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.

Jump to the question bank
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
Showing 1–1 of 1 · filtered from 100Clear filters
  1. 034Beyond the five standard Greeks, which second-order sensitivities actually get managed?The GreeksHardsuperdayExotics tradingVolatility trading

    Say this

    Vanna and volga, mainly. Vanna is how delta changes when volatility moves, and it is the same thing as how vega changes when spot moves. Volga is the convexity of vega in volatility. On any book with skew — which is every real book — those two determine whether your vega hedge holds up.

    Then walk it

    1. Vanna matters because implied volatility and spot are correlated. In equities the correlation is strongly negative: spot falls, volatility rises. So a position with vanna gets a second hit at exactly the moment the first one arrives, and the two are not independent risks.
    2. Volga is the reason a vega-neutral book is not volatility-neutral for large moves. Wing options have positive volga, so a long-wings, short-body position is vega-flat and still profits from a volatility spike. Every risk reversal and butterfly carries it.
    3. Charm is the decay of delta with time, and it matters near expiry and on barrier books, where your delta changes overnight without the market moving at all.
    4. The FX market prices in these terms directly. The vanna-volga approach prices an exotic by taking the Black-Scholes value and adding the cost of hedging its vanna and volga with the market-quoted risk reversal and butterfly. It is not elegant, but it reproduces market prices better than a naive smile interpolation.
    5. How desks actually manage it: a risk report showing profit and loss under a grid of spot and volatility shocks, rather than a list of Greeks. The grid captures vanna and volga implicitly and does not require you to trust a Taylor expansion.
    6. And the limitation: these are still local derivatives. A scenario grid with a minus 20 percent spot and plus 30 volatility shock tells you more than any second-order Greek, because in a real dislocation the correlations you assumed break and the higher-order terms are no longer small.

    Where candidates lose it

    Rattling off exotic Greek names without connecting them to spot-volatility correlation. Vanna matters in equities specifically because the skew is one-sided and spot and volatility are negatively correlated. If you cannot say that, the names are decoration.

    Expect next

    • Why is vanna so important in equities specifically?
    • How can a vega-neutral book still profit from a volatility spike?
    • Would you rather have a Greek report or a scenario grid, and why?

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.