The questions you'll be asked during a graduate trading interview with an investment bank
We can't tell you the exact questions that you will be asked when you sit down in an interview for a trading position: that will depend not only on the company and the interviewer, but on the the state of the market. We can, however, do the next best thing: we can prepare you for the types of questions you will definitely be asked if you try to get an entry-level role in a bank.
1. They'll ask you what you know about the position
What do you think is involved in a typical day for an analyst on a trading floor?
If you want your answer to stand out, you'll need to into some detail. Show that you recognize the differences between what a senior and a junior trader does. For example:
“From the insight I gained during my summer internship with Deutsche Bank, I'd say that there is a big difference between a typical day for a junior and more senior trader. In the first few years in the position, a lot of time seems to be dedicated to gathering data and updating financial models, as well as reading publications relevant to the industry - developing an in-depth understanding of the sector. After developing a sufficient level of expertise and a strong network of contacts, the duties increase and I would expect to be taking on more responsibilities - making trades on the market floor - as well as discussing the major moves with other traders and continuing to monitor the markets/news."
2. They'll ask you questions about the company you're joining
“What attracted you to work for Goldman Sachs rather than Deutsche or JPMorgan?”
Research the company you are applying to, but its competitors as well. You need to drop in key facts about the company and what makes them stand out from the rest of the industry. If possible, link your answer to past experience and make yourself stand out! There will be a lot of applicants who have spent a few hours on Google researching the company, but if you've taken the time to research the surrounding industry, flaunt it. For example:
"Granted, both are considered market leaders in trading, but with over $29 billion of legal settlements from the past two years eroding JP Morgan’s once-record earnings, it has cut risk taking substantially. On the contrary, Goldman are currently more lenient towards risk taking. I find this more exciting as it will allow for the trading of more challenging products.
"More generally, I chose Goldman for its prestige. Both Goldman’s history and name are unbeatable; I even read that 'Vault.com' ranked Goldman Sachs as the most prestigious bank in North America and the UK."
3. They'll ask you questions designed to probe your knowledge of the markets
How would you invest $20k today?
A good answer to this question shouldn't be short and sweet. It should be you thinking out loud, talking about the various types of investments you could pursue to better demonstrate your knowledge of the industry. Yes, you should come to a final answer, but it should be drawn from your previous evaluations of the various investments. This is also a fantastic chance to stand apart from other applicants. Decide on a specific investment after weighing it against others and supporting it with relevant reasoning based on current market conditions.
"The best way to invest $20k would depend entirely on what you would like to gain from your investment. If you would like your capital to grow steadily over time then I think corporate bonds would be a great option.
"On the contrary, if you are after a high yield strategy that carries greater risk, I would suggest looking at the emerging markets and researching a smaller company with a great idea and potential, something that has a healthy balance sheet. In the last few years the clean energy sector has seen some impressive figures, so this could be a great place t start. Companies such as ThinkLite and Silver Spring Networks in the US, both of which offer solutions for higher energy efficiency, have experienced over 1000% growth in the last 3 years."
Other questions to watch out for in this category:
Rank all the financial products from the safest to the most risky?
Your client is a hedge fund that requires you to analyse a certain sub-sector of the FTSE 100 to identify trading strategies based on volatility. How do you approach the analysis?
Can you talk to me about some recent financial news and how it impacted Deutsche Bank?
4. They'll ask you questions about the competencies they're looking for
Can you tell me about a time you have dealt with an angry or irate customer?
This is a chance to tell a story. You need to make sure you set up the scenario; explain what you proactively did to turn the situation around and what the result was, emphasising what you learned from the experience. Describe the Situation and set the scene; explain what your Task was in this exact situation; clarify what Action you took to tackle the issue; finally give an account of the Resolution – this is the STAR framework.
"During my 10 week internship at JPMorgan, I received a phone call from a client who was adamant that I had pursued a course of action against his wishes, even though I had done exactly what we had agreed upon. At one point he even threatened to make sure I was dismissed. Rather than getting defensive and trying to blame him, I took a deep breath, acknowledged that there was a problem to address and that I was equally concerned about finding the solution. I apologized for the stress it was causing him and this took the steam out of his complaint; he started talking to me more reasonably. This gave me time to propose and agree a solution with him. I quickly spoke to my manager and proposed that we not only cancel the transaction, but that we also refrain from charging our commission on the next one carried out for the client, just to keep him sweet. After speaking to the back office to make sure that the transaction was cancelled smoothly I reported back to the customer and he even praised me for a job well done."
5. They'll ask you about your career aspirations
Where do you see yourself in 5 years time?
There's no exact right answer to this one (it's similar to another common question - What’s the most important: Money, honour or knowledge?). What the interviewer is looking for here is an honest version of your career aspirations to see whether these would fit within the company. They don't necessarily need to hear that you aspire to work at the company for the rest of your career but equally it's not a good idea to say that in 6 months you plan to leave the country on a round the world trip. As with many things, look for balance. Show loyalty to the company and a drive to progress.
“I would say my most driving career aspiration is to find a position that both motivates and excites me, while allowing me to build upon the skills I have already gained. I know that being a junior trader would be ideal for me right now, as it would give me the opportunity to spend the next few years learning as much as I can in the role and the larger company. Being able to learn from and network with the more experienced members around me would help me to become an expert in the field myself, hopefully progressing in the company to more senior levels; helping the business grow as I grow.”
6. They'll ask you off-the-wall problem solving questions
How do you cut a cake into 8 slices with only 3 cuts?
The beauty of this question, and other such questions that seem so irrelevant to the position, is that there is no one correct answer. Even without getting to a correct answer, you can impress the interviewer. What they want is a calm and well thought out approach. You are showing how your mind works; if you panic easily and start saying that you don’t know, but it’s okay, because it’s not relevant, that is not a good sign.
If you are interested in a correct answer, there are a couple of ways around it:
- Cut the cake in half and half again, as you may expect to with the first two cuts. Once this is done, line up the four quarter sized slices and with one long slice/knife cut them all into half again.
Maybe you think that this is cheating, so how about this:
- Stop thinking in the boring world of 2D cake cutting. A cake is a 3D object and it can be cut in all three dimensions. So by doing the first two cuts as above, followed by a third cut with the knife parallel to the cutting surface, you can get 8 slices with just 3 cuts.
Other questions in this category include:
How many toothbrushes are there in London?
Why manholes are round?
How many tennis balls can you fit into a Boeing 747?
On your drive home after this interview, what are the chances of you hitting a cat?
About the Author: Jack Shardlow is the chief editor of Interview Bull Blog. Interview Bull provides affordable and personalised online interview coaching, specifically designed for students and recent graduates. Interview Bull’s experienced HR experts coach ambitious students to get the jobs they want through success at interview.