Interview questions to prepare for Sales&Trading

I have written up this list for the MBA2009s from my school but thought I might as well share it with others applying for summer internships in Markets. Writing it up, I realized there is a lot to prepare actually. Lots of questions are easy if you follow the markets and have been in the field before, but for career changers there is actually a lot to prepare! Here it goes:

Technical questions

• How are bond prices and yields related?

• How do you price a bond?

• How do you calculate implied forward rates?

• How do you price an option?

• What is a Credit Default Swap? How does it work?

• What is a CDO? How does it work?

• What happens to bond prices when interest rates rise? What happens to equity markets? What happens to currencies?

• What is an inverted yield curve and how do you interpret it?

• What is a carry trade? How does it work?
  

Market awareness

• Know the price of oil, gold, the level of the FTSE, S&P500, Nikkei, Dax, know FX rates USD/EUR, USD/Yen, EUR/GBP, what have these been doing over the last months?

• Know central bank rates of US, Euro area, UK and Japan, what have they been doing over the last months, what does the term structure look like, why?

• How would you invest $1million?

• Have you ever invested money?

• Tell me a trade idea?

• What stocks do you like and why?

• What do you think the Fed/Japanese Central bank etc. will do at their next meeting?
  (A really good source of commentary on rates and currency markets is Daily FX)
  

• Where do you think interest rates are going?

• What happened in the markets yesterday?

• Draw me the US yield curve. Draw me the UK yield curve. Why is it inverted?
  (check Bloomberg rates for the graphs, much easier than looking up the yields in the Financial Times and drawing it yourself. Wow, the UK yield curve looks funky right now!)
  

• What do you think about the current credit markets?

• What's your view on the US economy?

• What do you think is the next big investment opportunity in the markets that can offer spectacular returns?

• etc. (all questions like that to check if you have an opinion and read the newspaper, answer can be short and concise, there is no right answer as long as it is logical and moderately well informed)

• + questions that you provoke -i.e.
  If you say you are interested in emerging markets, they will ask you about which EM stock you like or what happened in Thailand last year,
  if you say you are interested in oil they might ask what's going on in Venezuela or Kazakhstan,
  if you say you come from financial engineering they might ask something more technical,
  if you say you want to do sales they might say “sell me something now” and so on

Fit

• Why do you want to do this?

• Why do you want to leave your previous job?

• We have invited 15 of your classmates for the final round. Why should we take you and not your classmates?

• How will you decide between different offers?

• What do you like about Deutsche Bank/Lehman Brothers etc.?

• Why Sales & Trading and not Investment Banking?

• Tell me about a time in your work when you really felt the power of a team and what a team can achieve