Random Walk Quant Interview Guide
Random walk quant interview guide for step processes, expectation, variance growth, hitting examples, market-model caveats, and mistakes.
Candidates seeing hitting probability, market model, or gambler's ruin prompts.
A random walk accumulates random steps
A random walk moves by adding a random increment each period. The simplest version steps up or down by one, but the interview setup should define step sizes and probabilities.
Variance usually grows with time
For independent steps, uncertainty about position grows as steps accumulate. Expected position and variance depend on whether the walk is fair or biased.
Concrete example
Starting at zero and flipping a fair coin to move plus one or minus one gives expected position zero after many steps, but the spread around zero increases.
Boundaries create hitting questions
Add upper and lower boundaries and the random walk becomes a hitting-probability or gambler’s ruin problem. Boundary conditions are the first thing to write down.
Common mistakes
Candidates often say markets are random walks too casually. In interviews, use the random-walk model as a simplified assumption and state what real behavior it ignores.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.