​Have a technical interview lined up in Asset Management? Then make sure you can answer each of the below questions competently. Your job depends on it!

1.    What is value investing and how is it different to growth investing?

2.    What's the formula for free cash flow?

3.    What is the difference between net income and free cash flow?

4.    Describe 3 important ratios used in value investing including their formula.

5.    What traits might an undervalued stock exhibit?

6.    What sort of information would you expect to see on a balance sheet?

7.    Explain one important way in which a balance sheet is different from both an income statement and a cash flow statement.

8.     What is WACC?

9.     What is the capital asset pricing model?

10.   What is leverage?

11.   Do you know any leverage ratios? Which ones?

12.   Please describe one or more studies that validate the virtues of value investing?

13.   Tell me about a stock that might be undervalued in the S&P500 and why.

14.   Tell me about one key proponent of value investing.

Book a mock interview to ace that interview!

Best of luck!! 

Have a technical interview lined up in corporate finance (a.k.a. IBD)? Then make sure you can answer each of the below questions competently. Your job depends on it!

1.  What is the difference between a buy-side advisor and a sell-side advisor? Which would you prefer? 
    
2.  Do you know any valuation metrics? Describe them. 
      
3.  What do you think about the current state of the US economy?

4.  Explain one important way in which a balance sheet is different from both an income statement and a cash flow statement.

5.  What is leverage? 

6.  Do you know any leverage ratios? Which ones?

7.  What is WACC? 

8. What is the capital asset pricing model? 

9.  Describe five synergies that would result from a merger between Vodafone and Sky TV. 

10.  Tell me about 3 businesses that are probably flourishing in the current economic environment and explain why you think they would be flourishing. 

11.  Tell me about a stock you like and why.

12.  What type of information goes into a pitch book? 

Book a mock interview to ace that interview!

Best of luck!!

​by Girl Banker 

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Competency-based questions are designed to elicit your  key qualities, e.g. your experience with working with others (team work), being a leader, taking initiative, overcoming obstacles, making quick decisions and so on. Here are some common questions:

1. What do investment banks do? How are investment banks different to commercial or retail banks?

2. Why do you want to work in corporate finance / sales / trading / asset management? Why do you think you would be good at corporate finance / sales / trading / asset management?

3. Why do you want to work for this bank?

4. Why should this bank hire you? What do you think distinguishes you from other candidates that have applied for this position?

5. Do you know this bank’s key competitors? What do you know about other investment banks?


6. Run me through the key aspects of your résumé/CV?

7. Describe yourself 

This is a very open-ended question so you should ask if there is anything the interviewer particularly wants you to talk about, e.g. your work experience or your ambitions, your degree and why you chose it, your university and why you landed there, your extracurricular activities etc.

8. You’re currently doing a non-financial course in university. Given this fact, what attracted you to investment banking? With so little financial knowledge, how would you be useful to us?

9. Would you describe yourself as hard-working?

10. What are your key strengths? 

11. How would someone that knows you well describe you?

12. What do you like the most about yourself?

13. What is your biggest achievement?

14. Do you have any weaknesses? What would you classify as your key weaknesses?

15. Have you ever failed? Have your plans ever not worked out? Tell me about a time when something went wrong. How did you resolve it?

16. What is the biggest failure you have ever had?

17. The grades on your résumé/CV are not the best I have seen today. Why should I hire you over someone with a better academic profile? 

18. Which other firms have you applied to? Which other firms are you interviewing with? 
Have you received any internship / job offers yet?

19. Are you only applying for positions in investment banks or are there other sectors you are considering?

20. How did you prepare for this interview?

21. Are there any questions you would like to ask me?

If you can fully prepare just the above questions for your competency based interview, you will be more than prepared. To Become an Investment Banker provides guidance on how to answer each one of these questions effectively.

Book a mock interview to ace that interview!

​by Girl Banker

Knowing details about the investment bank and then appropriately dropping that knowledge into an interview shows that you are very interested in the role, that you have done your homework and it will boost your chances of getting hired.

Before you head out, make sure you know the following:

1) Size of the bank by market cap. If you’re looking at a boutique investment bank this is not so relevant. Other metrics, such as the bank’s sector focus or client-focus, may be more meaningful to you. 

2)  Number of countries the bank is located in. 

3)  Number of employees. 

4)  The location of the head office of the bank.         

5)  The CEO of the bank and other important or well known employees.         

6)  The bank’s mission statement and guiding principles.         

7)  Read the careers section very thoroughly for any hints and tips; you may be surprised by how much info they give away.         

8)  In the careers section, do they have people profiles? What do employees say about the bank and why they like working there. If the pros they mention appeal to you, try to mention them in your interview.

9)  Interesting bank policies e.g. their environmental policy?
  
10)  The bank’s pet projects, e.g. are they supporting a big environmental restoration project or something to support a specific group of dispossessed people? 
        
11)  Recent news involving the bank: deals they are working on, regulatory rulings affecting them, earnings announcements.

I really charmed the pants off my interviewers at my first Goldman interviews because I had memorized their 14 business principles and I knew everything that Goldman was doing for the environment and so forth. I came up with this strategy because, as I perused the firm’s website, I noticed how frequently they referred to their business principles.

Some of my responses went like the following: “According to business principle number 7 which states that ... and I follow exactly the same mantra as exemplified by the time that I did...” – yep, it’s official, I’m a suck up and proud of it. A little flattery won’t hurt you but don’t overdo it. ​

by Girl Banker
​
Listen to the iTunes podcast instead.
 
These are the eight things that will get you a job in investment banking. I believe having seven out of these eight helped me get into Goldman Sachs as a newbie analyst.

1.      Gain knowledge

Read the news! At first you might feel like it’s a waste of time especially if you’re not interviewing yet but as time passes you’ll realize that some knowledge just sticks.

Without a shadow of doubt, if you spend 20-30 minutes per day on financial press, your overall knowledge and feel for the industry will start to become well-rounded.

2.      Come top of the Class or Course

If you came top in any class or course - highlight it, it means you’re smart; smart = hard working (normally).

In my second year in university, I came 5th in the Econometrics paper – you best believe that I brought that up interviews. Econometrics is hard and to come 5th out of about 150 people in a University of Cambridge class is the sort stuff interviewers are going to remember afterwards.

3.      Be an Achiever - prizes, awards and scholarships

Even if you’re not top of a class, any major prizes, awards and scholarships must be revealed when the opportunity arises.

This sort of stuff shows that you are an achiever, bankers love to work with and be associated with high performers.

4.      Be a Team Captain

If you are captain of any sporting teams - don't forget to bring it up; out of any other credentials you might have, this shows you are popular and hence personable the most. Especially at the secondary school level, to be awarded the role of captain you need to be liked by the teacher and the people you will be in charge of.

by Girl Banker
​
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The very word "derivative" makes some people start running for the hills. It sounds scary, complicated, brain numbing. However, if you take the time to read a little about them, the majority of derivatives are easy to understand, particularly derivatives that are designed to hedge specific financial risks. Speculative derivatives can get a lot more complicated.

A derivative is a financial product whose value depends on the change in the value of some other underlying product. 

Derivatives are primarily used for:

• Hedging: to protect a company against an adverse move in the market price of an input (costs) or an output (prices). To Become an Investment Banker focuses on explaining hedging. It's an important concept to understand because a lot of big companies undertake hedging activities.
  
  
• Speculation: to benefit from an expected change in market prices.
  
  
• Arbitrage: to take advantage of a perceived mispricing(s) in the market.
  
  

Understanding derivatives will a) help you decide what sort of products you might enjoy covering and b) it will give you a better feel for some of the key concerns that companies have to consider. 

In the equity capital markets, the simplest derivative is an equity call option and in the debt capital markets the simplest derivative is an interest rate swap. So read:

What is LIBOR? (it's an important variable in derivatives pricing)
What is an interest rate swap (or IRS)?  
What is a call option or an equity call option?

by Girl Banker

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An equity call option gives the buyer the right to buy a given number of shares in a given company at a given price on a given date (European-style option) or at any point with a given period of time (American-style option). Only the option buyer can exercise the option.

To buy a call option is called going long a call and selling a call option is going short a call. 

Example
Whilst Apple shares are trading at about $80 a share in late 2006 you decide to buy a call option that gives you the right to buy 1,000 shares in Apple Inc. at $200 anytime between 1 Jan 2010 and 31 Dec 2010.

Buying out-of-the-money call options is much cheaper than actually paying the money to buy the shares outright.

The call options are referred to as being out-of-the-money because the strike price, $200, is higher than the current share price of $80. If you buy this contract, you would be expressing the view that you believe in the company so much that you expect the share price to more than double over a four year period. This view would be the basis for buying the right to buy the shares at $200 in four years time, though the current value is only $80.

If at any point in 2010 Apple shares exceeded the option strike price of $200, you could exercise your right to buy the shares at $200 and immediately sell them to lock in a profit. Let’s say each option cost you $1, this means you would pay a premium of $1,000 for this option contract.

In Dec 2010, the Apple share price went over $320.

• You decide to exercise the option when the market price is at $320.
  
  
• You would pay $200,000 to exercise the equity call option contract: $200 strike price multiplied by 1,000 shares.
  
  
• You would then immediately sell all those shares at the market price of $320, locking in an immediate profit of $119,000:
  $320,000 current market value of 1,000 shares
  minus $200,000 option contract value received on sale (when you exercise the contract)
  minus $1,000 premium paid to enter into option contract 
  = $119,000 

In summary, buying equity call options implies the buyer believes the share price will go up and they want to profit if this does happen. The higher the share price is above the strike price, the higher the profit as seen below.

by Girl Banker

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The interest rate on money borrowed at a variable rate of interest, e.g. LIBOR, rises as the rate rises and falls as the rate falls. If interest rates are expected to rise, it is possible to hedge against the rise by entering into an interest rate swap (IRS) so that the floating rate is converted to a fixed rate.

An interest rate swap (IRS) is an agreement between two parties to exchange interest flows. 

One party pays a variable rate (normally LIBOR, but it can be another rate, e.g. a government base rate) whilst the other party pays a fixed rate as set on the date that the IRS is executed (i.e. when it is entered into).

The LIBOR payments are referred to as the ‘floating leg’; the fixed rate interest payments are referred to as the ‘fixed leg’.

The diagram below shows an interest swap between a book seller, Blissful Books United (BBU) and a bank. BBU pays a fixed rate to the bank and receives LIBOR.

by Girl Banker

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Libor is a very important concept if you want to work in the capital markets. You could easily be asked to define LIBOR in an interview.

What is LIBOR or Libor? 

LIBOR is the London Inter-Bank Offered Rate. It is the rate of interest that banks charge to lend money to each other, i.e. it is an interbank interest rate.

• LIBOR levels are compiled by an organization called the British Bankers’ Association.
  
  
• LIBOR is compiled on a daily basis (Monday to Friday, except public holidays) and is published at about 11:00 a.m. London time.
  
  
• For every maturity, the BBA gets 16 quotes from 16 banks; they discard the lowest four and the highest four; the remaining eight levels are then averaged to come up with that day’s LIBOR reference for that maturity.
  
  
• LIBOR rates are available for a term of up to one year.
  
  
• There is a different LIBOR rate for every currency i.e. we have GBP LIBOR, USD LIBOR, EUR LIBOR and so forth.
  
  
• LIBOR used to be viewed as a risk-free interest rate because the big banks that LIBOR is compiled from were seen as being “too big to fail” and therefore riskless. However, this view changed radically during the credit crunch, especially after Lehman Brothers collapsed.
  
  
• Nowadays, LIBOR is accepted as just a benchmark or reference level of interest rather than a clear reflection of bank credit risk.

• LIBOR is published for the following maturities (or tenors):