• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Equity Derivatives Interview Questions from Goldman Sachs

Joined
5/2/06
Messages
11,750
Points
273
1) Which structured product would you issue in the current market conditions?

2) Explain the Greeks for options.

3) Draw me a payoff profile for autocallable structures, digital coupon notes, Asian options and bonus certificates.

4) What is a square root of 0.1?

5) Is gold expensive or cheap ?

6) Explain the assumptions behind Black-Scholes.

7) How do you determine when to enter or exit the market using a chart?

Link Equity Derivatives Interview Questions from Goldman Sachs | News | www.eFinancialCareers.com
 
1) Which structured product would you issue in the current market conditions?
I would like to get into the interest rate swap market by issuing fixed leg to receive floating.

2) Explain the Greeks for options.
Simple

3) Draw me a payoff profile for autocallable structures, digital coupon notes, Asian options and bonus certificates.
This one is tough. I only know digital coupon notes and asian options. This question looks for strong product knowledge.

4) What is a square root of 0.1?
I got asked square root of 0.01 a while back. It is 0.1. Are you sure this was the right question?

5) Is gold expensive or cheap ?
This is tricky. It depends on whose perspective is the answer being given from. As a student who is in the same bracket as 90% of the population, gold is expensive.
As a finance student who is interested in trading, gold is cheap as it is a good buy.

6) Explain the assumptions behind Black-Scholes.
simple

7) How do you determine when to enter or exit the market using a chart?
Depends on the chart. You set up barriers for yourself. This can be explained and communicated well if you have a minimal knowledge of technicals or even common sense.
 
...i don't like the answer from that link about sqrt(0.1).
I think the interviewer had the following trick in his head: sqrt(0.1) = 1 / sqrt(10) = sqrt(10)/10. So it all boils down to calculating sqrt(10) and then shifting the answer one digit to the left.
 
I have to say those questions sound a bit easy for quant roles...
Not saying they don't get asked, but you will die horribly if these represent any sort of boundary on your ability to do interview questions.
 
Expecting people to memorize numbers like sqrt(10) is absurd.

I think this is a better approach:

Powers of 2 are much better known. 1024 = 2^10 = 32^2. So sqrt(0.1) is about 0.32.
 
Expecting people to memorize numbers like sqrt(10) is absurd.

I think this is a better approach:

Power of 2 are much better known. 1024 = 2^10 = 32^2. So sqrt(0.1) is about 0.32.

Clever! If more precision is needed, know that 31^2=961 :)
 
Find sqrt(19), sqrt(21), sqrt(23)
Same principle.... for example, we know that 45^2 = 2025 (remember your D5^2 rules!!!). Even if we suck at multiplying (like me ;) ) and don't know that 46^2 = 2116, we can still use a linear approximation; derivative of x^2 is 2x so we add 2 times x (which is 45) or 90. That's 2115 (only one off).
Instead of going forwards, we can go backwards and guesstimate for 43~44
so sqrt(19) is about 4.35 while sqrt(21) is about 4.6.

I suppose you could keep at it for sqrt(23) :P
 
Find sqrt(19), sqrt(21), sqrt(23)

Use Taylor approximation. The 1st order should be ok.
sqrt(16+3)= sqrt(16)+ [1/(2*sqrt(16))] *3 = 4+[1/8]*3 = 4+3/8= 35/8= 4.375

35/8 can be asily done without any calculator.

If you want a better approximation, go on:
sqrt(x+y)= sqrt(x)+ [df(x)*y]+[(1/2!)*d(df(x))*y]+...
 
Expecting people to memorize numbers like sqrt(10) is absurd.

I think this is a better approach:

Powers of 2 are much better known. 1024 = 2^10 = 32^2. So sqrt(0.1) is about 0.32.

where did anyone say that someone is expecting people memorize numbers like sqrt(10)?
 
Another way for sqrt(0.1) = sqrt(10)/10. Still need to approx sqrt(10). It's close to sqrt(9) = 3. How close? We can guess or make some argument about where 10 lies in comparison to 9 and 16 so we know how far sqrt(10) lies between 3 and 4.Guess less than 3.2 more than 3.1 so, 3.15?
 
where did anyone say that someone is expecting people memorize numbers like sqrt(10)?

Well then why go through sqrt(10) first? If you're going to use a trick like Taylor and write 10=9+1, why not go straight for sqrt(0.1) and write 0.1 = 0.09+0.01?
 
Well then why go through sqrt(10) first? If you're going to use a trick like Taylor and write 10=9+1, why not go straight for sqrt(0.1) and write 0.1 = 0.09+0.01?

LOL because, as with any math problem, there are more than one way to tackle it. Apparently in your world there is only one way - you own :)

Also, who said that to approximate sqrt(10) the only way is to resort to Taylor?
 
LOL because, as with any math problem, there are more than one way to tackle it. Apparently in your world there is only one way - you own :)

Also, who said that to approximate sqrt(10) the only way is to resort to Taylor?

Ha. My point was exactly that -- that your way is NOT different. At least not for any effectively beneficial reason. You're just unnecessarily scaling by a factor of 100.

It seems like you have a habit of picking fights with people...
 
Back
Top