Ten Interview Questions for Aspiring Quants

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 for an entry-level quant job.

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 returns over risk 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 are you with math?

Because quantitative work and Wall Street are numbers-intensive, 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.