Derivatives Foundation interview preparation

Questions

100

Traced to a firm

29

Firms

19

Updated

September 2026

Asked at

All firmsMSMorgan Stanley4Nomura4Akuna Capital2Amundi2HSBC2PIMCO2Bank of America1Barclays1Citadel1DRW1Goldman Sachs1Jane Street1Millennium Management1Mizuho1Old Mission Capital1RCRBC 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

1. 083What do you think this index closes at by the end of the year?Trading and marketsIntermediatetechnicalMSMorgan StanleySales and Trading · Tokyo · 2025

   Say this

   Give a number and build it, do not dodge it. Decompose into earnings growth and multiple: start from current index earnings, apply a growth rate you can defend, apply a multiple with a reason, and you have a level. Then give a range and say what the options market is currently implying, because that is the market's own answer.

   Then walk it

   1. The build: index level equals earnings times multiple. If earnings are growing 8 percent and the multiple is unchanged, you get 8 percent, and then you argue about the multiple — rates, risk premium and the growth outlook.
   2. Give one number and one range. 'My central case is up 6 to 8 percent from here, so roughly X, with a plausible band of minus 10 to plus 15.' Point forecasts are dishonest and no forecast is evasive; the number plus band is the professional answer.
   3. Then the market-implied cross-check, and this is where a derivatives candidate distinguishes themselves: the options market gives you a distribution for free. The at-the-money implied volatility annualised over the remaining period tells you the one standard deviation range the market is pricing, and the skew tells you the market's asymmetry.
   4. So you can say: the market is pricing about a plus or minus 12 percent one standard deviation range with a fat left tail, and my view is inside that range but with less downside than the skew implies — which is a trade, not just a forecast.
   5. Then the trade expression. If your view is modest upside with low volatility, sell a put spread or buy a call spread rather than buying outright calls. Matching the structure to the shape of the view is the point of being on a derivatives desk.
   6. And the risk to name: the level is driven by the multiple far more than by earnings over a one-year horizon, and the multiple is driven by rates and risk appetite, neither of which I can forecast. So the honest version is that my earnings number is a view and my multiple number is an assumption, and I would sensitise it.

   Where candidates lose it

   Refusing to give a number, or giving one with no construction. Both fail. Build it from earnings and multiple, then use the options market to give the range — that second step is free evidence and almost nobody does it.

   Expect next

   • What is the options market implying for the range?
   • Which part of your build are you least confident in?
   • How would you express that view in options rather than futures?

   Reported by candidates at Morgan Stanley (Sales and Trading, Tokyo, 2025). Source: Wall Street Oasis.

2. 084What would your allocation be in today's market?Trading and marketsIntermediatetechnicalAmundiRates · London · 2018

   Say this

   Start with the benchmark and state your deviations, because an allocation answer with no anchor is untestable. Then give three or four active positions, each with a reason, a size and a way of being wrong. And for a rates seat, make duration and curve positioning the centre of the answer rather than an afterthought.

   Then walk it

   1. Anchor first: 'against a 60-40 benchmark' or 'against a global aggregate index'. Then your tilts are measurable and the conversation can be about the tilts rather than about taste.
   2. Then the positions with sizes. Something like: duration slightly short of benchmark because the curve has too much easing priced; overweight the front end versus the long end, which is a steepener; underweight credit because spreads are near cycle tights and the compensation for illiquidity is thin; and a small allocation to convexity through options rather than cash.
   3. Each position needs one sentence of reasoning that refers to a price, not a sentiment. 'Spreads at X basis points against a cycle median of Y' is a reason. 'Credit feels expensive' is not.
   4. For a rates desk, be specific about the curve rather than the level. Level views are crowded and hard; curve and cross-market views — this country's five-year against that one's — are where rates managers actually take risk, and saying so shows you know the seat.
   5. Then the risk budget, which is what separates an allocation from a list. Say how much of your tracking error each position consumes, and note that a steepener and a credit underweight are correlated positions in a risk-off event, so you cannot size them independently.
   6. And the falsifier: name the data point that would make you cut. For the duration view it is a run of inflation prints above expectation; for the credit view it is spreads tightening through a level at which the carry no longer compensates. Ending on what would change your mind is the difference between an allocation and an opinion.

   Where candidates lose it

   Listing asset classes with adjectives and no benchmark, no sizes and no correlations. The interviewer is testing portfolio construction, not market views. And on a rates seat, if your answer is entirely about the level of yields and never about the shape of the curve, you have answered the wrong question.

   Expect next

   • Which two of those positions are correlated?
   • How much of your risk budget does each consume?
   • What would make you cut the duration position?

   Reported by candidates at Amundi (Rates, London, 2018). Source: Wall Street Oasis.

3. 085How would you allocate one million dollars versus one billion dollars?Trading and marketsIntermediatetechnicalScotiabankSales and Trading · Toronto · 2025

   Say this

   The million is a pure return problem, the billion is a liquidity and market-impact problem. At a million I can own whatever I like and get in and out in a day. At a billion my own trading moves prices, my universe shrinks to what can absorb size, and the constraint becomes how I build and exit a position rather than what I want to own.

   Then walk it

   1. At a million: concentrated is rational. Five to ten positions, small and mid caps available, options strategies viable in size because a hundred contracts is nothing to the market. Transaction costs are a rounding error.
   2. At a billion, capacity binds. A 5 percent position is 50 million, and in a small cap that is weeks of average daily volume — so the small and mid cap universe largely disappears, and I am pushed towards large caps, index derivatives and government bonds.
   3. Market impact becomes the dominant cost. Building 50 million in a moderately liquid name will move it, and the impact is not recovered. So execution — algorithms, participation rates, blocks, working the order over days — becomes part of the investment decision rather than a back-office task.
   4. The derivative alternative is the interesting answer for this desk: at a billion, index futures and total return swaps let me take beta exposure instantly without moving underlying stocks. Get the market exposure on cheaply in futures, then build the alpha positions slowly underneath.
   5. Number of positions rises for capacity reasons rather than diversification reasons, and that mechanically dilutes any edge. This is the core reason large funds' returns converge towards the index — not worse ideas, just less ability to express them.
   6. And the exit is the part people forget. A position you can build over three weeks may need to be sold in three days in a crisis, when liquidity is a fraction of normal. So at a billion I would size positions against stressed liquidity, not average liquidity, and keep a derivative overlay as the fast lever. The reason to do this is not theoretical: it is exactly the mismatch that forced the 2022 UK LDI funds and several credit funds into distressed selling.

   Where candidates lose it

   Answering it as a risk-tolerance question — 'more diversified with more money'. The real answer is capacity, market impact and exit liquidity, and the derivatives-desk version is that futures and swaps let you separate getting the exposure on from building the position. Size against stressed liquidity, not average.

   Expect next

   • How would you get the beta on quickly at a billion?
   • How does capacity dilute your edge?
   • How would you size against stressed liquidity rather than average?

   Reported by candidates at Scotiabank (Sales and Trading, Toronto, 2025). Source: Wall Street Oasis.

4. 086Two separate games have the same expected value. Which would you choose?BrainteasersIntermediatetechnicalAkuna CapitalSales and Trading · Chicago · 2025

   Say this

   Expected value is not enough information, so I would ask about the variance, whether I can play repeatedly, and what fraction of my capital is at stake. Same expected value, lower variance wins if I play once. If I can play many times and size small, I would take the higher variance game if it has any edge, because repetition converts edge into certainty.

   Then walk it

   1. First, name what is missing: the distributions. Two games can share an expected value and have completely different shapes — one pays 1 with certainty, the other pays 1,000 with probability one in a thousand.
   2. One-shot, meaningful fraction of capital: take the low variance game. Utility is concave and a single large loss is not recoverable, which is the whole content of the Kelly and utility arguments.
   3. Repeated play with small sizing: variance matters much less because the law of large numbers works for you. Then I would prefer whichever game has the better edge per unit of capital tied up, and the higher variance one may well be more profitable per dollar deployed.
   4. The crucial extra question is ruin. If the high variance game can take me to zero, no expected value justifies it, because zero is absorbing. So my real decision rule is: maximise growth subject to never risking ruin, which is Kelly sizing, not expected value maximisation.
   5. A concrete version: a coin flip paying 2 to 1 on heads has a positive edge, and betting your whole stack each time gives you an expected value that rises and a probability of ruin that approaches one. Expected value and survival are different objectives.
   6. So the answer I would actually give a trader: I choose neither until I know the variance and the sizing, and then I size by Kelly and prefer the game with the better ratio of edge to variance. That ratio is the Sharpe ratio, and preferring it is the same instinct as running a book rather than making a bet.

   Where candidates lose it

   Picking one and defending it. The question has no answer as stated, and the interviewer is testing whether you ask for variance, repetition and sizing. A candidate who says 'they are the same, so I am indifferent' has failed. A candidate who asks three questions before choosing has passed.

   Expect next

   • What if you could play a thousand times?
   • What if one game could take you to zero?
   • How would you size the bet?

   Reported by candidates at Akuna Capital (Sales and Trading, Chicago, 2025). Source: Wall Street Oasis.

5. 087Make me a market on something you cannot know. Now, how much would you risk to win 100 dollars if the real answer is inside your market?BrainteasersIntermediatetechnicalAkuna CapitalTrading · Chicago · 2025

   Say this

   If I believe my own market, the answer being inside it is the outcome I expect, so I should be willing to risk a meaningful amount — but the question is a test of whether my market was honest. The right response is to state my confidence as a probability, then size the bet from that probability, not from bravado.

   Then walk it

   1. First, be clear what a market means: a bid and an offer I am willing to be traded on either side of. If I quote 40 at 60, I am saying I will buy at 40 and sell at 60, and the width is my uncertainty.
   2. So the follow-up question is really 'what is your confidence that the answer lies between 40 and 60?' If I say 80 percent, the fair stake to win 100 is around 25 — because at 4 to 1 in my favour, risking 25 to win 100 is the break-even at 80 percent.
   3. That arithmetic is the answer: my willingness to bet has to be consistent with the width I quoted. If I quoted a tight market and then refuse to bet, my market was dishonest. If I quoted a wide market and bet enormously, I was sandbagging.
   4. Then apply a sizing discount for the fact that the interviewer has information I do not, or is choosing the question because it is adversarial. Betting against someone who knows the answer means adverse selection, and the correct response to adverse selection is to widen the market, not to bet bigger.
   5. So I would say: I quote 40 at 60, I am about 75 to 80 percent confident, and I would risk 20 to win 100 — and if you want me to risk more than that, I need to widen my market first. That trade-off between width and size is exactly the market maker's job.
   6. And I would say the meta-point out loud, because it is the point: the test is consistency between my quoted uncertainty and my willingness to back it. A trader who cannot price their own confidence cannot be trusted to price anything else.

   Where candidates lose it

   Answering with a number to look brave, or refusing to bet at all. Both fail. The answer must tie the stake to the probability implied by the width you quoted, and it should mention adverse selection — the interviewer picked this question for a reason. Consistency is being graded, not courage.

   Expect next

   • Your market was 40 at 60. What probability does your bet imply?
   • I want to bet ten times that size. What do you do?
   • Why should you widen rather than bet bigger when I know more than you?

   Reported by candidates at Akuna Capital (Trading, Chicago, 2025). Source: Wall Street Oasis.

6. 090How many taxis are there in Hong Kong Central?BrainteasersIntermediatetechnicalHSBCSales and Trading · Hong Kong · 2026

   Say this

   I would build it from demand rather than guess at a fleet. Central has roughly 250,000 to 300,000 daytime workers and visitors, say 10 percent take a taxi on a given day, so about 25,000 to 30,000 trips. A taxi does maybe 25 trips a day, so around 1,000 to 1,200 taxis serving Central at any time. As a sanity check, Hong Kong licenses about 18,000 taxis in total, so Central holding 5 to 7 percent of them is plausible.

   Then walk it

   1. State the approach before the arithmetic: demand side, because I can estimate people and trips more reliably than I can estimate a fleet directly.
   2. Population of Central during the working day: it is a dense financial district, so a few hundred thousand is the right order. I would say 250,000 and flag that as my biggest uncertainty.
   3. Trips per person per day: most people walk or take the MTR in Central because it is compact and well-served, so I would use 10 percent rather than something higher. That gives 25,000 trips.
   4. Trips per taxi per day: a 10-hour shift with an average trip and repositioning taking 20 to 25 minutes gives roughly 25 trips. So 25,000 over 25 is about 1,000 taxis.
   5. Then the cross-check from the supply side, which is what makes the answer credible: Hong Kong's total licensed fleet is around 18,000, a number that is publicly known and stable because licences are capped. My 1,000 to 1,200 for Central is a believable share of it.
   6. And I would name the sensitivity: the answer is most sensitive to the trips-per-person assumption. Double it to 20 percent and I get 2,000 taxis. So my honest answer is a range of roughly 1,000 to 2,000 with a central case around 1,200, and I would want the actual taxi stand data to tighten it.

   Where candidates lose it

   Guessing a number and then rationalising it. And in Hong Kong specifically, ignoring that Central is compact and MTR-dense — a candidate who uses a New York taxi propensity will be out by a factor of three. Cross-check from the licensed fleet, and name which assumption drives the answer.

   Expect next

   • Which assumption is your answer most sensitive to?
   • Now do it as a fleet-size estimate and see if the two agree.
   • How many beds are there in a New York hotel?

   Reported by candidates at HSBC (Sales and Trading, Hong Kong, 2026). Source: Wall Street Oasis.

7. 096What did you learn from that experience that you hadn't expected to learn?FitIntermediatesuperdayJane StreetSales and Trading · London · 2026

   Say this

   Answer with something that genuinely surprised you, which means it should be slightly unflattering. The word 'unexpected' is the whole question — if your lesson is the one anyone would predict from the story, you have not answered it. The good version is a belief you held that turned out to be wrong.

   Then walk it

   1. The structure: here is what I expected going in, here is what actually happened, here is the belief I had to revise. Three beats, and the third one is the answer.
   2. Make the revised belief specific and about you. 'I expected the hard part to be the modelling and it turned out to be getting three people to agree on the assumptions' is a real lesson. 'I learned the importance of teamwork' is not.
   3. It is stronger when it is mildly unflattering, because that is what makes it credible as a surprise. Somewhere like Jane Street is explicitly testing intellectual honesty and the ability to update, which is the same trait as cutting a losing position.
   4. Then say what you did differently afterwards, concretely. An unexamined lesson is not a lesson. 'So on the next project I wrote the assumptions down and got them signed off before I built anything' closes the loop.
   5. Then, if it fits, name what you still find hard about it. Saying 'I am better at this than I was and still not good at it' is disarming and almost always true.
   6. And avoid the two failure modes: a rehearsed lesson that any story would produce, and a humblebrag where the surprise is that you were even better than you thought. Both tell the interviewer you are performing rather than thinking.

   Where candidates lose it

   Giving the predictable moral of the story. The word 'unexpected' means the lesson must be one you could not have guessed at the start, which almost always means it involves you being wrong about something. A generic teamwork or time-management lesson is a non-answer here.

   Expect next

   • What did you do differently after that?
   • What do you still find hard about it?
   • Tell me about a time you changed your mind about something important.

   Reported by candidates at Jane Street (Sales and Trading, London, 2026). Source: Wall Street Oasis.

8. 097What would you do if you get the offer?FitIntermediatesuperdayBarclaysSales and Trading · New York · 2026

   Say this

   Be straight about it. If this is your first choice, say so plainly and say why in one specific sentence. If you have other processes running, say that too and give your actual timeline. The question is a sincerity test, and an obviously over-eager answer fails it as badly as an evasive one.

   Then walk it

   1. If it is your first choice: say 'I would accept', then one concrete reason that could not apply to any other bank — a desk, a product franchise, a person you met in the process and what they said. Vague enthusiasm reads as a line.
   2. If you have a competing process: say so, name your timeline honestly, and say what would make the decision. Recruiters talk to each other and they can usually tell. Being caught in an easy lie costs you the offer.
   3. Do not negotiate here. This is not the compensation conversation, and treating it as one before an offer exists reads badly.
   4. It is also a legitimate moment to ask one good question back, because the answer changes your decision: which desk would I sit on, how does the rotation work, and who decides placement. That turns the exchange into a real conversation.
   5. The subtext is retention. Graduate programmes lose people to other offers and to the buy side, and they are trying to gauge how likely you are to be there in two years. Speaking about the medium term concretely — the product you want to learn, why that takes years rather than months — addresses that directly.
   6. And the thing that actually convinces: knowing something specific about their business. If you can say which of their desks you want and why, and reference something real about the franchise, the sincerity question answers itself without you having to protest.

   Where candidates lose it

   Over-promising with 'I would sign immediately, this is my dream job' when you have three other processes running. Interviewers ask this exact question to test candour, and they hear the rehearsed version all day. State your real position, including a competing offer if you have one, and be specific about why their business.

   Expect next

   • Where else are you interviewing, and how do we compare?
   • Which desk would you want, and what if you were placed elsewhere?
   • Where do you see yourself in three years?

   Reported by candidates at Barclays (Sales and Trading, New York, 2026). Source: Wall Street Oasis.

9. 098When would you use C++ over Python on a trading desk?FitIntermediatetechnicalWells Fargo SecuritiesSales and Trading · Charlotte · 2026

   Say this

   C++ where latency and deterministic performance matter — the execution path, the pricing engine inside a market-making loop, anything in the hot path measured in microseconds. Python everywhere else: research, calibration, backtesting, reporting and glue. Most desks run both, with the Python layer calling into C++ libraries.

   Then walk it

   1. The real distinction is the hot path versus everything else. If code runs a million times a second between a market data tick and an order, you need C++ or something comparable — predictable memory layout, no garbage collector pauses, control over allocation and cache behaviour.
   2. Python's cost is not just raw speed, it is the interpreter's unpredictability. A garbage collection pause of a few milliseconds is irrelevant in research and fatal in a quoting engine.
   3. Where Python wins decisively: iteration speed in research, the numerical and data ecosystem, and readability for code that a team has to reason about. Pandas, NumPy and the scientific stack mean a volatility surface calibration takes an afternoon rather than a week.
   4. The standard architecture is both. Numerical kernels in C++ exposed through bindings, with Python orchestrating. The heavy libraries you use in Python are C or C++ underneath anyway, so a vectorised NumPy routine can be within a small factor of hand-written C++.
   5. So the practical answer: write it in Python first, measure, and only rewrite the part that is actually the bottleneck in C++. Premature optimisation in C++ costs weeks of development time for latency nobody was going to notice.
   6. And I would be honest about my own level. If I am stronger in Python, I say that and say what I have done in C++ — knowing enough to read a pricing library and understand why it is written the way it is, versus being able to write a low-latency engine, are different claims and I would not blur them.

   Where candidates lose it

   Answering 'C++ is faster' and stopping. The interviewer wants the hot-path distinction, the point that most production stacks are both, and the discipline of measuring before rewriting. And do not overclaim your C++ — a technical interviewer will test it in the next question.

   Expect next

   • What specifically would you put in C++ on a market-making system?
   • How fast can Python get if you vectorise properly?
   • How strong is your C++, honestly?

   Reported by candidates at Wells Fargo Securities (Sales and Trading, Charlotte, 2026). Source: Wall Street Oasis.

10. 099Tell me about a time a position or a piece of work went badly against you.FitIntermediatesuperdayProp trading firmsSell-side sales and trading

    Say this

    Pick a real loss, state the size, and be specific about what your process got wrong rather than what the market did. The structure is: here was the thesis, here is what happened, here is the error in my process, here is what I changed. The error should be yours, not the market's.

    Then walk it

    1. Give a real example with numbers, even if small. 'I was long a position that was 30 percent of my account and it fell 40 percent' is credible. A vague story about a group project that got tight on time is not what is being asked on a trading desk.
    2. Separate the two failures explicitly: was the thesis wrong, or was the sizing and risk management wrong? Those have different fixes, and the ability to distinguish them is the actual skill being tested.
    3. Name the process error. Common honest ones: I sized to conviction rather than to the loss I could tolerate, I had no pre-defined exit so I kept renegotiating with myself, I added to a loser to improve my average, I confused a liquidity problem with a value opportunity.
    4. Then the change, concretely. A written thesis with a falsifier before entry, a maximum position size rule, a stop defined in advance, or a journal reviewed weekly. Say the rule you now follow and whether you have had to use it.
    5. Then the part that most candidates skip: what you did in the moment. Did you tell someone, cut, hedge, or freeze? Freezing is the honest answer for most people the first time, and saying so is far more convincing than a story where you acted perfectly.
    6. And no self-serving framing. Not 'the thesis was right, the timing was wrong' — that is the most common self-deception in the industry, and a trader hearing it will assume you have not actually learned anything. If the position was closed at a loss, the trade was wrong.

    Where candidates lose it

    Blaming the market, or the 'right thesis, wrong timing' framing. On a trading desk that phrase is a red flag, because it means you have preserved the belief that lost the money. Own a process error, name the rule you changed, and say honestly what you did in the moment.

    Expect next

    • Was the thesis wrong or was the sizing wrong?
    • What rule did you put in place, and have you had to use it?
    • What did you do in the hour after you realised?

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.