Morgan Stanley Quantitative Researcher Interview Experience — Three VO Rounds from a Brainteaser to Black-Scholes Robustness

Virtual Onsite interview experience

The VO had 3 rounds total, each about 30 minutes.

Round 1

Mainly resume questions + probability questions + a brainteaser.

The interviewer first asked some project-related questions based on my resume, then asked some probability questions. At the end there was a brainteaser: there's a dog running on a circle of radius 1, at speed 4. You're at some point inside the circle, at speed 1. Question: can you escape the circle? If so, how should you run?

Round 2

This round was mainly about estimating option Greeks.

The interviewer had you estimate the Greeks by mental math, without a calculator — things like:

• delta
• gamma
• vega

They also asked about tricks for quickly estimating Greeks without knowing the Gaussian CDF quantiles. This mainly tested:

• understanding of the Black-Scholes formula
• some approximation methods
• a sense of orders of magnitude

Round 3

This round mainly discussed the robustness of the Black-Scholes formula.

The question was roughly: if the real market volatility isn't constant, but you still use the constant-volatility Black-Scholes model to hedge, then:

• What does the PnL look like when hedging an option?
• Under what conditions do you make money or lose money?
• What's the relationship between PnL and realized volatility vs. implied volatility?

Basically this was discussing the PnL structure under delta hedging.