Derivatives Foundation interview preparation

The full derivatives syllabus from no-arbitrage pricing through the Greeks, the volatility surface, swaps, CDS and clearing, plus the Indian index-options market. Every question is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it - we do not invent attributions.

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Question bank

100 questions, mapped to the firms that asked them

Questions
100
Traced to a firm
29
Firms
19
Updated
September 2026
Asked at
All firmsMorgan Stanley4Nomura4Akuna Capital2Amundi2HSBC2PIMCO2Bank of America1Barclays1Citadel1DRW1Goldman Sachs1Jane Street1Millennium Management1Mizuho1Old Mission Capital1RBC Capital Markets1Scotiabank1UBS1Wells Fargo Securities1
Topic
All topicsForwards and futures10Options basics8Option pricing7The Greeks10Volatility7Option strategies9Swaps and rates7Credit derivatives4Market structure and clearing6Indian derivatives8Trading and markets9Brainteasers6Fit9
Level
AnyCoreIntermediateHard
Type
AnyTechnicalCaseMarket viewBrainteaserFit
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  1. 063When would a client want an exchange-traded derivative and when an OTC one?Market structure and clearingCorephone / first roundSell-side sales and trading

    Say this

    Exchange-traded when they want liquidity, price transparency and no counterparty risk, and they can live with standardised terms. OTC when the exposure they are hedging does not match any listed contract — an odd maturity, an odd notional, a bespoke underlying — and they are willing to pay a wider spread and take credit risk for the precision.

    Then walk it

    1. Exchange: standard size, standard dates, central clearing, continuous two-way prices, and margin set by the exchange. You can get out by trading, not negotiating.
    2. OTC: any terms you can agree. A corporate hedging a 47 million dollar payable on the 14th of March cannot do that with 1,000-lot standard contracts without leaving a residual.
    3. The cost of precision is the spread and the credit. An OTC trade is priced with CVA and funding charges built in, and you are exposed to the dealer — collateralised under a CSA, but exposed between margin calls.
    4. Hedge accounting pushes corporates to OTC too. A precise hedge that matches the exposure qualifies for hedge accounting and avoids profit and loss volatility; a proxy hedge with basis risk may not.
    5. Since 2009 the line has blurred. Standardised OTC products — most vanilla interest rate swaps and index CDS — are now centrally cleared and often traded on electronic platforms, so they have exchange-like credit and margin with OTC-like flexibility on terms.
    6. The practical rule I would give a client: start with the listed market, and only go OTC for the residual you genuinely cannot hedge there. Most treasurers who ended up in trouble had a bespoke structure where a plain vanilla listed hedge would have covered 90 percent of the exposure at a fraction of the cost and with none of the complexity.

    Where candidates lose it

    Presenting it as a two-column comparison table with no judgement. The interviewer wants you to pick, and the answer that lands is 'listed by default, OTC only for the residual you cannot hedge there'. Mention that cleared OTC now sits in between.

    Expect next

    • What does a corporate give up by using a listed contract?
    • How has clearing changed the distinction since 2009?
    • Why does hedge accounting push clients towards OTC?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.