# 462

Market Risk Analyst interview questions shared by candidates

## Top Interview Questions

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Market Risk Summer Analyst was asked...2 March 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?

similar question http://brainteaserbible.com/interview-brainteaser-snail-drainpipe-climbs-falls-at-night-how-long-reach-top Less

Almost seems too easy...you could simply say that the snail goes up 3 and down 1 every day, so it nets 2 ft which at that rate would take ten days. IMO, i think its important to ask what time of day it starts on the first day to give a more accurate answer... Also geographic location (it could be Barrow Alaska during winter, completely changing your answer. Less

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

### 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

### 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

### 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

### How do you decide which discount curve to use when valuing future cash flows of financial instruments (bonds, IRS,...)?

I have no idea on this one.