All questions have been designed after talking to or having been referenced from the work of traders and market practitioners (quants, risk managers, etc.) who have either worked at Goldman Sachs or are as smart, if not more, than those who work at Goldman Sachs. Forget FRM, PRM, QRM, GRM, CFA, MFA, TFA and all the other crap on which you spend so much money and time. If you get these following questions right, you are there, mate!

So, are you smarter than a Goldman Sachs trader? Answer these questions and find out. If you get less than 80% then you better go back and waste yourself with all those shitty exams.

1) Of all the theories (disciplines) below which one is totally linear:

a) Quantum Mechanics

b) Evolutionary Biology

c) Meteorology

d) Finance

2) A trader looks at the daily chart of a stock price and finds that its shape is exactly the

same as the shape of a yearly chart of that stock. He therefore concludes that:

a) markets are fractal in nature

b) markets follow random walk

c) markets are always in equilibrium

d) none of the above;

3) Rho , the sensitivity of an option to the interest rate, is proportional to T, the time

to maturity of an option, whereas vega , the sensitivity of an option to the volatility

of the asset, is proportional to the square root of T . Therefore, in the long run:

a) Volatility risks will dominate interest rate risks

b) Interest rate risks will dominate volatility risks

c) both volatility risk and interest rate risk will become equal

d) None of the above;

4) Given the constant volatility assumption of Black-Scholes model, which of the following

risk sensitivities (greeks) are inconsistent with the model assumption:

a) vega

b) gamma

c) rho

d) both (a) and (c);

5) The value of a vanilla call option on an asset is $3.00. The value of a corresponding

fixed strike (same strike as the vanilla) lookback call would be:

a) $6.00

b) $1.50

c) $9.00

d) $4;50

6) VWAP (Volume Weighted Average Price)

a) an algorithmic trading strategy for cash equities;

b) can be used to determine the structure of the trading day;

c) is used for settlement of all FROs (fixed return options);

d) all the above;

7) In a world of three currency pairs, Euro-Dollar, Dollar-Yen, and Euro-Yen, if the implied

correlation between Euro-Dollar and Dollar-Yen remain constant and the implied

volatilities of Euro-Dollar and Dollar-Yen both increase then the volatility of Euro-Yen

will:

a) remain constant

b) increase

c) decrease

d) cannot be computed:

8) For Asian options which of the following is a “secondary” market risk:

a) skew

b) term structure of rates

c) term structure of volatility

d) variance ration

9) A Swaption has one of the following characteristics:

a) it is an option on a swap

b) it is not decomposable into any smaller units;

c) it is similar to an option on a basket;

d) all the above;

10) A smart and an experienced proprietary trader knows that:

a) the ratio of luck to skills decreases with transaction frequency

b) the ratio of luck to skills increases with transaction frequency

c) the ration of luck to skills remains the same regardless of transaction frequency;

d) the ratio of luck to skills has no discernable pattern

**answers later this week 😉**

Trading requires more skill than knowledge. 🙂

the right answer is ..right skill and right knowledge 😉