How Investment Horizon Changes Risk Choices in a Trading Interview
Summary
The document discusses an interview prompt asking what to do with a large capital allocation over either a multi-year horizon or a few days. One response frames the problem as maximizing expected return over the available horizon, with the idea that a longer period permits taking more risk while a shorter one calls for less. It also suggests that a market-making firm may expect candidates to consider market-making approaches rather than give a generic investment answer.
The exchange offers no concrete trading strategy, return estimate, risk model, or details about the interviewer's constraints. The horizon-based risk framing is therefore only a starting point; a strong answer would need to clarify the objective, allowable instruments, liquidity and risk limits, and whether the prompt concerns market-making inventory or directional trading. One reply is satirical and contributes no actionable investment method.
Key ideas
- The prompt contrasts deploying capital over a multi-year period with using it over a few days.
- The response frames the choice as an expected-return problem shaped by the time horizon.
- It suggests a market-making firm may expect market-making ideas in the answer.
- The exchange supplies no concrete strategy, assumptions, or evidence to compare the alternatives.
Tags
Full text
# If I gave you 100 million dollars for 3 years, what would you do? What if it was 3 days? # If I gave you 100 million dollars for 3 years, what would you do? What if it was 3 days? Just looking for some advice on a recent interview question I got for a junior quant trading role. In particular, I was asked by this quant trading/market making firm: If I gave you 100 million dollars for 3 years, what would you do? What if it was 3 days? I am just curious if anyone in the industry had any idea what kind of answers they were looking for and how to approach answering it? Thank you. ## Answer by madilyn (score 2) https://quant.stackexchange.com/a/80505 There's one optimal strategy to minimize your loss function. - Pocket it. - Buy some politicians along the way. - Set aside a portion of it to drag out your litigation defense forever. - Set up a rival firm in China where having a litigation history with your previous employer and taking trading secrets with you is actually street cred. (Not a political statement.) ## Answer by KaiSqDist (score 0) https://quant.stackexchange.com/a/80503 On the surface, sounds like a problem of maximizing expected return over a certain horizon. If you have a shorter (longer) horizon, you can take less (more) risk to maximize the expected returns. However, since they are a market-making firm, there are probably market-making solutions that make more given the same parameters. I would probably Google how market-making firms make money given a specified horizon.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.