Quant interview preparation

Questions

100

Traced to a firm

53

Firms

15

Updated

September 2026

Asked at

All firmsOld Mission Capital12Tower Research Capital10Jump Trading7Akuna Capital5Citadel4DED.E. Shaw3Jane Street3ACAQR Capital Management2DRW2Millennium Management2Schonfeld2SCSquarepoint Capital2Susquehanna International Group2Belvedere Trading1Optiver1

Topic

All topicsProbability10Coins, cards and games6Expected value8Statistics11Market making15Estimation and mental maths4Stochastic processes4Regression5Machine learning6Time series6Programming10Options and derivatives8Fit and motivation7

Level

AnyCoreIntermediateHard

Type

AnyBrainteaserTechnicalCaseMarket viewFit

1. 016You win a hundred dollars if you roll a ten with two dice. How much would you risk to play?Market makingIntermediatetechnicalAkuna CapitalTrading · Chicago · 2025

   Say this

   Fair value is eight dollars and a third. Three of the 36 outcomes make ten, so probability is 1/12 and the expected payoff is 100 over 12. I would pay up to about seven to leave edge, and if I am being asked to make a two-way price I would quote around 7 at 9.

   Then walk it

   1. Count the outcomes: 6-4, 4-6, 5-5. Three ways out of 36, so 1/12, about 8.33 percent.
   2. Expected payoff 100 times 1/12 equals 8.33. That is fair value, and fair value is where you break even, not where you trade.
   3. So I need edge. I would bid 7 and offer 9 if I have to two-way it, which is about a dollar and a half of edge either side, roughly fifteen percent of fair value. That width reflects the fact that I cannot hedge a one-off die roll.
   4. Size matters as much as price. This bet has a standard deviation of about 28 dollars against a mean of 8.33, which is a terrible ratio. I would do it small even at a good price, and I would want to repeat it many times rather than do it once large.
   5. If the game is repeatable and I can do it a thousand times, I pay closer to 8. The edge I demand is compensation for variance I cannot diversify, and repetition diversifies it.

   Where candidates lose it

   Answering with the fair value of 8.33 as if that were your bid. A trader never pays fair value, and saying eight and a third is what I would risk tells the interviewer you do not understand where the money comes from. Quote a price below fair value, name your width, and say your size.

   Expect next

   • Now make me a two-way market on it and I will trade you.
   • What if I could roll a hundred times?
   • What is the standard deviation of your P&L on one play?

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

2. 064You are long five hundred lots and the market keeps offering below you. What do you do with your quotes?Market makingIntermediatetechnicalProp trading firmsQuant trading

   Say this

   Skew. Lower both my bid and my offer so I am more likely to sell than to buy, because I want to reduce inventory, and widen if the flow suggests the market is informed. Skewing quotes is how a market maker manages inventory without crossing the spread.

   Then walk it

   1. The mechanism: a market maker's reservation price moves against their inventory. Long inventory means I value the next unit less, so my fair value shifts down and my quotes should shift with it. That is the core result of the Avellaneda-Stoikov style inventory models.
   2. Skewing is cheaper than hedging aggressively. If I dump 500 lots at market I pay the spread plus impact immediately. If I skew, I get paid the spread to unwind, just more slowly.
   3. But I need to distinguish two situations. If the offers are noise traders, I keep skewing and unwind profitably. If the offers are informed flow ahead of news, skewing just means I keep buying into a falling market, which is how market makers blow up.
   4. The tell is whether the market comes back. If I sell some and the price recovers, I was providing liquidity. If every trade is followed by the market moving further against me, I am being run over and I should widen, reduce size, or cross the spread and get flat.
   5. So the decision rule I would say out loud: skew first, size down second, and cross the spread third if my position is still growing against me. And I would have a hard limit set in advance, because the one thing you cannot do is decide your maximum loss while you are losing.

   Where candidates lose it

   Answering hold and wait for it to come back, which is the losing trader's answer. Also answering just hedge without noting that hedging costs the spread. The interviewer wants to see the skew mechanism named, and wants to hear you distinguish noise flow from informed flow.

   Expect next

   • How do you tell whether the flow is informed?
   • At what point do you cross the spread and get flat?
   • How would you set your position limit in advance?
3. 065What is adverse selection and why is it a market maker's real cost?Market makingIntermediatetechnicalProp trading firmsQuant trading

   Say this

   Adverse selection is the fact that whoever trades with you chose to, and sometimes they chose because they know something you do not. Your quote gets hit disproportionately when it is wrong, so on average the trades you get are worse than the trades you wanted.

   Then walk it

   1. The mechanism: you post a two-sided quote at your fair value. Uninformed flow hits both sides roughly equally and you earn the spread. Informed flow only takes the side that is mispriced, so those trades lose you money immediately.
   2. The measurement is simple and it is what every market making desk tracks: mark your fills against the mid price a few seconds or minutes later. If your buys are systematically below where the market goes, you are being adversely selected. The industry term is markout.
   3. This is why the spread must be wide enough that the profit from uninformed flow covers the loss to informed flow. Glosten and Milgrom's model makes the spread purely a function of the probability of informed trading, with zero inventory risk at all.
   4. It explains observable behaviour. Spreads widen before earnings and economic releases, when the probability of informed flow spikes. Market makers pay for retail order flow precisely because retail flow is less informed, so it is worth more.
   5. And the extreme version is why quotes get pulled. If adverse selection becomes severe enough that no spread compensates, the correct response is not to widen but to stop quoting. That is what a flash crash looks like from the inside, and saying that shows you understand the business rather than just the term.

   Where candidates lose it

   Confusing adverse selection with inventory risk. Inventory risk is the price moving while you hold a position you did not want. Adverse selection is getting the position in the first place precisely when it is wrong. Interviewers ask candidates to distinguish them, so have both definitions crisp and know that markout is how you measure it.

   Expect next

   • How is that different from inventory risk?
   • How would you measure it on your own fills?
   • Why is retail order flow worth paying for?
4. 068Why do market makers widen their quotes before a scheduled event like an earnings release or a central bank decision?Market makingIntermediatetechnicalProp trading firmsQuant trading

   Say this

   Because both of their costs spike at once. Expected volatility over the holding period jumps, and the probability that whoever trades with them is better informed jumps too. Wider spreads are the price of continuing to quote into that.

   Then walk it

   1. Inventory risk: any position you hold through the release is exposed to a gap, not a diffusion. You cannot hedge or unwind through the print, so the relevant horizon volatility is much larger.
   2. Adverse selection: more participants have a view, some have better information or faster access to the number, and the flow immediately before a release is disproportionately informed.
   3. You can see it in the options market directly. Implied volatility on the expiry that spans the event is elevated, and it collapses the moment the number is out. That is the volatility crush, and it is a pure statement about event risk being priced.
   4. The usual sequence is widen, then reduce size, then in the final seconds many makers pull quotes entirely, which is why the book gets thin right before a Fed statement and depth collapses.
   5. The interesting trade is on the other side of it. If you think the market is overpaying for the event, you sell that volatility, but the position has a short gamma profile through a gap, so you size it for the tail and not for the expected move. Saying that shows you understand why a wide quote is a risk decision and not just a fee increase.

   Where candidates lose it

   Answering only because volatility is higher. Half the answer is adverse selection, and the interviewer is listening for both. Also be ready to connect it to the options market, since the implied vol term structure around an event is the same phenomenon priced explicitly.

   Expect next

   • What happens to implied volatility right after the print?
   • Would you rather be long or short gamma into the event?
   • Why does the order book get thin rather than just wide?
5. 069You quote a tight market and get lifted on your offer immediately. Are you happy?Market makingIntermediatetechnicalProp trading firmsQuant trading

   Say this

   No, not immediately. An instant fill is usually bad news: it means my offer was the cheapest thing available, which suggests my fair value was too low. I would shift my market up, not celebrate the spread I just earned.

   Then walk it

   1. The right frame is that a fill is information. If the market wanted my offer that fast, my offer was probably below consensus fair value.
   2. The fill I actually want is slow and two-sided: I buy on the bid, sell on the offer, and end the day roughly flat having collected the spread many times. Getting filled on one side only is a warning.
   3. So the immediate action is to move both quotes in the direction of the flow and reconsider the width. The mid moves up, and I may widen because I am now less sure where fair value is.
   4. How to measure whether it was actually bad: markout. Look at the mid a minute later. If the market is above where I sold, I was adversely selected regardless of the spread I booked. Booking the spread and losing on the markout is the classic way a market maker loses money while showing positive spread capture.
   5. The one case where I am genuinely happy is if I know the flow is uninformed, for instance a retail-sized order or a predictable end-of-day hedger. Then an instant fill is exactly the business. So the honest answer is: it depends who traded with me, and I would want to know that before I formed a view.

   Where candidates lose it

   Saying yes, I made the spread. That is the answer of somebody who thinks the spread is profit rather than gross revenue. Instant one-sided fills are the signature of adverse selection, and the interviewer is checking whether your instinct is to update or to congratulate yourself.

   Expect next

   • How would you check whether you were picked off?
   • What do you do with your quotes now?
   • When would an instant fill be good news?
6. 070Something goes badly wrong on your book during the session. How do you react?Market makingIntermediatetechnicalOld Mission CapitalProp Trading · Chicago · 2025

   Say this

   Reduce risk first, diagnose second, and tell someone immediately. In that order. The instinct to understand the problem before acting on it is the wrong instinct when the position is still live and the loss is still growing.

   Then walk it

   1. Step one, stop the bleeding. Pull quotes, flatten or hedge the exposure I did not intend to have, and cap any automated system that might still be adding to it. Getting smaller is almost never the wrong move under uncertainty.
   2. Step two, escalate. Tell the senior trader on the desk and the risk desk straight away, before I know the cause. Every trading floor's disaster stories are about someone who tried to fix it quietly first.
   3. Step three, establish the facts. What is my actual position, what is the realised and unrealised loss, is the pricing wrong or is the position wrong, and is anything still running that I have not stopped.
   4. Step four, only then diagnose and fix. A bad parameter, a stale feed, a hedge that did not go through, a fat finger, a genuine adverse move.
   5. And afterwards, write it up. A one-page post-mortem with a concrete control change is what stops the same failure twice. What a desk actually wants to hear from a junior candidate is that you act to reduce risk without needing permission, and escalate without needing to look competent first. Composure plus disclosure, in that order.

   Where candidates lose it

   Answering that you would investigate the cause first. On a live book that is exactly backwards, and a prop trading interviewer is listening for the reduce-then-escalate-then-diagnose sequence. Also do not claim you would stay completely calm. Say you would act on a checklist precisely because you would not be calm.

   Expect next

   • Who do you tell, and how quickly?
   • Tell me about a time you made a real mistake and what you did.
   • What would you put in the post-mortem?

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

7. 072Where does the money come from in market making versus a systematic hedge fund strategy?Market makingIntermediatetechnicalProp trading firmsQuant trading

   Say this

   A market maker gets paid a fee for providing immediacy and aims to be flat at the end of the day. A systematic fund takes a position because it forecasts a return and holds risk overnight. One sells a service, the other takes a view.

   Then walk it

   1. Market making: high turnover, tiny edge per trade, thousands of trades a day, Sharpe ratios that can be very high because the law of large numbers works for you, and capacity limited by volume rather than capital. Risk is inventory and adverse selection, measured in seconds to minutes.
   2. Systematic trading: lower turnover, larger edge per position, Sharpe typically 0.5 to 2, capacity limited by market impact, and risk measured in days to months. You are exposed to being simply wrong about the forecast.
   3. The counterparty differs, which is the deepest version of the answer. A market maker's profit comes from other participants' demand for immediate execution. A systematic fund's profit comes from other participants' mispricing, behavioural bias, or need to shed risk.
   4. Which tells you what kills each one. Market makers die from a fast informed move against a large inventory, or from technology failure. Systematic funds die from crowding, regime change, and leverage in a deleveraging.
   5. And it explains the career difference, which is usually the real reason the question is asked. Market making gives you feedback in minutes and rewards fast reaction under pressure. Research gives you feedback in months and rewards patience and statistical honesty. Saying which one suits you, with a reason, is what they are listening for.

   Where candidates lose it

   Treating them as the same job with different time horizons. The economic source of the profit is different, and saying it plainly, a fee for liquidity versus a return for taking a view, is what demonstrates real understanding. Then connect it to which seat you want, because that is where the question is going.

   Expect next

   • Which of those do you want to do and why?
   • Why can market makers run much higher Sharpe ratios?
   • What kills each business?
8. 075How has electronic market making changed over the last decade, and where do you think the edge is now?Market makingIntermediatetechnicalProp trading firmsQuant trading

   Say this

   Spreads have compressed to a tick or less in liquid products, the pure speed race has largely been won and commoditised by a handful of firms, and the remaining edge has moved to breadth of product, quality of the pricing model, and access to less-contested flow.

   Then walk it

   1. What changed: colocation and microwave or hollow-core fibre links turned latency into a fixed capital cost rather than an edge, exchange data got faster and cheaper, and the number of firms who can compete at the top tier is small.
   2. Where it went. First, breadth: applying the same infrastructure across equities, options, futures, crypto, ETFs and fixed income, since each new product is incremental revenue on a paid-for stack. Second, modelling: in options and ETFs the hard part is pricing thousands of related instruments consistently, which is a research problem, not a wire problem.
   3. Third, flow quality. Internalising or purchasing retail flow is valuable precisely because it is less informed. That is the economics behind payment for order flow, and it is the reason the regulatory debate about it matters commercially.
   4. The structural trend in fixed income and credit is worth naming: electronic market making has moved into products that were voice-traded a decade ago, and ETF creation and redemption is the mechanism that makes bond market making hedgeable at all.
   5. My honest view, offered as a view and not a fact: the marginal edge now sits in products where pricing is genuinely hard rather than where speed is hard, because speed has a ceiling that has been reached and modelling does not. And I would caveat that I am reading this from the outside, which is part of why I want to work somewhere that sees it from the inside.

   Where candidates lose it

   Reciting high-frequency trading is about speed as if it were still 2010. The interviewer works at one of these firms and will know instantly. Have a specific, current view, name the shift from latency to breadth and modelling, and flag that it is your view rather than asserting inside knowledge you do not have.

   Expect next

   • Is payment for order flow good or bad for the end investor?
   • Why is options market making harder than equities?
   • What do you think our firm's edge is?

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.