

3 mins read

Its that time of the year again. You have made it through the initial selection rounds but you are worried about the quantitative interview. If you are one of the lucky few, you already have an offer but you have been thinking about taking a running start before you hit the trading desk.

The sales & trading interview guide serves as a quick refresher for quantitative questions you should expect to be tested on during the recruiting and interviewing process for investment banking roles. Given the nature of the quantitative interview there is a lot of ground that needs to be covered and your preparation should start a few weeks before your interview date.

We cover nine core quantitative themes that need to be mastered in addition to your personal, background, fit and motivation interviews. In terms of reading time the first eight items can take a full day to cover, a little longer to completely process and digest.

The two video courses that follow would need four hours to complete, but the Black Scholes course may require revisiting a few times before you are comfortable with its content. If you are out of time and need to be selective, just focus on (5), (6) and (8). The Black Scholes model is the basis of almost everything we do on the pricing, valuation and risk management side. Not being comfortable with it is a significant disadvantage. Doesn’t matter if you speak to clients, with other traders in the group or with firm wide risk, everyone assumes that you understand the foundation on which modern finance is built.

Here is the technical Sales & Trading interview guide’s laundry list of topics.

  1. Understanding Greeks – (Options trading desks – also see volatility surfaces)
  2. Risk & Treasury Models – (Pricing & Valuation – based on 1 credit risk & pricing course)
  3. Risk & Treasury Case Studies – (Fuel Hedging, market risk, swaps, economic capital)
  4. Asset Liability Management – (Required for Insurance, Pensions, Banking, Capital Arbitrage interview focus)
  5. Monte Carlo Simulation – (Pricing & Models – Exotics, Trading, Pricing interview focus)
  6. Advance Risk Management Models – (Assorted exotic topics including portfolio optimization)
  7. Economic Capital – (Economic Capital estimation for banking – alternate approach)
  8. Understanding Black Scholes – (Free video course -Understanding N(d1), N(d2) – 102 minutes)
  9. Risk Basics Crash Course – (Free video course – Quant crash course – 117 minutes)

The list is not comprehensive or all inclusive but is equivalent to a 9 credit hour course load (3 full semester courses) in the risk and investment management concentration.

Sales & Trading Interview Guide – Background reading

In addition to the above topics, you should also catch up on background reading; posts that can be used to create questions that you can pose to the interview panel, fill in background material and context for positions and occasionally for informal conversation starters at lunch or dinner meetups.

  1. A quick look at investment banking roles
  2. Before you accept that middle office offer…
  3. What is included in the credit risk management function?
  4. A framework for estimating liquidity risk capital for a bank.
  5. Risk jobs – treasury vs. market risk vs. credit risk
  6. A visual history of US yield curve shifts – 1978 – 2013
  7. Operational risk management – a quick introduction
  8. Frontier & Emerging markets Enterprise Risk Management.
  9. High Frequency Trading, Flash boys & Mr. Lewis
  10. Why does bank regulation fail?

Best of luck for the interview. Drop us a line if you would like us to add more topics to this list.

Update – 30th Nov 2014 – Two free video courses added – Understanding Black Scholes & Risk Basics Crash Course. Updated new course links for Asset Liability Management & Monte Carlo Simulation as well as added new materials on Economic Capital – the alternate approach. Added background reading section.

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