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Explain Option Greeks and Futures Pricing
Market Fundamentals for Quantitative Roles
This interview assesses your understanding of market fundamentals relevant to quantitative trading and data-focused roles. Please answer the following questions clearly and quantitatively.
- Define option delta and gamma.
- For European call and put options, what are the typical signs of delta and gamma?
- As the underlying stock price increases, how do delta and gamma typically change for calls and puts?
- A call option currently has delta = 1 and gamma = 1. If the underlying price increases by 10, approximate the delta PnL and gamma PnL using a second-order Taylor approximation. Ignore contract multipliers and assume gamma is locally constant.
- What factors affect the price of a futures contract?
- How would you price a futures contract on a stock?
- What is the difference between a futures contract and a forward contract, and when can their prices differ?
- Describe volatility skew in an options chain. Why does it occur, and when is it commonly observed?
AI interview prep
Core dilemma
Demonstrating a deep, intuitive understanding of financial derivatives and their market dynamics, beyond mere definitional recall, to inform data-driven strategies and risk management.
Mid-level signals3
Senior signals3
Red flags3
3 tradeoffs and 3 stress tests locked
Interview prep
Unlock the interviewer X-Ray rubric, tradeoff matrix, stress tests, clarifying questions, and key concepts.
Explain Option Greeks and Futures Pricing
Market Fundamentals for Quantitative Roles
This interview assesses your understanding of market fundamentals relevant to quantitative trading and data-focused roles. Please answer the following questions clearly and quantitatively.
- Define option delta and gamma.
- For European call and put options, what are the typical signs of delta and gamma?
- As the underlying stock price increases, how do delta and gamma typically change for calls and puts?
- A call option currently has delta = 1 and gamma = 1. If the underlying price increases by 10, approximate the delta PnL and gamma PnL using a second-order Taylor approximation. Ignore contract multipliers and assume gamma is locally constant.
- What factors affect the price of a futures contract?
- How would you price a futures contract on a stock?
- What is the difference between a futures contract and a forward contract, and when can their prices differ?
- Describe volatility skew in an options chain. Why does it occur, and when is it commonly observed?