Term Structure Volatility Interview Guide
Term structure volatility interview guide covering expiries, event risk, mean reversion, volatility curves, examples, and caveats.
Candidates explaining implied volatility across expiries.
Volatility varies by expiry
The volatility term structure shows implied volatility across option maturities, reflecting event risk, uncertainty horizon, and supply-demand.
Events can kink the curve
Earnings, macro releases, central-bank meetings, and known catalysts can make specific expiries trade at unusually high volatility.
Concrete example
A one-week option covering earnings can trade at much higher implied volatility than a nearby option expiring before the event.
Mean reversion matters
Longer-dated volatility may move less than short-dated volatility if markets expect shocks to fade over time after events.
Common mistakes
Candidates often compare term structure to futures curves too literally. Options expiry risk and variance scaling need separate treatment.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.