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. 061What is a market maker actually paid for, and how do you decide how wide to quote?Market makingCoretechnicalProp trading firmsQuant trading

   Say this

   You are paid to provide immediacy, and the bid-ask spread is the fee. Width is set by the risks you are taking on: how uncertain you are about fair value, how much adverse selection you expect, how long you will be stuck with the position, and how volatile it is while you hold it.

   Then walk it

   1. The business model in one line: buy at the bid, sell at the offer, turn over the inventory many times a day, and capture a fraction of the spread on each round trip. You are not forecasting direction, you are being compensated for warehousing risk.
   2. The four inputs to width. One, uncertainty about the true value, which is wide in an illiquid name and tight in a liquid one. Two, expected adverse selection, which is the probability the person trading with you knows something. Three, expected holding period until you can offload or hedge. Four, volatility over that holding period.
   3. A rough decomposition: half-spread should cover expected adverse selection cost plus inventory risk plus your fixed costs, plus a margin. In a liquid future the first term dominates and you quote one tick. In a wide illiquid option you might quote ten percent of the premium.
   4. Then the competitive constraint. You do not quote your theoretical width, you quote the tightest width you can justify given who else is on the book, because the trade goes to the best price. So in practice width is min of what I need and what the competition forces.
   5. The number worth knowing: on a liquid listed equity the effective spread is often under a basis point and market makers still make money, because they do enormous volume and their adverse selection is managed in milliseconds. On an illiquid corporate bond a dealer might need 50 basis points for the same economics, because they will hold it for days.

   Where candidates lose it

   Describing market making as making money on the spread with nothing about adverse selection or inventory. The spread is gross revenue, not profit. A candidate who cannot name the two costs that eat it has not understood the business, and this is the single most common weakness in trading interviews.

   Expect next

   • What is your biggest cost as a market maker?
   • Why would you ever quote a market wider than the competition?
   • When would you not want to quote at all?
2. 063Make me a market on something you cannot possibly know, and be ready for me to trade either side.Market makingCorephone / first roundProp trading firmsQuant trading

   Say this

   I would estimate fair value out loud, set a width that reflects how uncertain I am, quote it, and then stand by it. And I would say my size, because a market without a size is not a market.

   Then walk it

   1. Do the estimate first and say it: here is my central estimate and here is why. Then convert uncertainty into width. If my estimate is 300 but I could easily be wrong by fifty percent, my market should be something like 250 at 350, not 298 at 302.
   2. Then quote a size. Ten dollars a unit, or one lot. Naming your size unprompted is a strong signal, because it shows you understand a quote is a commitment.
   3. The interviewer will then trade you and immediately ask if you are happy, or they will tell you the answer is far outside your market. Both are tests of composure. The correct reaction is to update and re-quote, not to argue.
   4. When they trade one side, that is information. If you get lifted instantly on your offer, the market is probably above your offer, so shift both bid and offer up and consider widening. Skewing rather than freezing is what separates a trader from a calculator.
   5. The one thing you must not do is quote too tight to look confident. A tight market you cannot defend gets arbitraged in one question, and the interviewer will do it on purpose. Wide but honest beats tight and wrong, and you can always tighten once you have explained your uncertainty.

   Where candidates lose it

   Quoting a market so tight that any trade immediately loses you money, usually because the candidate thinks a narrow spread looks impressive. It looks the opposite. Also never quote a market without a size, and never argue when you get picked off. Update and re-quote.

   Expect next

   • I buy at your offer. Are you happy?
   • Now tighten your market by half.
   • The answer is actually double your offer. What went wrong in your estimate?
3. 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?
4. 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?
5. 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.