Sales and Trading Interview Guide: Understanding Greeks

Trading requires a combination of intuition, discipline and process. Of the three intuition is the most difficult to teach, since discipline and process is an incentives and control game. While individual intuition can be built over years of experience there are rules that make it easier to pick up that intuition faster.

Institutional intuition gets passed on between generation of traders through shadowing, standards, processes and controls. This passage of rites becomes easier if you have a knack for the subject, if you already know some of the rules or if you are familiar with the trading language.

The sales and trading language has many dimensions dealing with execution, trading strategy, customer behavior and product variations. This book only focuses on one very limited aspect of that language – the aspect dealing with risk management, hedging and Greeks.

The challenge with this part of the language lies partly with the terminology (a range of Greek symbols), partly with the presentation (partial differential equation), with calculations (a combination of Greek symbols and partial differential equations) and with interpretation (can you please say that again in a language that we can all understand).

Most business school derivative courses run out of time before the product universe has been covered, let alone spend time on teaching how to read, predict or forecast the behavior of exotic Greek symbols. .

Advance derivative courses cover pricing and if we are lucky spend limited time on sensitivities and Greeks because of conflicts with other topics in the outline. Sometime as business school students all we get are case notes and text references that are long on definitions and calculations but short on guidance and practical applications.

Which is unfortunate because the option price sensitivity topic is difficult to grasp for most audiences given its very non-linear nature. It takes time to think comfortably in the non-linear world. We understand simple straight forward, single dimensional relationships very well. When you ask us to envision a new dimension or even worse collate reactions from multiple dimensions into a single trading decision, our mental frameworks breakdown.

To develop an appreciation for this topic you need at least a few days of hands on or modeling experience followed by active application of the same concepts. The reason why you have purchased this book is because you don’t have a few days. You possibly have a few hours or a night before that interview or presentation is due.

So we have tried to compress primary lessons into short bite sized pieces. There are some equations but we don’t spend time on them or their derivations. We do spend time on ground rules, behavior and intuition. As a trader I am more likely to ask you about how Gamma is going to behave under a given scenario and how that is different from Vega’s reaction.

Our assumption is that you have some familiarity with Options, Black Scholes and the derivative pricing world. If this is not the case you need more help which is available on our partially free site at

This book is based on a four part MBA course on derivative pricing and risk management that I have taught in Dubai and Singapore and the risk and treasury management practice I have run since 2003. The material is based on training tools we developed to teach advance treasury concepts to our students using our signature hands on, equations off mode.

And now let’s go waltz with some Greek symbols.

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Preparing for the quantitative portion of a sales and trading interview for a main street bank is a nightmare. Specially if the bank is an active derivative trader and wants it intake class of interns and full time analysts and associates to hit the Sales and Trading desk running.

While basic option concepts generally get covered quite well in the MBA curriculum, when it comes to option price sensitivities and Greeks, our understanding remains rudimentary and superficial. One reason is the focus on formulas and calculation rather than intuition and understanding. Most courses have run out of time when it comes to delta, gamma, vega, theta and rho and stop after a basic rudimentary coverage of the material.

There is a lot of good material available on basic quantitative and numerical techniques tested in a Sales and Trading interview. But when it comes to option price sensitivities or Greeks, available material generally looks like this.

As part of the work we do with customers and students, our Apple iPad iBooks team is working on two very interesting and exciting titles.

The first is the Sales and Trading Interview Guide – Understanding Greeks for Dummies. Using the interactive iBook template we will help you master your Greeks to such a level where future mention of delta, gamma, vega, theta and rho would no longer break you out in cold sweat and palpitations. The iBook will cover Greeks behavior across time, volatility, spot and strike prices using easy to understand language, graphs and self assessment quizes.

But it’s the second iPad iBook title that we are really excited about. Sales and Trading Interview Guide – Delta Hedging and other higher dimensions, will help you build your own delta hedging sheet in excel using Monte Carlo Simulation. Both iPads books will have options for purchasing supporting excel spread sheets that extend the concepts covered in the iBook.

Planned for release in mid September, the two books will increase our inventory of interactive iBook for iPad titles to 5. Please feel free to drop me a note if you would like to learn more about the release dates and table of content for both titles.

Related posts:

  1. Asset Liability Management (ALM) Study Guide for Board Members – coming soon to an iPad near you.
  2. Understanding ALM and Calculating Value at Risk iBooks featured on the Apple iTunes store
  3. Accounting Crash Course: Small Business Accounting Training – Sales Journal and Sales Ledgers

When they announced his name as the winner of the distinguished teaching award at the commencement day of Class of 2000, twelve years ago, every single one of Ralph’s student in the audience stood up and clapped. We didn’t stop till Ralph stepped off the stage.

I asked him when I met him just before I left New York, if he had noticed. He smiled with his eyes and answered with his very own version of “Oh, yes.”

I remember that “Oh yes”, I remember the smile that always started with his eyes.

I first saw Ralph smile with his eyes on a cold Tuesday morning in January at the business school’s new campus on Amsterdam. It was the best possible start to a new year and to Tuesday and Thursday mornings for the next five months.

Arno and everyone else who had taken Ralph’s signature course on general management had raved about Top Management Processes (TMP). Ken and I both signed up for the course, completely unaware of what awaited us in the class room.

We also tried to convince Safwan Masri, the Vice Dean at the Business School that given our “extended” corporate experience we really didn’t need the course on Corporate Strategy. Strategy was nothing but fluff and there were other hard courses that needed our attention.

Fortunately for us, Safwan was a much better negotiator and forced us to sign up for a double dose of Ralph. Top Management Processes on Tuesday morning. The core course on Corporate Strategy on Thursday mornings. Within a week both days were labeled as power mornings amongst Ralph’s students.

The classes were the most fun we had at school. Ralph premise was simple. Are general managers born or can be trained? Is there a science to this subject? Can you teach it in a full semester course at Columbia? For twelve years the power morning sessions of TMP generated some of the most intensive case discussions and debates around strategy and general management on campus.

Ralph became our guide to understanding the drivers at work at the Bay of Pigs and the Cuban missile crisis. He introduced us to T J Rodgers and no excuses management at Cypress Semi Conductor. He made us choose between Mustafa at Serengeti eyewear and the controversy that was T J.

But more importantly like John Whitney in the Perfect Prince and Donald Sexton in International Marketing, Ralph introduced us to ourselves and our many friends in the class room. We saw amazing insights, analysis and arguments in every single class. Ralph conducted our case discussions with the finesse of a maestro. His “But, Jawwad” would somehow inspire and move you to give reasoning and arguments that you had never thought of before. “What would you do” became the other hall mark from the TMP course, since the course was just as much about doing as it was about dissecting. Ralph made us the stars we became by showing us what we could do if we applied our minds and started thinking and behaving like general managers.

The TMP mailing list and Ralph became my most important support group as I first build the business that became Avicena and later picked up the pieces as the world around me came crashing down. Confused with the conflicting reactions I had received from two other professors, I asked Ralph for his opinion about doing what I was trying to do. Ralph took his time and finally said, “Why not?”. Glenn Hubbard, our entrepreneurial finance professor and Ralph, both helped as advisors and mentors during the final six months at school as I tried to wrap up the MBA and launch a new business off the ground.

Ralph’s door was always open, if you needed help, guidance, a second opinion or good advice. And of all the friends and mentors at school, Ralph always gave great advice.

It was the Ralph on the sidelines of the class that I remember and miss the most. Amin, our 8 month old son would routinely hang on to my knees and cry as I tried to sneak away for my early morning class. A few times I ran really late and tried a lit bit more stealth than was called for. Given how important Ralph’s approval and opinion had become to all of us I went up to him and explained why I had walked in late that day. Ralph smiled, (I know I keep on repeating myself but he always did, that is what I remember of him), and said, “We all have sons, Jawwad, we have all gone through this stage, no worries”.

This morning as I stood by the whiteboard and looked at my eager class of MBA students in Dubai, I really missed Ralph.

I had been struggling with his death ever since I landed in Dubai and saw Glenn’s email on Tuesday night. As Ralph would say, it would not be good form for a forty year old to shed a few tears in front of his thirty year old students. Or maybe not. Ralph taught us that general managers and professors, despite the myths and the hype, were also human. Especially at Columbia Business School.

The best of teachers, teach. The greatest of teachers inspire others to teach. Ralph E. Biggadike was my inspiration.

May the Almighty bless him with the best of Golf Clubs, of Golf Courses, and the biggest, baddest whiteboard of them all in the afterlife.

I miss you Ralph.

Ralph E. Biggadike. 17th August 2012.

No related posts.

Our third title in our ground breaking Risk on the iPad series, “Asset Liability Management & Value at Risk Test Bank“  is now available for sale on the Apple iTunes iBook Store.

Customers asked for a self contained, self assessment iBook based on our earlier Value at Risk (VaR) and Asset Liability Management (ALM) titles. Our third title for the iPad does just that. Based on quizzes and questions from Value at Risk (VaR) and ALM titles, we added two detailed step by step case studies that will help you follow calculations, concepts and logic.

With 65 pages, this iBook is a supplementary study aide to our earlier release of Calculating Value at Risk and Understanding ALM. Both titles were recently featured in the New and Noteworthy section in finance on the Apple iBook store.

This title includes:

I.    ALM topic quiz on interest rate and interest rate mismatch risk measurement tools

ii.    ALM case study quiz that tests the concepts of Duration & interest rate sensitivity and impact of interest rate sensitivity on shareholders’ equity and net interest income (NII)

iii.    VaR topic quiz covering VaR methods and risk management framework

iv.    VaR case study quiz that showcases how VaR is calculated for a portfolio comprising of Gold & Oil

v.    Answers with detailed explanations

Vi    Detailed case study walkthroughs that demonstrate and explain how questions and examples may be solved in EXCEL using a simple spread sheet.

The Apple iBook unfortunately is only available in the following countries in Asia, Europe and North America. We are trying to work with Apple to make new stores available in the Middle East and the Sub Continent and would love to get you involved in that effort.

There is a valid and powerful case to be made for adding iBook stores for Hong Kong, Singapore, Malaysia, Thailand, India, Pakistan and UAE.

In Asia

  1. Australia


In Europe

  1. Austria
  2. Belgium
  3. Bulgaria
  4. Cyprus
  5. Czech Republic
  6. Denmark
  7. Estonia
  8. Finland
  9. France
  10. Germany
  11. Greece
  12. Hungary
  13. Ireland
  14. Italy
  15. Latvia
  16. Lithuania
  17. Luxembourg
  18. Malta
  19. Netherlands
  20. Norway
  21. Poland
  22. Portugal
  23. Romania
  24. Slovakia
  25. Slovenia
  26. Spain
  27. Sweden
  28. Switzerland
  29. United Kingdom


In North America

  1. United States
  2. Canada

Related posts:

  1. Understanding ALM and Calculating Value at Risk iBooks featured on the Apple iTunes store
  2. Asset Liability Management (ALM) Study Guide for Board Members – coming soon to an iPad near you.
  3. Asset Liability Management – Earnings at Risk

Jawwad Farid
How is that for a birthday gift?

Value at Risk and ALM iBooks Featured on the iBook store

FourQuants VaR and ALM ibooks titles get featured on the Apple US iTunes Store


The Apple iTunes store features two of our iBooks for iPad titles in the New and Noteworthy featured section in Finance. The Featured in Finance titles include Understanding ALM and Calculating Value at Risk.

A job well done by an outstanding team. Keep an eye out for our third iBook title on risk, scheduled for release this weekend – The ALM, Value at Risk Test Bank with Case Studies.


The Features iBook section shows up for customers in markets with an active iBook Store.  Click on Business and Personal Finance and then pick the Finance category to see the featured titles list on the iTune store.

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