Markets interviews are structured to assess three things: technical knowledge of financial instruments and markets; commercial awareness and genuine engagement with current market events; and personal qualities — composure under pressure, clarity of communication, and evidence of independent thinking. Understanding what each question is designed to test helps candidates answer more effectively.
'Walk me through the lifecycle of an interest rate swap.'
This is one of the most common technical questions in any markets interview — for front office, middle office, and operations alike. Interviewers are testing whether you understand the full process, not just the product definition.
A strong answer covers: pre-trade (ISDA documentation, credit limits, clearing eligibility); execution (voice or electronic, trade capture); confirmation (MarkitWire/DTCC for cleared trades); clearing (CCP submission, IM call, novation); rate resets (SONIA fixing, floating payment calculation); cash flows (quarterly net payments via SWIFT, nostro matching); amendments and assignments; and maturity/early termination (MTM close-out).
'What is the difference between VaR and Expected Shortfall?'
Tests risk management technical knowledge. VaR at 99% confidence tells you the maximum loss that will not be exceeded on 99% of days — but says nothing about losses in the worst 1%. ES (also called CVaR) measures the average loss in the worst 1% of scenarios, providing more information about tail risk. FRTB uses ES at 97.5% rather than VaR for internal models, specifically to capture this tail.
'What is a CDS, and how does it pay out?'
Tests credit derivatives knowledge. A CDS is a derivative where the protection buyer pays a periodic premium (the CDS spread, expressed in bps of notional per year) and the protection seller pays a defined amount if a Credit Event occurs (typically the notional minus the recovery value). Credit Events include: bankruptcy, failure to pay, restructuring, and (for sovereign CDS) moratorium and repudiation.
'Why do you want to work in [specific function]?'
Tests motivation and self-awareness. The strongest answers are specific: 'I want to work in product control because I want to develop deep technical pricing knowledge while working close to the business, and because I find the combination of quantitative analysis and commercial context engaging.' Generic answers ('I love markets and want to work with numbers') score poorly.
'What is happening in markets today?'
Tests whether you actually follow markets. Candidates should read the Financial Times and Bloomberg daily in the weeks before an interview, tracking: what the central bank is doing and why; where yields are and what is driving them; any significant corporate or geopolitical events; and the performance of major equity indices and credit spreads.