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Arbitrage Interview Questions

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31 arbitrage interview questions shared by candidates

You have a bag of coins, 3 nickels, 2 dimes, and 1 coin with no value. what is the probability that there is a difference in value of the coins of 5 cents if you remove two coins from the bag? Stone drops into a pool and makes a ripple that has a radius that expands at 3 ft/sec. what is the rate at which the area is changing at 10 seconds? if a dice lands on an even number you get paid $15 if it lands on odd you have to pay $5 calculate the sharp ratio of this given a zero% risk free rate? calculate the fair value of an option on a stock that is worth $100 today and will be worth $110 or $95 tomorrow? the option expires tomorrow. Also asked what I knew about the firm before the stat and probability questions. and then asked about my resume after the technical questions.
avatar

Relative Value Arbitrage Summer Intern

Interviewed at TransMarket Group

4.1★
May 21, 2015

You have a bag of coins, 3 nickels, 2 dimes, and 1 coin with no value. what is the probability that there is a difference in value of the coins of 5 cents if you remove two coins from the bag? Stone drops into a pool and makes a ripple that has a radius that expands at 3 ft/sec. what is the rate at which the area is changing at 10 seconds? if a dice lands on an even number you get paid $15 if it lands on odd you have to pay $5 calculate the sharp ratio of this given a zero% risk free rate? calculate the fair value of an option on a stock that is worth $100 today and will be worth $110 or $95 tomorrow? the option expires tomorrow. Also asked what I knew about the firm before the stat and probability questions. and then asked about my resume after the technical questions.

Why does volatility smile/skew? What is the difference between a futures contract and a forward contract? How will this cause the prices to be different (e.g. last gold ED)? If you are long a FRA and short a ED future with the same fixing dates, do you have positive convexity or negative convexity?
avatar

Relative Value Arbitrage Trader Intern

Interviewed at TransMarket Group

4.1★
Feb 16, 2015

Why does volatility smile/skew? What is the difference between a futures contract and a forward contract? How will this cause the prices to be different (e.g. last gold ED)? If you are long a FRA and short a ED future with the same fixing dates, do you have positive convexity or negative convexity?

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