Quant interviews assume a shared vocabulary. Interviewers say “what's your edge here?” or “how do you handle adverse selection?” without pausing to define anything, and candidates from pure math or CS backgrounds lose time decoding the jargon instead of solving the problem. This glossary covers the terms that actually come up — grouped by firm types, roles, interview stages, and trading concepts — with just enough depth to use each one correctly.
Firm types
Prop shop (proprietary trading firm). A firm that trades only its own capital — no outside clients, no management fees. Profits are split between the firm and its employees, which is why prop shops pay aggressively and tie bonuses tightly to desk performance. Jane Street, Optiver, SIG, and DRW are the canonical examples. See how they stack up on our firms-by-interview-difficulty ranking.
Market maker. A firm (or role) that continuously quotes both a bid and an ask on an instrument, earning the spread between them while managing the risk of the inventory it accumulates. Most options prop shops are market makers. This is why “make me a market” is a standard interview exercise — the job in miniature.
Quant hedge fund. A fund that manages external investor capital using systematic strategies and charges management plus performance fees. Citadel, Two Sigma, and DE Shaw are quant hedge funds; a “pod shop” or “multi-strat” (Millennium, Balyasny) runs many independent teams, each with its own risk budget and quick cut if it loses money.
HFT (high-frequency trading). Strategies where speed is the edge, with holding periods of microseconds to seconds. HFT firms hire heavily for low-latency engineering; not all prop shops are HFT, and not all HFT is market making.
| Firm type | Whose money | Typical holding period | Examples |
|---|---|---|---|
| Prop shop / market maker | Firm's own | Seconds–days | Jane Street, Optiver, SIG |
| Quant hedge fund | External clients | Days–months | Two Sigma, DE Shaw |
| Multi-strat / pod shop | External clients | Varies by pod | Citadel, Millennium |
| HFT firm | Firm's own | Microseconds–minutes | HRT, Jump, XTX |
Roles
Quant trader (QT). Makes real-time pricing and risk decisions, often on a market-making desk. Interviews emphasize mental math, probability, and game-based rounds. Quant researcher (QR). Builds the models and signals; interviews go deeper on statistics, regression, and stochastic processes. The line varies a lot by firm — our trader vs researcher guide breaks down how the roles and interview loops differ. Quant developer (QD) builds the systems (often low-latency C++) that research and trading run on.
Interview-process terms
Online assessment (OA). A timed screening test sent before human interviews — mental arithmetic, probability MCQs, sequences, or HackerRank coding depending on firm and role. It is usually a hard cutoff. Full breakdown in what is a quant online assessment.
Zetamac / 80-in-8. Zetamac is the arithmetic speed drill the industry standardized on; “80 in 8” refers to Optiver's benchmark of 80 correct answers in 8 minutes on its arithmetic test — see the Optiver 80-in-8 guide for what a competitive score looks like.
Superday / final round. A batch of back-to-back onsite (or virtual) interviews, often including a market-making game and an estimation question, after which the firm decides.
Market and trading terms
Bid-ask spread. The gap between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). It is the market maker's gross revenue per round trip and the taker's cost of immediacy.
Order book. The live list of resting buy and sell orders at each price level. Questions about queue priority and book dynamics come straight from our market microstructure question bank.
Adverse selection. The risk that the counterparty trading with you knows something you don't — when your quote gets hit, it's disproportionately by informed traders. This is the single most-tested concept in market-making game rounds.
Edge and EV. Edge is your expected profit per trade after costs; EV (expected value) is the probability-weighted average outcome. “Only trade when you have edge” is the house philosophy at every prop shop.
PnL, alpha, Sharpe ratio. PnL is profit and loss. Alpha is return attributable to skill rather than market exposure. The Sharpe ratio is average excess return divided by its standard deviation — the standard yardstick for a strategy's risk-adjusted quality. Compensation conversations are ultimately about these numbers; our quant salary guide shows how they translate to pay.
Math terms interviewers drop casually
The Greeks. Sensitivities of an option's price: delta (to the underlying), gamma (delta's sensitivity), vega (to volatility), theta (to time). Martingale. A process whose expected future value equals its current value — the backbone of many probability interview questions. Kelly criterion. The bet-sizing rule that maximizes long-run growth; interviewers use it to probe whether you size bets proportionally to edge over variance.
Put the vocabulary to work
Definitions only stick when you use them under time pressure. Drill the concepts in our probability question bank, try quoting two-sided prices in the market-making game, or run a timed OA-style simulation to see which terms you can actually operate with.
Frequently asked questions
What is a prop shop in quant finance?
A prop shop (proprietary trading firm) trades exclusively with its own capital rather than managing money for clients. Because there are no outside investors, profits flow directly to the firm and its employees, which is why prop shops like Jane Street, Optiver, and SIG pay large performance-linked bonuses. The trade-off is that compensation and job security track firm performance closely.
What is the difference between a market maker and a hedge fund?
A market maker earns money by continuously quoting buy and sell prices and capturing the bid-ask spread across a huge number of trades, holding positions for seconds to hours. A hedge fund manages external client capital and earns management and performance fees, typically holding positions for days to months. Market makers are usually prop firms; quant hedge funds like Citadel or Two Sigma answer to outside investors.
What is an online assessment (OA) in quant recruiting?
An online assessment is a timed, unproctored or lightly proctored test sent early in the hiring funnel, usually before any human interview. Depending on the firm and role it covers mental arithmetic, probability multiple-choice, sequence patterns, or HackerRank-style coding. Most firms use it as a hard filter, so a below-threshold OA score typically ends the process regardless of your resume.
Do I need to memorize all this jargon before a quant interview?
You need working fluency, not memorization. Interviewers will use terms like adverse selection, edge, or expected value mid-question without defining them, and pausing to ask what they mean costs you time and signal. Learn the terms by solving problems that use them rather than reading definitions in isolation.
Practice the real thing
QuantVault has 2,800+ quant interview problems with full solutions, intuition, and hints, firm-by-firm interview funnels, and an auto-graded coding judge. Start free.