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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100 questions, mapped to the firms that asked them

Questions
100
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29
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September 2026
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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
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  1. 036What is the difference between implied and realised volatility, and which one are you actually trading?VolatilityCoretechnicalVolatility tradingProp trading firms

    Say this

    Realised volatility is what the underlying actually did — measured from historical returns. Implied volatility is what the option market is charging, backed out of the price. When you buy an option and delta hedge it, you are long realised and short implied: you make money if the world turns out more volatile than the price you paid.

    Then walk it

    1. Realised is backward-looking and measurable: annualise the standard deviation of log returns, typically by multiplying the daily figure by root 252. The answer depends on your window, which is why people argue about it.
    2. Implied is forward-looking and is a price, not a forecast. It contains the market's expectation plus a risk premium plus supply and demand for that specific strike and expiry.
    3. The trade: buying a delta-hedged option is long realised volatility, short implied. The profit over the life is roughly the gamma-weighted difference between the two, which is why a variance swap — whose payoff is exactly realised variance minus a strike — is the clean expression of the view.
    4. A number to anchor it: Nifty realised volatility runs in the low teens in calm periods while India VIX often sits a few points above. That gap is the premium, and it is persistent enough that systematic short-volatility strategies exist to harvest it.
    5. The two are not even measuring the same object. Implied is a risk-neutral expectation over the option's remaining life. Realised is a sample statistic over a past window. Comparing them requires matching horizons, and most casual comparisons do not.
    6. The limitation to volunteer: implied above realised does not mean options are expensive. It means you are being paid for taking crash risk, and the payment looks generous right up to the point where you find out why it existed. February 2018 and March 2020 are the two reference points.

    Where candidates lose it

    Treating implied volatility as the market's forecast of realised volatility. It is a price with a risk premium in it, and a persistent gap is compensation rather than mispricing. Saying so is what separates an answer from a definition.

    Expect next

    • So is a persistent gap between them an inefficiency?
    • How would you measure realised volatility, and over what window?
    • What is the cleanest instrument for trading realised against implied?

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.