Fixed Income Arbitrage Interview Guide
Fixed income arbitrage interview guide for relative value, convergence, funding, leverage, basis, risk, and examples.
Candidates discussing curve trades, basis trades, and financing constraints.
Relative value is not risk-free
Fixed-income arbitrage usually means exploiting pricing relationships between related instruments, but funding, liquidity, and basis risk remain.
Convergence can take time
A spread may look mispriced, but it can widen before converging. Leverage and funding constraints can force exits at the wrong time.
Concrete example
A cash-futures basis trade depends on the bond, futures contract, repo financing, delivery options, and how the basis evolves.
Risk management is part of the trade
Discuss DV01, curve exposure, financing haircuts, liquidity, stress scenarios, and what would invalidate the relative-value thesis.
Common mistakes
Candidates often use the word arbitrage too casually. In interviews, explain the residual risks and why the trade is expected to converge.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.