Quantitative Trading Interview Questions

 "Yeah, I received my Bachelor's in Mathematics from WSO University. I took courses in probability theory, statistics, calculus, and linear algebra. 

I also have a Master's Degree in Financial Mathematics from OSW University. My master's program focused more on quantitative finance, stochastic calculus, and financial modeling."

"I am fairly proficient in Python & C++. I used both languages in my previous job. More specifically, I used Python to create trading algorithms with signal generation and portfolio optimization and C++ to backtest and simulate trading strategies."

“I keep up-to date-on quant finance news through academic journals, industry conferences, and seminars. I also follow financial news and market trends to be informed and act on emerging opportunities in the market. 

In addition, I actively participate in online forums like the Wall Street Oasis and converse with other professionals in the field.”

"I took coursework in both and used them in my previous roles to develop risk models for financial institutions and analyze market data to identify patterns and trends. I have also used both in my work on portfolio optimization and simulating portfolio performances."

“I keep up-to date-on quant finance news through academic journals, industry conferences, and seminars. I also follow financial news and market trends to be informed and act on emerging opportunities in the market. 

In addition, I actively participate in online forums like the Wall Street Oasis and converse with other professionals in the field.”

"Of course! The Black-Scholes model is a formula used to price options based on the price of an asset, the strike price, the time to expire, and the volatility. Stochastic Calculus deals with random processes, similar to stocks or interest rates.”

“Quantitative trading uses mathematical models and algorithms to identify profitable trading opportunities in financial markets. It involves analyzing large amounts of data, developing and testing trading strategies, and using automation to execute trades.”

"I would evaluate the performance vs. historical data, its risk-to-reward profile, and market sensitivity. I would also look at the robustness of the strategy, like how it performs in different simulated scenarios and acts with out-of-sample data."

“Alpha is the excess return generated by a trading strategy beyond what can be explained by market factors or beta. Beta, on the other hand, measures the systematic risk of a portfolio or security relative to the overall market. 

In other words, beta measures the volatility of a security compared to the broader market, while alpha measures the skill of a portfolio manager or trading strategy in generating returns.”

“It requires using algorithms to make trades at high speed and volume. It also uses co-located servers to reduce latency while taking advantage of the market microstructure to profit off of small price movements. 

It is normally used by proprietary trading firms and hedge funds to generate profits from small inefficiencies in the market.”

“I typically use a wide range of market data in my trading strategies, including historical price data, order book data, news sentiment data, and economic indicators. 

I also often use machine learning algorithms to extract features from these data sources, such as identifying patterns or correlations that predict future market movements.”

“Risk management is a critical component of any trading strategy, and I typically incorporate risk management techniques such as position sizing, stop-loss orders, and hedging into my trading strategies.

I also regularly monitor the performance of my strategies and adjust the risk parameters as needed to ensure that they remain within acceptable risk limits.”

“Market-making involves providing liquidity to the market by buying and selling securities at bid-ask spreads. 

Market makers typically profit from the difference between the bid and asking prices rather than directional price movements. 

Directional trading takes positions in securities based on future price movement expectations. They profit if the price moves in the direction of their trade.”

“Volatility is a measure of the magnitude of price fluctuations of a security or market over a given period. It is often used in trading to estimate the risk of a portfolio or to price options contracts. High volatility means high risk, and vice versa. 

Traders may also use volatility as a signal for trading, such as using mean-reversion strategies to profit from periods of high volatility followed by periods of low volatility.”

The answer to this brain teaser is 3. 

Here is how you would solve it: first, you weigh 3 balls against 3 others. If the weights are equal, the heaviest ball is one of the remaining 2 balls, so you would weigh them against each other to get the heaviest one. 

If the weights from the 3v3 are unequal, you would weigh 2 balls randomly from the heavier 3v3 group to find the heaviest one.

This is a guesstimate question, so your answer could vary. The purpose of this question is to test your ability to make reasonable estimates based on your knowledge and experience. 

It would help if you estimated the size and volume of a golf ball and school bus and then consider how you would arrange them and the leftover space.

This question tests the candidate's ability to apply math concepts to a more practical problem. The candidate might want to explain how the value of pi is related to the probability a needle of a certain length will intersect with a series of parallel lines on a piece of paper. 

By conducting a series of experiments and measuring the number of intersections, the candidate could estimate the value of pi using statistical methods.

This is a combinatorics problem where the interviewer assesses the candidate's ability to apply principles of counting and probability to solve this problem.  

To answer this, the candidate might explain that there are 52 cards in the deck, and the order matters, so there are 52! (52 factorial) ways to arrange a deck of cards. 

This number is extremely large (over 8x10^67), so the candidate might also consider approximations or simplifications to the problem, such as dividing by the number of identical permutations (such as swapping two adjacent cards).

This question is meant to focus on your problem-solving ability, persistence, and resilience. You would ideally describe the project, the obstacles, and the circumstances surrounding the project. 

Please explain the steps you have taken to address, communicate, and resolve the issue clearly, quickly, and efficiently.

This question focuses on the candidate’s adaptability and flexibility. The candidate should describe a situation where they were not given structure and how they progressed through that. 

The interviewer might ask themselves during your answer: Did the candidate seek additional information? Did they make decisions based on existing data? How did they approach the situation? Your response should be able to answer the questions the interviewer is looking to gain insight on.

We’ve all heard the saying, “teamwork makes the dream work.” This question is designed to evaluate a candidate’s teamwork and conflict-resolution skills. 

The candidate should explain a situation where they have had a disagreement with a team member and how they approached the decision. If you listened to another perspective, proposed a compromise, or seek mediation, make sure to mention it.

Because quantitative trading is such an intense industry, a candidate should have strong time management and organization skills. 

You should explain a situation where you have had to balance multiple priorities and handle unexpected deadlines. You should explain the steps you took to address those priorities and how they helped you.