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Optimize interval-scoring strategy

Last updated: Mar 29, 2026

Quick Overview

This question evaluates decision-theoretic optimization, interval estimation, probabilistic modeling, and risk-allocation skills in a Statistics & Math context, and is commonly asked to assess an applicant's ability to balance coverage versus payoff and allocate limited risk under distributional uncertainty.

  • hard
  • Optiver
  • Statistics & Math
  • Data Scientist

Optimize interval-scoring strategy

Company: Optiver

Role: Data Scientist

Category: Statistics & Math

Difficulty: hard

Interview Round: Technical Screen

You are given a five-round interval-estimation game used in market-making interviews. In each round, the interviewer asks a quantitative question with an unknown true numeric answer A. You must report a closed interval [L, U]. Scoring per round: if A ∉ [L, U], score = 0; if A ∈ [L, U], score = L/U. The goal after five rounds is a total score ≥ 2.0. Assume for each round you can form a subjective probability distribution for A. a) Formulate the optimization to choose L and U that maximizes expected per-round score E[(L/U)·1{A∈[L,U]}] given a known continuous pdf for A. b) Derive first-order optimality conditions and discuss how the optimal coverage probability compares to conventional confidence levels under light- vs heavy-tailed beliefs. c) Describe a strategy to allocate risk across five rounds (e.g., dynamic programming or heuristic thresholds) to target total ≥ 2.0, including how to adjust interval tightness after early wins/losses. d) Provide a quick mental method for approximately optimal [L, U] under log-normal beliefs; explain how you’d adapt for heavy tails. e) Outline a simple simulation to validate your strategy and estimate its probability of meeting the ≥ 2.0 target.

Quick Answer: This question evaluates decision-theoretic optimization, interval estimation, probabilistic modeling, and risk-allocation skills in a Statistics & Math context, and is commonly asked to assess an applicant's ability to balance coverage versus payoff and allocate limited risk under distributional uncertainty.

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Optiver logo
Optiver
Aug 7, 2025, 12:00 AM
Data Scientist
Technical Screen
Statistics & Math
3
0

Five-Round Interval-Estimation Game: Optimal Intervals and Risk Allocation

You play five independent rounds. In round i, an unknown numeric answer A is drawn from a continuous distribution. You announce a closed interval [L, U]. The round score is:

  • 0 if A ∉ [L, U]
  • L/U if A ∈ [L, U]

Total score is the sum across five rounds. The target is total ≥ 2.0. Assume that for each round you have a subjective continuous pdf f(a) (cdf F) for A.

Answer the following:

(a) Formulate the optimization for choosing L and U that maximizes the expected per-round score E[(L/U)·1{A ∈ [L, U]}] given a known continuous pdf.

(b) Derive the first-order optimality conditions (FOCs). Discuss how the optimal coverage probability compares to conventional confidence levels under light- vs heavy-tailed beliefs.

(c) Describe a strategy to allocate risk across five rounds (e.g., dynamic programming or heuristics) to maximize the probability of achieving total ≥ 2.0, including how to adjust interval tightness after early wins/losses.

(d) Provide a quick mental method for approximately optimal [L, U] under log-normal beliefs (A > 0), and explain how you’d adapt for heavy tails.

(e) Outline a simple simulation to validate your strategy and estimate the probability of meeting the ≥ 2.0 target.

Assume U > 0 and typically A > 0 (most market-making questions are positive). If A could be negative, you may work on a transformed scale (e.g., log of absolute value) or restrict to positive-support questions.

Solution

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