Rand Merchant Bank Quantitative Analyst Interview Questions and Answers

Black-Scholes model is used to calculate the theoretical price of European-style options based on various assumptions.

• Assumes constant volatility of the underlying asset

• Assumes the stock price follows a lognormal distribution

• Assumes risk-free rate and dividend yield are constant

• Assumes no transaction costs or taxes

• Assumes markets are efficient and there are no arbitrage opportunities

An example of a derivative product is a futures contract.

• A derivative product is a financial instrument whose value is derived from an underlying asset, index, or rate.

• Futures contracts are a type of derivative product where two parties agree to buy or sell an asset at a specified price on a future date.

• Futures contracts are commonly used in commodities trading to hedge against price fluctuations.

• Example: A farmer ente...read more