I'm interviewing for a junior trader position at a small hedge fund. Has anyone interviewed for junior trader position at a hedge fund? What should I expect. Heres a description: Evolution Capital Management is an equity and derivatives hedge fund launched in 2002 that specializes in the Pan-Asian markets (Japan, China, Korea, Australia, etc.) Strategies include statistical arbitrage, long/short stock selection, event/special situations and convertible bond arbitrage. Any information will be greatly appreciated.
That would be a sweet gig. I would not mind living in Hawaii for a little while. Good luck on the interview.
OK: Here are some simple questions that are often asked at the "name" firms when they interview potential employees for derivatives desks. 1. "Lets say you don't have a computer available, but you want to value a European style option that is close to "at-the-money" forward and has just a few weeks to expiry. Give us a "quick and dirty" approximation of the Black-Scholes formula in one line" 2. "What is the formula for stochastic volatility with mean reversion?" 3. "What is the formula for constant volatility?" 4. "Which commonly used variation of the Black-Scholes equation allows the user to generate 4 dimensional gamma" I look forward to reading your answers Lefty
I don't claim to know the answers. But if you are so bold as to suggest these questions, surely you have a general answer for each of these "simple" questions I might be asked. (its actually very unlikely I would be asked anything of this nature, but thanks for the creative quotes Lefty.) I look forward to any attempts at these questions as I am incapable of comprehending the questions, let alone answering them. (not that it matters for my interview)
Hah. Not even a quant at a leading institution would know these answers ad hoc. what are you on crack or something? How about you prove Ito's Lemma "quick and dirty" in a few sentences.
1. Know current U.S. and, obviously, Asian market levels (equity, bonds, fx, energies, commodities), what they have been doing over the past couple of years, and the big macro stories in each market. 2. Know about some of the significant stocks in the Asian markets. 3. Have a solid opinion on economies of China, Japan, and India. 4. Know Black-Scholes, but not necessarily how to derive it. Know what each input variable means, what the underlying assumptions are, and the limitations of the underlying assumptions. 5. Know all the options strategies cold (spreads, straddles, flys, etc.). 6. Know about the various instruments the fund trades (e.g. What is a convertible? How do they work? What do funds do to "arb" convertibles?). 7. Come up with good answers to the "touchy-feely" questions. Don't answer the question "Why do you want to be a trader" with "I've felt that I was destined to trade ever since I was five"...be an adult about it. These topics are just the bare minimum. Good luck.
Hey folks: I am still on vacation, but I have to say the responses to my post always give me something to laugh about: First, Kamdoo you say you are interviewing for a derivatives position, yet you cannot make sense of the questions, and you have no answers. Also you dismiss the whole thing saying that it is not likely that you will be asked this type of question. You might be in for a surprise. I hire traders every year. I ask these questions and I make decisions based on the response. Not whether the answer is correct, but how a person responds and whether the response shows me the ability to think critically about a subject. In your case, you flunked (as did the other posers who claim that "no quant could answer them". The fact is any good Phd student or grad could answer them. In fact a student in finance or quantitative methods could talk about these questions for quite a while before exhausting their background. So for those who don't have a fucking clue (that would be all of you). Here is the answer to question #1 (I am glad to answer all of them but I want to see what the response is to each) call = put = StockPrice * 0.4 * volatility * Sqrt( Time ) Above is an approximation of standard Black-Scholes that allows the user to calculate the value of a European style option that is close to at-the-money forward and has a short time to expiry. Looking at the approximation you should first note that I start by using call/put parity. After that I leave it to you to make some sensible comment. After all, this is the business you say you are interested in. Again I look forward to your comment(s). Lefty Edit: By the way. If I look to hire someone, I need a reason. I expect to pay a good salary to the person I hire. In return, I expect them to add value to my business. In other words, I need a reason to hire someone. If you want to have a chance with your potential employer, you might want to take a moment to think like them. What can you do or say that gives them a reason to hire you. Do you know anything abou the strategies they use? Do you have any background that would be of value to them. How can you add value to their business? If all you have is a passionate interest, well thats nice, but it is of no use to anyone. Think about it.
Your equation makes no sense at all, a $50 stock with 14 days to expiration at 9% vol would be valued at $7 per your model. Even MWD option with vols probably higher than that and at $52.65 don't trade nearly that high ($3.70); a good estimate? Try common sense. So I don't know how much you pay for your options, I take it way too much. Keep it real lefty; no harm intended. You happy with your hires??