Archives: Lessons

What is Market Making? – Simulator Explanation and Interview Setup

Usually, the trading firm will provide you with some information that helps you prepare for the market making game during an interview. It is important to understand the basic concepts and terminology about market marking. If you skipped the background information on limit order books, here is a brief overview […]

Introduction to the Limit Order Book and Order Types

Who or what is a market maker and how does market making work? Before we elaborate on this question, it is important to understand what a limit order book is and how it basically works. Exchanges generally hold different instruments. These instruments all have their own order books, which are […]

Introduction to Probability Distributions (Statistics)

There are a lot of different types of probability distributions and corresponding probability density functions. For your trading interview, the following distributions are important to understand: Uniform distribution Normal distribution Binomial distribution Exponential distribution But first, what is a probability density function? Let us start with the sample space, which […]

How the Covariance Affects the Expected Value and Variance of a Joint Probability (Statistics)

In the previous section, the expected value, variance and covariance have been introduced. This section will elaborate on how a covariance – that isn’t equal to zero – affects the expected value of a joint probability (non-independent variables).  In case two random variables X and Y are independent – which […]

Introduction to Sequences and Interview Tips

What does it look like during an interview? Depending on the level of the sequences, you have an average of 30-60+ seconds per sequence. For example, there are companies that ask you to fill in 26 sequences in 30 minutes. Examples of some sequence questions: 3, 5, 8, 12, 17, […]

Introduction to Mental Arithmetic and Interview Tips

Introduction to mental arithmetic Traders are quick if it comes down to mental arithmetic. Even though the trading scene is transforming into a more algorithmic environment, the vast majority of traders still have to make quick decisions behind their desk. Therefore, the first round of interviews usually contain a mental […]

Expected Value, Variance, Covariance and Correlation (Statistics)

When someone wants to make an investment, the expected value, variance and covariance of the stock or derivative are key metrics. The expected value of the return on the investment indicates whether you might become interested in going long or short in the product. The variance indicates how volatile – […]