Capital Markets Interview Questions (ECM, DCM, S&T)

Free sample from the Deskcraft question bank

Markets roles — ECM, DCM, sales & trading — test how the IPO process works, how debt and equity are priced and placed, and your view on markets. Real questions from the Deskcraft bank, with model answers.

1. What is the difference between sales and trading?

Model answer

Sales covers institutional clients, pitching ideas and taking orders, while traders make markets, manage risk and execute those orders by quoting bids and offers and holding inventory. Sales is relationship and idea driven; trading is risk and execution driven. Together they intermediate between clients and the markets.

2. What is the yield curve and what does an inversion signal?

Model answer

It is a plot of government bond yields across maturities, normally upward-sloping so longer maturities yield more. An inversion, where short-term rates exceed long-term rates, has historically preceded recessions, reflecting expectations of future rate cuts and slowing growth. It is a closely watched macro signal.

3. Explain the difference between a call and a put option.

Model answer

A call is the right, not the obligation, to buy the underlying at the strike before expiry, so it gains value as the underlying rises. A put is the right to sell at the strike, so it gains value as the underlying falls. The buyer pays a premium, which is also the buyer's maximum loss.

4. How do interest rates affect stock valuations?

Model answer

Higher rates raise the discount rate and cost of capital, lowering the present value of future cash flows and hitting long-duration growth stocks hardest. They also raise borrowing costs and can slow the economy and earnings. Lower rates do the reverse, so rates are a key driver of valuation multiples.