Fair Price Interview Questions
Fair price interview prep for pricing random payoffs, expected value, toy trading games, bid-ask caveats, and model assumptions.
Candidates practicing quant trading fair-value prompts.
Fair price as expected payoff
In a simple risk-neutral interview setup, the fair price of a random payoff is its expected payoff.
Compute net value
If you pay a price to receive a payoff, the expected net value is expected payoff minus price.
Concrete example
If a die game pays the roll amount in dollars, the expected payoff is 3.5 dollars. In the toy model, 3.5 is the fair price.
Assumptions
Real markets include risk, financing, inventory, adverse selection, and liquidity. A simple interview fair price is a model answer, not a market claim.
Bid and ask
Market-making prompts may ask for a bid and ask around fair value. The fair value is the anchor, not the whole quote.
Common mistakes
Candidates often price the most likely payoff instead of the expected payoff. Fair price uses the full distribution.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.