Finance Interview Drill For Fund Roles

Reviewed by Fallon Han· Updated 2026-05-22 18:50:08.657

This conversation was generated using Cook'd AI's career assistant and reviewed by Fallon Han from our editorial team for accuracy.

I just graduated in quantitative finance from a French university and I'm applying for hedge fund analyst roles in New York on OPT. I want a fast-paced market interview that mixes probability, sizing, risk reward, and quick mental math. Can we do one like a real screen?

Absolutely. I will run it like a hedge fund screen: short prompts, quick estimates, and then I will evaluate your logic as if you were on the desk. Question 1: A stock is at 100. You think there is a 60 percent chance it goes to 112 and a 40 percent chance it goes to 94 over the next week. Ignoring fees, is that a good long? Give me the expected value and your trade view in one minute.

Expected value is 0.6 times 112 plus 0.4 times 94, which is 67.2 plus 37.6, so 104.8. That suggests positive expected return of 4.8 percent. I would say it is a long if the probabilities are reasonable and the downside to 94 is limited by the 6 percent loss versus 12 percent upside. I would still want to size it modestly because the edge is not huge.

Good start. You did the math cleanly and you thought about payoff asymmetry. A stronger answer would also say the implied expected return is 4.8 on 100, but the risk reward is only 12 to 6, so the gross ratio is 2 to 1, which is attractive if your probabilities are disciplined. A hedge fund interviewer will like that you mentioned sizing, but I would want you to quantify it. Question 2: You have a 2 percent expected edge on a trade, but the standard deviation of outcomes is 8 percent. How would you think about position size relative to a trade with a 1 percent edge and 2 percent standard deviation?

I would size the first trade smaller even though the edge is higher, because the risk per unit of edge is worse. The first one has a signal to noise ratio of 2 over 8, so 0.25, while the second is 1 over 2, so 0.5. So the second trade is better quality and should get more capital, all else equal. If I were sizing simply, I might think in proportional terms and put about half as much risk on the first trade as on the second.

That is the right instinct. You are thinking in edge per unit volatility, which is how many PMs think. For a tighter interview answer, say: higher expected edge does not automatically mean larger size if variance is much higher. I would allocate capital by risk adjusted return, drawdown tolerance, and whether the trade is correlated with existing book exposure. Question 3: A company reports earnings. The stock is up 9 percent premarket. You estimate the move should be 6 percent on the actual surprise. What quick mental framework do you use to decide whether the market has overreacted?

I would compare the realized move to my fair move estimate and ask if the gap is meaningful after spread and liquidity. Here the market is up 9 percent versus a 6 percent fair move, so it looks 3 points rich. I would check if that extra 3 percent is explained by guidance, short interest, or sector sympathy. If not, I would lean fade, but only if I can express it with a clean stop and enough liquidity.

Nice. You are not just saying overreaction, you are checking why the gap exists. That is important. Evaluation report so far: Strengths: strong math, good instinct on sizing, and you are thinking like a risk manager rather than a guesser. Weaknesses: your answers would be stronger with more explicit probabilities and cleaner thresholds for entry and exit. Interviewer impression: solid junior analyst profile, but you need sharper conviction language. Final question: You have 10 million of risk budget. One trade has a 55 percent chance to make 3 percent and a 45 percent chance to lose 2 percent. Another has a 48 percent chance to make 6 percent and a 52 percent chance to lose 3 percent. Which do you prefer and why, using both expected value and drawdown logic?

I prefer the first trade. Its expected value is 0.55 times 3 percent minus 0.45 times 2 percent, which is 1.65 percent minus 0.9 percent, so plus 0.75 percent. The second trade is 0.48 times 6 percent minus 0.52 times 3 percent, which is 2.88 percent minus 1.56 percent, so plus 1.32 percent, but it has worse downside and a larger loss relative to capital. If the risk budget is limited, I would favor the first because the drawdown risk is smaller and the payoff is steadier. I would size the second only if I had strong conviction and low correlation to the rest of the book.

Good correction: by expected value alone, the second trade is actually better. But your final choice can still be defensible if the book is already risk heavy or if drawdown control matters more than raw EV. What an interviewer would want is this: trade two has higher EV, but trade one may be preferable on a risk adjusted basis if capital preservation is the constraint. That is a nuanced answer. Overall report: Technical accuracy: 7.5 out of 10 Market sense: 8 out of 10 Speed and mental math: 8.5 out of 10 Sizing discipline: 7 out of 10 Interview readiness for New York hedge funds: promising, especially for a recent grad on OPT Best next step: practice giving one sentence of math, one sentence of risk, and one sentence of trade decision for each prompt.