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    Proba Finance Interview Questions

    Uploaded by

    theodor_munteanu
    Examples from quant interviews in the past. 1. Geometric angular probability on a circle. 2. Correlated geometric brownian motions and multi-asset option valuation. 3. Simulated LGD's and expected loss of a credit portfolio.

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    Proba Finance Interview Questions

    Uploaded by

    theodor_munteanu
    200 views1 page
    Examples from quant interviews in the past. 1. Geometric angular probability on a circle. 2. Correlated geometric brownian motions and multi-asset option valuation. 3. Simulated LGD's and expected loss of a credit portfolio.

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    © © All Rights Reserved

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    Examples from quant interviews in the past. 1. Geometric angular probability on a circle. 2. Correlated geometric brownian motions and multi-asset option valuation. 3. Simulated LGD's and expected loss of a credit portfolio.

    Copyright:

    © All Rights Reserved
    200 views1 page

    Proba Finance Interview Questions

    Uploaded by

    theodor_munteanu
    Examples from quant interviews in the past. 1. Geometric angular probability on a circle. 2. Correlated geometric brownian motions and multi-asset option valuation. 3. Simulated LGD's and expected loss of a credit portfolio.

    Copyright:

    © All Rights Reserved
    of 1

    Probability and finance interview problems (1)

    1. Given 3 points uniformly distributed on a unit circle, what is the probability that at least one angle is
    greater than 𝜋/2 ? (Interview, CIB, Paris, Junior Quant R&D 2018-2019)

    𝑑𝑆𝑡1 = 𝜇1 𝑆𝑡1 𝑑𝑡 + 𝜎1 𝑆𝑡1 𝑑𝐵𝑡1


    2. Suppose two stocks from companies X,Y have the dynamics { where 𝑑 <
    𝑑𝑆𝑡2 = 𝜇2 𝑆𝑡2 𝑑𝑡 + 𝜎2 𝑆𝑡2 𝑑𝐵𝑡2
    𝐵𝑡1 , 𝐵𝑡2 >= 0

    a. If 𝜇1 = 0.1, 𝜇2 = 0.05, 𝜎1 = 𝜎2 = 20% find 𝑃(𝑆𝑡1 < 𝑆01 , 𝑆𝑡2 < 1.05𝑆02 )

    b. If 𝑑𝐵𝑡1 𝑑𝐵𝑡2 = 0.3𝑑𝑡 find again the above probability.


    𝑆1 𝑆2
    c. Find the value of a financial derivative paying off max ( 𝑇1 . 𝑇2 ) ⋅ 1,000$ if the Brownian motions
    𝑆0 𝑆0
    remain non-correlated (T = 1 year).

    d. Given a call option on the two assets whose payoff is 𝜙(𝑆𝑇1 , 𝑆𝑇2 ) = max (𝑆𝑇1 + 𝑆𝑇2 − 300$, 0) how is
    the price evolving if it depends on the correlation 𝜌 = 𝑐𝑜𝑟𝑟(𝐵𝑡1 , 𝐵𝑡2 ). 𝑆01 = 130$, 𝑆02 = 160$(Technical
    test, CIB, Hong-Kong, IT Quant C++, 2018)
    𝑎𝑥𝑦, (𝑥, 𝑦) ∈ [0,1]𝑥[0,1]
    3. Suppose (𝑋, 𝑌) has the density 𝑓(𝑥, 𝑦) = {
    0, 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒
    a. Find 𝑎 such that 𝑓 is indeed a density.

    b. Are X and Y independent? If not, what is their copula function (dependence function)?

    c. Propose a simulation algorithm for (X,Y).

    d. Suppose (X,Y) are the LGD’s (loss given defaults) distributions of two risk classes 𝐴 and 𝐵 and a credit
    portfolio manager holds an homogenous portfolio made up of 3 loans from risk class A, notional 𝑁 =
    1,000,000 𝑒𝑢𝑟𝑜𝑠 and 4 loans from risk class B, notional 𝑁2 = 600,000 euros with annual default
    probability 1% and 3% respectively. What is the 1-year expected loss and value at risk 99%?

    (Credit Risk Quant Interview Test, CIB, Paris, 2020)

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