FX Models : Quant Interview Playbook
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About this resource
Foreign Exchange is the most misunderstood asset class in quantitative finance. Most candidates learn Black–Scholes, SABR, or Heston — yet fail interviews and desks because FX does not behave like equities or rates. FX is a relative price, driven by interest-rate differentials, carry, correlation, and regime shifts, not just volatility.
This guide is a desk-first, decision-driven FX modeling playbook, built to bridge the gap between academic models and real trading, risk, and interview expectations. This is not a theoretical text. This is how FX desks actually think, price, hedge, and explain PnL.
What This Guide Covers 🔹 FX Market Reality Why FX has no natural drift Carry as the dominant PnL driver G10 vs EM regime behavior Why macro dominates short-term price moves 🔹 Garman–Kohlhagen as the FX Coordinate System Domestic vs foreign measures Interest-rate parity and forward pricing Why GK is still the foundation of FX desks 🔹 FX Volatility Smile (The Right Way) ATM, Risk Reversal, Butterfly decomposition What skew actually represents in FX Sticky-delta vs sticky-strike (and why barriers break models) 🔹 Local Vol vs Stochastic Vol Why Dupire fails for barriers Heston vs SABR in FX context Parameter instability and calibration traps When stochastic vol is necessary — and when it’s dangerous 🔹 Jumps & Event Risk Central bank announcements as scheduled jumps Why jump risk cannot be delta-hedged Model reserves and desk-level adjustments 🔹 Quanto & Hybrid FX Models Correlation entering the drift Numeraire change intuition FX–Rates–Equity hybrid pricing logic 🔹 FX PnL & Hedging Spot, carry, vol, skew, correlation PnL Why FX PnL attribution is different from equity Residual PnL diagnostics and model failure detection 🔹 Model Selection Framework Which model for: Vanilla options Barriers Digitals Exotics EM FX Speed vs accuracy trade-offs Pricing vs risk vs capital models 🔹 Interview Toolkit 25+ desk-level FX interview questions Decision trees, red-flag answers, and pressure scenarios “What to say” vs “what not to say” Model choice justification under time pressure Who This Is For Aspiring FX Quants & Strats Desk Quants (FX / Hybrid desks) Risk & XVA Quants Traders who want model intuition Candidates preparing for FX quant interviews What Makes This Different Model choice tied directly to PnL and hedging Explains why models fail, not just how they work Desk language, not textbook language Covers insights not available in public resources Coupon Code 🎟 FXD10 — Get 10% OFF Disclaimer These notes are for educational purposes only.
They do not constitute financial advice, trading recommendations, or investment guidance. All models discussed are simplifications of reality and carry inherent limitations. Past market behavior does not guarantee future results. Use professional judgment when applying any model in real trading or risk environments.
What you get
- Instant digital delivery by email after purchase
- Written by a practising quantitative risk modeller
- Desk-focused material, not textbook theory
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