Top Six Bank of America Sales and Trading Interview Questions

One thing I've said many times is that within sales and trading, balance sheet is king. Because of the enhanced regulation post great financial crisis surrounding sales and trading, more capital essentially needs to be "put aside" compared to pre-crisis.

As I've gone into detail when discussing the modern regulatory environment in S&T, what this all means practically is that all banks are a bit balance sheet constrained and have to pick and choose what desks they want to devote the most balance sheet to. For some banks, this has made them concentrate their efforts on being market leaders in certain desks as opposed to spreading themselves thin trying to be market leaders across all desks. 

For JP Morgan and Bank of America, balance sheet constraints are still an issue, but not nearly as much as for smaller banks without a large retail presence like Goldman Sachs and Morgan Stanley.

This is all a long winded way of saying that as you'd expect given their large balance sheet Bank of America has a strong presence across the entire spectrum of trading, but in particular does well in the balance sheet heavy areas like credit and structuring.

Bank of America also has a great sales and trading summer analyst program (technically they call this the global markets sales and trading program) that allows you to rotate through fixed income or equities. Further, you can get exposure to areas like origination and structuring that are usually siloed away from traditional sales and trading programs at other banks.

Note: Origination is a big business for Bank of America and is an interesting niche, if that kind of work is appealing to you.

When interviewing at BofA you should expect a wide diversity of questions as opposed to focusing in on one product type or desk. This is because you're going to be expected to come in relatively open minded about what desk you'll ultimately end up on full-time.

Bank of America Sales and Trading (Global Markets) Interview Questions

Below are some interview questions you can expect, feel free to click the links below to move between the questions.

Question 1: Why Bank of America for sales and trading?

Question 2: USD/CAD opens at 1.5 and closes at 1.5035. As a trader, you sell $1mm USD at the open and bought it back at the close. Walk me through your gains and losses?

Question 3: How are FX quotes structured?

Question 4: What kind of optionality exists in mortgage backed securities?

Question 5: If you were to place a dollar value on an apple tree, how would you think about doing it?

Question 6: What's one market story you've been following recently?

Why Bank of America for sales and trading?

Often applicants - especially for summer analyst programs - will focus in on technical questions and forget the "basic" questions that you're guaranteed to get in your interviews. 

I imagine this is because people think that questions about why you want to work at a certain bank have generic answers that can't possibly differentiate you from others. While this may be true if you're applying to an investment banking role, in sales and trading there are meaningful differences you can point to between the banks.

These differences are a bit nuanced and (trust me) the vast majority of applicants will not say these, so it's impressive if you do. So here's what you should reference.

First, you should point to the fact that you've heard in modern sales and trading, having significant balance sheet is important because of the enhanced capital that has to be set aside (in particular for trading in more "risky" products, like non investment grade credit). As a consequence of this, Bank of America is able to differentiate itself by being strong across all trading products. This is important to you, as the applicant, as you want to be open to ending up anywhere within the trading floor so don't want to feel like you have to go to a certain desk, because that's the one the bank you're applying to is strongest in.

Second, you should highlight how many banks have moved from having rotations over the summer to having set placements. As I've discussed before, you should always have a reasonable idea on a few desks that you want to be on, but it's always great if you have the ability to see how well you gel with various desks over the summer.

Third, Bank of America is an iconic brand that has leaned into their sales and trading operations over the past decade (while some banks have chosen to focus on other areas more, like wealth management or investment banking). This has resulted in strong outperformance across fixed income and equities.

If you can weave these three points into your answer, that'll be more than good enough. They're unique, but not pandering to the point of being a bit over the top.

USD/CAD opens at 1.5 and closes at 1.5035. As a trader, you sell $1mm USD at the open and bought it back at the close. Walk me through your gains and losses?

So here's a little FX question. These can often be asked because they're a bit more of a brain teaser that don't require much domain knowledge; you just have to keep track of each currency.

Let's start with the basics: the price moved against us! We sold at X and X then went up when we bought back (to close out our position for the day so we don't take risk overnight).

We'll first consider the base current (USD) loss, which would just be 0.035 divided by 1.5035 and then multiplied by the notional amount ($1mm). This gives us -$2,328.

In CAD terms, this would be 0.035*$1mm or -$3,500CAD.

How are FX quotes structured?

There are two components, the "big figure" and the "pips". For example, if you see something quoted $1.45 50-55 that means the big figure is $1.45 - which would be a static element - and the 50-55 are the pips, which represent the bid-ask spread (what you are willing to buy at and what you are willing to sell at). 

Within every desk of S&T how assets are quoted can vary a bit and come along with their own terminology. When dealing with rates trading, you'll often hear talk about basis points or the basis, for example.

It can be a bit annoying to get the lingo down initially, but if you do prior to your internship it's a great way to stand out (as just sounding fluent in the product is half the battle!). 

What kind of optionality exists in mortgage backed securities?

A great way to stand out is to have a very basic understanding of the major asset classes that exist on the trading floor. Bank of America has always been - and still is - a major player in the mortgage backed securities (MBS) market.

MBS products are defined by their optionality, which means the capacity for borrowers (those who have the mortgages that make up the mortgage pools within the MBS) to repay their mortgage prior to its maturity.

In a falling rates environment, as you'd expect, more people refinance their mortgages at lower rates (or perhaps sell their homes, because they've gone up in value) which reduces down the duration of the MBS.

If you were to place a dollar value on an apple tree, how would you think about doing it?

This may seem like a bit of an odd question at first, but what it's really trying to do is get to your sense of how you would value any asset (by giving a bit of an absurd example).

So think about your traditional valuation techniques: comparables analysis, DCF analysis, and precedents transactions. 

For comparables, we could just look at what similar apple trees have sold for recently (that have a similar amount of apple yield, are in a similar location, etc.) then take an average of them. Alternatively, we can look at precedents transactions, meaning look at apple trees that have recently sold and take an average to find out what our apple tree would be worth. 

For a DCF, what we would do is forecast each year, over say five years, what the total amount of apple revenue we believe we would get (discounting back to present for each year) and then come up with a terminal value. We would then add the discounted years we forecasted along with the terminal value to find the "enterprise value" of our little apple tree. Essentially all this would mean is we're taking the value of the apples on the apple tree, over it's expected life, and discounting each year's apple haul to the present (so apple revenue in year ten will make up a smaller part of our enterprise value than year one apple revenue).

What's one market story you've been following recently?

Obviously I can't give you a timely example, depending on when you're reading this. But I'd recommend going to Bloomberg or the WSJ, going to the markets section, then trying to find an article that clearly fits into a given desk.

For example, it's far better to talk about some volatility that's been reported in the municipal bond market as opposed to broader macro themes. 

Another way to stay abreast to interesting stories is by reading Matt Levine's always good daily newsletter, where he'll often talk about topics that would work great in an interview.

Conclusion

Bank of America offers one of the best sales and trading summer analyst programs on the street (via its Global Markets program, I don't know why every bank insists on now calling their S&T division something unique).

Because of its rotational nature, you should be prepared for basic questions on every desk. You should also be prepared - although we didn't cover it here - for the "basic" qualitative questions that are bound to come up in any interview surrounding what desks you may be interested in, etc.

Because of the breadth of S&T interviews, it can be a bit daunting to prepare. Just remember that if you can really shine on at least a few of the questions, that can be enough to get the offer (although it's better to hit all of them out of the park!). 

Because there's so little information out there, I created this site and put together hundreds of sales and trading interview questions and desk guides to help you prepare. Feel free to check it out if you're gearing up for summer analyst or full-time interview -- I'm sure it'll be helpful. I've also put together some more sales and trading interview questions in other posts.

Good luck in all your prep -- remember not to get too overwhelmed with it all and go into your interviews as relaxed as possible.