Derivatives questions at interviews

#1

Hi all,

I have got a couple of interviews for a derivative position and I was wondering what kind of questions could be asked?

I have good knowledge of the Hull but it seems that all the pricing and Greeks computing needs to be used with Black and Scholes model.

Any idea of what questions could be asked.

Many thanks

#2

If you have read Hull then you will be fine. This in depth knowledge is far beyond what you will need. I work in a structured product role and I wouldnt expect an Analyst candidate to know much beyond:

  1. How do you price an option - drilling down onto what makes it more/less expensive i.e. higher dividends make a call option cheaper etc
  2. Definition of put call partity
  3. Understanding all the greeks
  4. Perhaps drawing a few option diagrams e.g. can you draw a diagram of the payoff made by combiing a short 80% strike put option and a long 120% strike call option

This should be enough to prove you are passionate about the roll which is ultimately why we ask these questions. Make sure you have done youre homework.

Of course if you are interviewing for an Associate quant role then you should be able to derive Black Scholes and expect a lot of manipulation of the maths behind option/derivative pricing.

Good luck.

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