SIG Quant Trading Interview: How to Price Contracts with Asymmetric Information
In the highly competitive world of quantitative trading and financial engineering, interviews at prestigious firms like Susquehanna International Group (SIG) test not just your technical skills, but also your understanding of real-world market mechanisms. One common theme in these interviews is the pricing of contracts when parties have asymmetric information. In this article, we will provide a comprehensive, step-by-step solution to a classic SIG Quantitative Trading Intern interview question: How do you price a contract when a buyer can choose to purchase an asset after observing its true value, but the seller must set the contract price in advance?
Let's begin by carefully parsing the question:
This is an excellent example of an asymmetric information problem, a concept that lies at the heart of many real-world trading scenarios. Let’s break down the key elements:
