Hi guys,
I am currently a junior quant at a BB (in risk analytics) with a maths degree, been here for less than 1 year. I have got an interview coming up for equities exotics trading at another BB. I honestly don't have much idea about what they are gonna ask me or how to prepare. I am quite good at mental math, know stochalc/financial maths (ie to the level of shreve) but don't know much about options trading and never did anything related to markets in my current role (it is 60% coding, 40% maths/stats).
A friend suggested reading "trading volatility", prepping brainteasers and fit questions + keeping up with the markets. Do you guys have any suggestion on the prep and also some more info on what exactly this job entails? Thanks in advance
Interested as well. Question to OP, what position level is for your interview, analyst or associate? I have also noticed that many exotics traders have master degrees in financial engineering/computational finance, will they ask questions about how to price exotics(barrier, asian etc) or replication/hedge, or in a more general scope of questions such as vanilla option greek, how to make long/short gamma/theta/vega portfolio?
Hi, it's for analyst.
I had a trader asked me to derive gamma scalping formula for a corporate equity trader role at GS, felt ambushed after that lmao
Just curious because this is a project I'm working on. Is there a definitive way to monetize volatility trading through gamma scalping?
Sure in high volatility environments maybe you adjust a bit more frequently and in low volatility environments you see some gamma hedging engines for example hedging a bit less frequently to ride any momentum, but is there a definitive close-form solution on the optimal way to hedge deltas in order to monetize that IV/RV spread?
A current thing I want to try and backtest is probably by splitting into a volatility regime, high and low and then backtesting delta hedging for something like BTC at a 1% interval, 0.5% interval, 2.5% interval, and see if there's something that actually shows outperformance. Like maybe in a high volatility environment hedging deltas when the upper and lower bound move 2.5% from the mid seems to be the optimal way to capture the momentum and not leave too much on the table etc.
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Understand the basics of volatility trading like time weighted Vega (3m vs. 12m), the gamma/vega profile of a calendar position. What is the skew/vanna (d delta d vol) profile of a put spread position. Prob know some exo trading risk management stuff like in a barrier option, what the delta is like at barrier and how to manage such risks and the skew profile of the barrier options (DnO/UnO, DnI/UnI Call/puts). They can also ask questions like the delta of a DnO call vs. vanilla
For models, know the behavior of pricing under local vol vs stoch vol (I'm sure as a quant you know this)
For industry knowledge as a plus, know what an autocallable is, the risk profile, and why banks do stuff like this. Know how a sell side vol desk work (a vol desk franchise flow) like how desks bid their vol supply, recycle their risks (vega and correlation risk)
will there be any coding questions? or questions about digital options?
Could I DM you? I am a first-year analyst at a market-maker trading volatility and I'd like to pick your brain about maybe some resources you might have or advice you have for new traders on a volatility desk.
Thanks! What resources do you suggest to learn this stuff? (most of which tbh I don't know) Is trading vol a good book?
[JP Morgan] Variance Swaps.pdf
https://www.amazon.com/Volatility-Trading-Website-Euan-Sinclair/dp/1118…
https://www.amazon.com/Dynamic-Hedging-Managing-Vanilla-Options/dp/0471…
https://www.amazon.com/Exotic-Options-Trading-Frans-Weert/dp/0470517905
Industry color: https://www.risk.net/topics/autocallables
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