Morgan Stanley Senior Associate Interview Questions, Process, and Tips for Experienced

Black-Scholes-Merton (BSM) model is a mathematical model used for pricing options.

• BSM model assumes constant risk-free rate, constant volatility, and lognormal distribution of stock prices.

• It assumes no dividends are paid during the option's life.

• The model assumes the option can only be exercised at expiration.

• The underlying stock follows a geometric Brownian motion.

• The model is used to calculate the theoretical price ...read more

Options are financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a specific time period.

• Options can be call options or put options

• Call options give the holder the right to buy the underlying asset at a specified price within a specific time period

• Put options give the holder the right to sell the underlying asset at a specified price...read more

ATM option delta is 0.5 because it represents a 50% chance of the option expiring in-the-money.

• ATM option delta is 0.5 because it is at-the-money, meaning the option strike price is equal to the current underlying asset price.

• Delta measures the sensitivity of an option's price to changes in the underlying asset price.

• A delta of 0.5 indicates a 50% probability of the option expiring in-the-money.

• ATM options have the hig...read more

One million has six zeros: 1,000,000.

• One million is represented as 1 followed by six zeros.

• In numerical form: 1,000,000.

• This can be broken down as: 1 x 10^6.

• Examples of one million: 1 million dollars, 1 million people.

Work-life balance is essential for personal growth, mental health, and sustained productivity, regardless of marital status.

• Maintaining mental health: A balanced life helps reduce stress and prevent burnout, which is crucial for long-term career success.

• Pursuing hobbies: Engaging in personal interests outside of work fosters creativity and can enhance problem-solving skills in the workplace.

• Building relationships: Havi...read more

Hedge funds are investment funds that pool capital from accredited individuals or institutional investors and use various strategies to generate high returns.

• Hedge funds typically have high minimum investment requirements and are only available to accredited investors.

• They often use leverage and derivatives to amplify returns.

• Hedge funds can invest in a wide range of assets, including stocks, bonds, commodities, and re...read more

Bonds are debt securities issued by companies or governments to raise capital. Different types include corporate bonds, municipal bonds, and treasury bonds.

• Bonds are essentially loans that investors give to companies or governments in exchange for periodic interest payments and the return of the bond's face value at maturity.

• Corporate bonds are issued by corporations to raise capital for various purposes, such as expan...read more

Corporate actions are events initiated by a public company that impact its shareholders and securities.

• Types of corporate actions include dividends, stock splits, mergers and acquisitions, rights issues, and spin-offs.

• Dividends are payments made to shareholders from a company's profits.

• Stock splits involve dividing existing shares into multiple shares to lower the price per share.

• Mergers and acquisitions occur when two...read more

Dirty price includes accrued interest while clean price does not.

• Dirty price includes accrued interest that the buyer must pay to the seller on top of the bond's market price.

• Clean price is the market price of the bond without the accrued interest added.

• The difference between the dirty price and the clean price is the accrued interest.

• For example, if a bond has a clean price of $1,000 and accrued interest of $20, the d