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Ten interview questions for quants

Successfully navigating an interview for a quant job can be as much about explaining how you think as it is knowing the right answer.

When it comes to quants, says Joanna Moody, North American recruiting manager at JPMorgan, the firm's process varies, with interviews less about standardized questions and more about a candidate's background and approach to problem-solving.

Here, then, are 10 questions you could be asked during an interview.

1. Walk me through your thesis.

Moody says that JPMorgan tends to interview candidates with Ph.D.s and master's degrees,

and being able to explain their thesis is a common question.

2. Walk me through a computer model and explain how you used programming language to write it.

You could be asked to explain the outputs that come from a model and how they impact trading volatility and trade variance. On the trading and risk side, the question measures your understanding of markets and the relationships between portfolios.

3. What does VaR measure?

Value at risk measures the risk associated with losses on a specified asset portfolio. It's the threshold in which the probability that mark to market losses on a portfolio exceeds this value over a given time horizon.

4. Why do price spreads exist in asset-trading markets?

Spreads are the difference between the price in which a market maker will purchase a security and the price that a firm is willing to sell it. It's commonly known as the bid-ask difference, and exists because market markers are trying to profit from every trade they make.

5. Describe your P&L?

A quant trader may be asked to quantify how much they've earned from trading, says Leon Devereaux, commercial director at NJF International. Those returns, he says, would need to be measured against the risk they've assumed in order to achieve them. For example, a firm would need to assess the profit and loss for a quant trader with a $50 million book compared with someone managing twice that amount.

6. What is the Sharpe Ratio?

The Sharpe Ratio measures risk over returns and is calculated by subtracting the risk-free rate, from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. It tells someone whether a portfolio's returns are due to smart investment decisions or the product of high risk investments. The Sharpe ratio formula is important in positions such as high frequency trading. You may also asked to explain how you went about calculating it.

7. How good are you at maths?

You'll be asked to go into detail about your mathematical aptitude. Being well-versed in areas such as algebra, calculus, statistics, and probability are a must in securing a quant job.

8. What is Black Scholes?

Be prepared to show that you know what Black Scholes and other basics such as risk-neutral and call-put parity are. Black-Schole models price variation over time for assets such as stocks. They can be used to determine the price of call options. Risk neutrality lies between risk aversion, or a focus on safer investments, and risk taking.

9. What is the discount rate and why it is important?

Okay, you probably know this, but it's a common question, and not simply for fixed-income quants. The discount rate is the interest rate a central bank like the Federal Reserve charges banks and other institutions that borrow reserves from it. Its importance lies in its ability to determine the value of a bond. Bonds are valued by discounting the bond's expected cash flows to the present using the appropriate discount rate.

10. Which door is the prize behind?

And finally, you may be asked to answer any one of many common, riddle-like questions that test your understanding of probability, involving coin flipping, playing cards, and eggs falling from buildings.

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AUTHORScott Krady Insider Comment
  • re
    researcher 100
    26 November 2010

    that not the kind of questions expected in interview
    scott what kind of rubbish is that?

  • Sl
    Slacker
    25 November 2010

    Typical questions (as found in "Heard it on the Street", "FAQs in Quant Finance", Wilmott.com forums, etc) include:
    1) Show Integral of normal distribution between +/- infinity is 1.
    2) If a train can have between 1 and 100 carriages, what is the expected number of carriages your particular train has given that you're currently sat in the 5th carriage?
    3) If 2 equals 3, 3 equals 5, 5 equals 4, and 4 equals 4. What does 10 equal?
    4) Describe a program to find all the prime factors for a given number.
    5) Describe inheritance.

  • Sl
    Slacker
    25 November 2010

    This is only for people with relevant financial experience. For people with a PhD/DPhil in a different quantitative subject, the typical interview will consist of:
    1) 2 mins to flag key things from CV whilst they read it for the 1st time.
    2) 5 mins to discuss thesis and anything interesting (be able to explain it to someone with limited relevant knowledge - know your audience!)
    3) 50 mins probability/brainteaser questions
    4) 3 mins to ask questions.

  • Mr
    Mr Frank White
    25 November 2010

    Common Dominic, you know you want to respond to this!

  • pe
    peteM
    25 November 2010

    Are these really questions for quants? I thought CFA levels 1 &2 covered these questions, where as most quants I have encountered seem to come from a different planet!

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