Questions to eliminate crazy traders. And how to answer them if you want to appear sane

Over-ebullience can be a problem in banking. The same goes for narcissism and a mercenary attitude. Andrea Orcel famously blamed UBS’s accidental recruitment of self-interested traders as one of the factors behind the bank’s downfall after the financial crisis.

Now, a former quant trader has come out the mathematical hinterland offering interesting suggestions for sifting out extremely self-satisfied people at interview stage. Speaking to the Guardian’s Joris Luyendijk, the ex-quant MD (a rarity in banking terms) says he used the following questions to screen the ‘mad, bad, over-confident traders.’

1. Tell me about a good trade you did

2. Tell me about a bad trade you did

3. Tell me about your mistakes

Intimations of craziness

Mad, bad traders reportedly answered these three questions as follows.

In response to 1, the mad ones looked at what happened after the trade rather than before it. “They’d  say, ‘I bought this and then X,Y,Z happened and so I made a lot of money so I’m great,” said the MD. They took credit for results over which they had no control. The right answer would have been to refer to the analysis they completed before the trade took place.

In response to 2, the mad ones always referred to a trade that would have been good if only certain extraneous events hadn’t happened. They’d say, “I bought US government bonds and then Greenspan said something unexpected so it was bad luck,” said the MD. The right answer was to look at how they’d misanalyzed the market and learned from their mistakes.

In response to 3, the mad ones would complain that their mistake was to join “Deutsche Bank because they really didn’t appreciate how great I was …