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Market Risk Analyst interview questions shared by candidates

## Top Interview Questions

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Market Risk Summer Analyst was asked...March 2, 2011

### Brain Teaser: A snail goes up 3 feet during the day and falls 1 foot at night. How long does it take him to go up 10 feet?

It doesn't say how long does it take him to make it ten feet up the wall. It just says, how long does it take for him to move up ten feet. That's 3 1/3 days (assuming equal movement throughout the day). Although he will have moved "up" ten feet, he will have also fallen back and will not be ten feet up the wall. Of course, you can also interpret it as the other answers suggest. Less

4 days and 16 hours 16 hours because by the end of the 4th day, it is 8 feet up on the wall and only needs to climb up 2 feet. Well, assuming that the snail travels 3 feets uniformly throughout the day, then it needs to travel an additional (2/3)*24 = 16 hours for it to climb up that extra 2 feet for it to be at the height of 10 feet. Less

4 days and 8 hours, assuming the day is 12 hours long and the night is 12 hours long. Almost agree with the &gt;4 days answer above, however not quite agree with the (2/3)*24=16 hours part. The snail climbs 3 feet in the day, which would definitely be shorter than 24 hours. If we assume the day means 24/2=12 hours. on the 5th day, the snail took 2/3*12=8 hours to reach 10 feet. So that would be 4 days and 8 hours, assuming the day is 12 hours long and the night is 12 hours long. Less

### Tell me the different ways that you can calculate VaR (Value at Risk).

Typically there are 3 ways in the industry to calculate VaR: 1. Historical (by far the most common, IME) 2. Parametric (not very useful, as returns tend to not be normal, unless you use EVT) 3. Monte Carlo (more often used in fixed income and other credit/debt portfolios than other asset classes) Less

I think I said Monte Carlo, delta, gamma and Black-Scholes.

### What is gamma? what is delta?

You can find these online

Delta - Change in option price w.r.t change in underlying price Gamma - Change in Delta w.r.t change in underlying price Less

### What are the greeks

They are the key market risk sensitivies used to monitor risk within the group.

delta- dC/dS gamma - d2C/dS2 theta - dC/dt vega - dC/dvolatility rho - dC/dinterest rates Less

### How do you work in a team? Leadership?

I like working in a team when I like the team. I am a great leader when I like what I lead. Less

I thought I would be able to read what the candidate answered.

### Hedging strategy in different scenarios?

Little bit of derivate knowledge and common sense

What's the package for risk analyst?

### Name the main greeks and how they are derived.

Delta, gamma, Vega Theta

vanna volga

### Discuss the flaws of Black-Scholes.

Should have Wiki before

The flaws are largely in its assumptions, namely: 1. It assumes lognormal returns 2. It assumes 24/7 trading (i.e., no jumps in prices) 3. It assumes frictionless markets Less

### 10 yr bond with 9% coupon, market yield is 3%, what's the price of this bond?

~151.. assuming par value of 100

151