30 Sales and Trading Interview Terms Defined
- Stephen Turban
- May 29
- 7 min read
The 30 terms below are the ones that come up in 80% of bulge bracket S&T interviews in 2026. They span rates, FX, equities, derivatives, and the general markets vocabulary that every analyst on a trading floor is expected to know. Each term has a clean definition, the context that makes it matter on a desk, and an example interview question to drill against.
This isn't an exhaustive glossary. It's the working set you need fluent recall on before your first S&T superday. If you can define all 30 of these in under 30 seconds each, you've cleared the vocabulary bar.
As a Harvard alum, former McKinsey consultant, and founder of WSG, I watch S&T-targeting candidates trip on vocabulary every cycle. The fix is mechanical: drill the 30 terms below until the recall is automatic. This is the working set I hand WSG candidates the week before their first markets interview.
How many of these terms should I know before my first S&T interview?
Aim for fluent recall on at least 25 out of 30. Trading-floor culture rewards crisp, opinionated answers. A 5-second hesitation on a basic term signals you haven't done the prep. If you're hazy on 6+ terms, postpone the interview if you can; the gap between hazy and fluent is the difference between an offer and a polite rejection.
Rates and Fixed Income
1. Basis points (bps)
Definition: One basis point equals 0.01% (1/100th of one percent). 100 bps equal 1%.
Why it matters: All rates and credit pricing is quoted in bps. A 25 bps cut means the Fed lowered the policy rate by 0.25%.
Example question: "If a bond yield moves from 4.25% to 4.10%, how many bps did it move?" Answer: 15 bps lower.
2. Yield curve
Definition: The relationship between bond yields and their maturities. Plotted with maturity on the x-axis and yield on the y-axis.
Why it matters: Steepness, flatness, and inversion of the yield curve signal market views on growth and Fed policy. Inverted curves often precede recessions.
Example question: "What's the spread between the 2-year and 10-year Treasury today, and what does it tell you?"
3. Duration
Definition: A measure of a bond's price sensitivity to a 1% change in interest rates. A bond with duration of 7 falls roughly 7% if yields rise 1%.
Why it matters: Duration is the primary risk metric in fixed-income trading.
Example question: "If you own a portfolio with duration 5 and rates rise 50 bps, what's your approximate P&L impact?" Answer: approximately -2.5%.
4. Convexity
Definition: The second-order sensitivity of a bond's price to rate changes. Captures the curvature of the price-yield relationship.
Why it matters: Duration is linear; convexity captures the non-linear effect. Long-duration bonds have more convexity, which means they gain more from rate cuts than they lose from rate hikes of equal size.
5. Repo
Definition: Repurchase agreement. A short-term collateralized loan where one party sells securities and agrees to buy them back at a higher price.
Why it matters: The repo market is the plumbing of the financial system. Repo rates are a key short-term funding cost.
Example question: "What happened in the repo market in September 2019?" Answer: rates spiked to 10%+ briefly due to a funding squeeze; the Fed had to intervene.
6. Swap spread
Definition: The yield difference between an interest rate swap and a Treasury of the same maturity.
Why it matters: Swap spreads signal the relative attractiveness of swaps vs Treasuries and capture funding stress.
7. SOFR
Definition: Secured Overnight Financing Rate. The replacement for LIBOR as the primary US dollar benchmark rate. SOFR is based on actual repo transactions.
Why it matters: Virtually every floating-rate loan and derivative in the US now references SOFR.
Example question: "Why did the market move from LIBOR to SOFR?" Answer: LIBOR was based on bank submissions and was manipulated; SOFR is based on actual transactions.
8. IRS
Definition: Interest Rate Swap. A contract where two parties exchange fixed-rate and floating-rate cash flows on a notional principal amount.
Why it matters: The most-traded derivative product globally. Used by corporates and asset managers to hedge rate exposure.
FX and Macro
9. Pip
Definition: Price interest point. The smallest standardized unit of FX price movement. For most currency pairs, one pip equals 0.0001 (1/100th of one cent).
Example question: "If EURUSD moves from 1.0850 to 1.0865, how many pips did it move?" Answer: 15 pips.
10. Carry trade
Definition: Borrowing in a low-yielding currency to invest in a high-yielding currency, capturing the rate differential.
Why it matters: The classic FX strategy. Works in calm markets, blows up in volatility (currency moves overwhelm the rate spread).
11. Hawkish vs dovish
Definition: Hawkish: in favor of higher rates or tighter monetary policy. Dovish: in favor of lower rates or looser policy.
Why it matters: Reading central bank statements is core to macro trading. A "hawkish hold" means the central bank held rates but signaled future hikes.
12. Risk-on / risk-off
Definition: Market regimes. Risk-on: investors buy risky assets (equities, EM, high-yield). Risk-off: investors flee to safe havens (Treasuries, gold, dollar, yen).
Why it matters: Macro trading positions vary materially based on the prevailing regime.
Equities
13. Beta
Definition: A measure of a stock's volatility relative to the market. Beta of 1 means the stock moves with the market; beta of 2 means it moves twice as much.
Why it matters: Beta is a primary equity risk measure and the input to CAPM.
Example question: "What's the beta of a high-flying tech stock vs a utility?" Answer: tech high (~1.5-2), utility low (~0.5).
14. Alpha
Definition: Return in excess of the benchmark, adjusted for risk. The portfolio manager's edge.
Why it matters: Hedge funds and active managers sell alpha. Passive managers sell beta. The distinction is core to asset management.
15. Market making
Definition: Standing ready to buy and sell a security at quoted prices. Market makers earn the bid-ask spread and take on inventory risk.
Why it matters: Most bank trading desks are market-making operations, not prop trading.
16. Prop trading
Definition: Proprietary trading. The firm trades with its own capital for its own P&L. Dodd-Frank's Volcker Rule restricted prop trading at US banks.
Why it matters: Banks today do limited prop trading; most "trading" is market-making. Pure prop trading happens at firms like Jane Street, Citadel Securities, and Optiver.
17. P&L
Definition: Profit and loss. The day's net trading result, tracked in real time on the desk.
Why it matters: P&L is the trader's report card. Bonus, promotion, and seat retention all flow from cumulative P&L.
18. Block trade
Definition: A large equity trade (often $10M+) executed outside the public order book, typically with a single counterparty.
Why it matters: Block trading is a meaningful S&T revenue source. The block desk negotiates large positions with institutional clients.
Derivatives and the Greeks
19. Delta
Definition: The sensitivity of an option's price to a $1 change in the underlying. A call with delta 0.5 gains $0.50 if the underlying rises $1.
Example question: "What's the delta of a deep in-the-money call?" Answer: close to 1.0.
20. Gamma
Definition: The rate of change of delta. Captures how quickly an option's delta changes as the underlying moves.
Why it matters: High-gamma options have explosive payoff potential but require active hedging.
21. Theta
Definition: Time decay. The amount an option loses in value per day as it approaches expiration, holding everything else equal.
Why it matters: Short-dated options bleed value quickly. Long options positions have negative theta exposure.
22. Vega
Definition: The sensitivity of an option's price to a 1% change in implied volatility.
Why it matters: Volatility trading is a meaningful revenue source. Vega is the primary risk metric for vol traders.
23. Implied volatility (IV)
Definition: The volatility level implied by the current option price. Markets' expectation of future volatility.
Why it matters: When IV spikes, options get more expensive. Volatility itself is a tradeable asset.
24. Black-Scholes
Definition: The standard options-pricing model. Inputs: underlying price, strike, time to expiry, risk-free rate, volatility. Output: theoretical option price.
Why it matters: Foundational pricing framework. Every desk uses some variant or extension of it.
Credit and Structured Products
25. CDS
Definition: Credit Default Swap. A derivative where one party pays a premium and receives a payout if a reference entity defaults.
Why it matters: CDS prices are a real-time market view on credit risk. The CDS market was at the center of the 2008 financial crisis.
26. MBS
Definition: Mortgage-Backed Security. A bond backed by a pool of mortgages.
Why it matters: MBS is one of the largest fixed-income markets. Prepayment risk makes MBS pricing more complex than standard bonds.
27. Investment grade vs high yield
Definition: Investment grade: bonds rated BBB- and above. High yield ("junk"): bonds rated BB+ and below.
Why it matters: Different desks trade IG vs HY. Risk profile, spread, and liquidity all differ.
28. Spread (credit spread)
Definition: The yield difference between a credit-risky bond and a Treasury of the same maturity. Quoted in bps.
Why it matters: Spreads compress when investors are bullish on credit and widen when they're bearish.
General Markets
29. Bid-ask spread
Definition: The difference between the highest price a buyer will pay (bid) and the lowest a seller will accept (ask). Market makers earn this spread.
Why it matters: Tight spreads signal liquidity; wide spreads signal stress.
30. Liquidity
Definition: The ability to buy or sell a security quickly without moving the price. A liquid market has tight spreads and deep order books.
Why it matters: Liquidity disappears in stressed markets. Trading desks measure and manage liquidity risk constantly.
How to drill these terms before a superday
Make 30 flashcards. One term per card. Front: the term. Back: definition + why it matters + an example. Drill 10 cards in the morning, 10 at lunch, 10 in the evening for a full week. By day 7 you'll have fluent recall on all 30.
Then practice using them in context. Run a 90-second mock "tell me about today's markets" and force yourself to use 5 of these terms naturally. The bar isn't memorization. The bar is fluent use of the vocabulary in a markets-conversation context.
Trading-floor culture punishes vocabulary hesitation. A candidate who can't define duration in 5 seconds gets cut from a rates desk superday regardless of how strong the rest of the application is. These 30 terms are the table-stakes vocabulary. Drill until they're automatic.
Stephen Turban is the co-founder of Wall Street Guide and Lumiere Education. He graduated Magna Cum Laude from Harvard College in Statistics, worked as a Business Analytics Fellow at McKinsey & Company. He founded WSG to give ambitious students the same insider access to finance and consulting recruiting that top-school students take for granted.
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