Options-related study material (interview help)

[tommy.hunt]

Hi everyone,

I'm new here so I hope this is the right section to post this thread.

I'm writing in hope that someone could help me out suggesting some references for an upcoming interview that I have.

I have a PhD in applied mathematics, and although my background is mathematical biology and it has nothing to do with finance, I managed to get some quant interviews. In particular, in a couple of weeks I have the 3rd interview at Citi (in the risk department, not exactly a "traditional" quant role as far as I understand).

Anyway, the first interview was just a chat. The second got technical and they gave me a math problem (nothing related to fianance though) and we discussed a bit Black-Scholes formulas for options (during the first interview they suggested I started to read something related to options).

Well now they want to interview me again and they said again just "study equity options" (and the math behind them). Well, to me that sounds very generic and it's really hard to understand how to plan the study. There are a lot of resources and I wouldn't even know where to start.

I have studied a little bit some chapters related to options from the famous book by Hull before the 2nd interview, but even there that book is huge and it's hard for me to understand which part might be more or less "fundamental" to know.

Obviously I don't have much time and their goal is just to see, given that I don't have a financial background, how much I am eager to work there and mostly how fast I am able to learn in a short time.

So I am asking you, how should I organize the study for "options" given what I said above? What are the main things to know financially/mathematically, what kind of references (eventually chapters/sections) would you suggest me to study?

Thanks a lot

 

[Daniel Duffy]

My 2 cents on valuing Equity option from Hull's book (I have 6th edition).

1. chap 9 properties of stock options
2. binomial trees (ch. 11)
3. BS Merton (ch. 13)
4. Greeks (ch 15)
5. Maybe global overview of ch. 22
6. ch. 24!! in particular Monte Carlo, PDE/finite difference method

And Paul Wilmott's "Mathematics of Financial Derivatives, Student edition".

As a mathematician, this should be OK for you. Learning the why, what and how is also important.

How long do you have to prepare?

 

[tommy.hunt]

Hi Daniel,

thanks a lot for your suggestions. Will definitely look those up. Thank you.

 

[Daniel Duffy]

Hi Daniel,

thanks a lot for your suggestions. Will definitely look those up. Thank you.

You're welcome.

It may be too much just now, but being able to write a short C/C++ program to code up BS does no harm IMO.

// Actually, you might find some relevant snippets from these MSc theses.
Datasim Financial Forums • View topic - MSc theses in computational finance

 

[pingu]

Read this:

http://amzn.com/0994103859

 

[tommy.hunt]

You're welcome.

It may be too much just now, but being able to write a short C/C++ program to code up BS does no harm IMO.

// Actually, you might find some relevant snippets from these MSc theses.
Datasim Financial Forums • View topic - MSc theses in computational finance

Thanks again. Sorry I forgot to answer that I have less than 2 weeks to prepare.. It's kinda tight.

 

[tommy.hunt]

Read this:

http://amzn.com/0994103859

Thanks for the suggestion. It really looks like a book that could help. Given that I have really a short time to prepare could you tell me which chapters/sections would be best to read? Thank you.

 

[Daniel Duffy]

Thanks again. Sorry I forgot to answer that I have less than 2 weeks to prepare.. It's kinda tight.

It's probably just right, actually, given the objectives to pick up some new stuff in a short period on your own, I reckon.
I would try to got over the material several times, maybe starting with an 'aerial' photo and them zooming into details.

 

[pingu]

Thanks for the suggestion. It really looks like a book that could help. Given that I have really a short time to prepare could you tell me which chapters/sections would be best to read? Thank you.

read the whole thing cover to cover. It's around 150 pages only.