My Experience as a Market Risk Analyst

Post any questions you may have and I'll do my best to answer!

There doesn't seem to be much information on this website regarding this niche role so I'd like to just expand on this and hopefully future readers can gain insight on this function.

Market Risk Analyst Position Overview

I interned this past summer in Market Risk at a top BB (GS/MS) and I think the role is great if you want to make a decent living with great hours.

As an analyst, I covered two equity trading businesses and you primarily analyze the risks that the traders take in using VaR and stress tests. You'll look at PnL changes day over day as well as your exposure to equity delta risk, interest rate risk, credit risk, etc. There was definitely some interaction with front office Strats as well as other groups within Finance including credit risk, controllers, and corporate treasury. The work is interesting in the fact that you are able to learn a lot about the markets and see the risk side of things that the traders don't see. Traders usually look at the traditional trading greeks while we looked at VaR and stress tests.

Some of the other interns that worked with me covered other desks like mortgages, interest rate products, credit products, etc. They learned a lot about their own businesses and during the summer a few full time analysts lateraled into S&T.

It actually isn't too quant intensive as I thought it would be. Most of the work is done in Excel and some prop software like secDB. Strats do more of the quant work.

Some parts were definitely boring though. Lots of internal process work for SOX, Volcker, Basel, CCAR, etc and compiling different kinds of risk packages on legal entities to internal risk committees, SEC, and the FRB.

However, a misconception is that it is a supporting role. It is definitely not a supporting role. Market Risk does not support or report to the front office. The Market Risk team reports directly to the CRO of the company. In fact, the group I interned at had our own support teams in the Technology division.

Compensation - in NY base started at 80k + 10k sign on, I'm guessing bonus would be around 15-25k
Hours - 8-8 usually with no weekends. There will be the occasional 10pm night but it is rare.

It gets a lot better when you move up the ladder though. All the VPs and up I worked with left by 5-6 pm.

Sure, compensation flattens out but work life balance gets a lot better and it's not a stressful job at all.

Post any questions you may have and I'll do my best to answer!

5 Intriguing Insights From A Market Risk Analyst

Although it is little discussed in most financial circles, a career in market risk can be both lucrative and fulfilling. Due to its lack of publicity, there is a deficit of knowledge on the subject. This leaves prospective market risk analysts full of questions. Luckily, Wall Street Oasis has users with experience in nearly every financial field imaginable. User @Communist", a consultant, answered questions on topics ranging from market risk analyst salary to moving to and from jobs in market risk. Here are the top five takeaways:

Market Risk Analyst Salary

Let's face it. Money makes the world go round, and it is likely one of the primary reasons you are pursuing a life in the world of finance. Market risk analysts make slightly less than IBD analysts in base pay. In 2016, the IBD base pay was 85k while the market risk base was 80k. Because of the difference in functions between the two, market risk analysts also do not get quite as much in bonuses. All in all market risk analysts can hope to net between 105k to 115k in total compensation. While the pay may be slightly lower, later you will see why a lower stress factor and greater freedom could make it worth your while.

Market Risk Analyst Workload

Market risk analysts have a very diverse workload. User @Communist", a consultant, spends about 20-30% of his time with risk reporting. 50% of his work (including risk reporting) is spent with regulatory work. The other 50% is more variable. Risk production, account integrity, and projects. The projects are extremely interesting as you have immense amounts of freedom. You are also allowed unlimited access to the front office prop software which is what the traders use to book their trades. Pertaining to the amount of workload, market risk analysts have among the best hours.

Moving in And out of Market Risk

More often than not, market risk analyst positions are filled by students that are nearing graduation. It is usually not necessary to go to grad school to land a job, but some roles may be a bit more difficult and the extra education could be a plus for technical skill development. In regards to moving out of market risk, there are varying exit opportunities. You can lateral into things like structured finance IBD and securities. Many people will go to business school to further their career. If you are talented enough you can go into consulting and make great money even outside of NYC.

Necessary Skills for Market Risk

Both qualitative and quantitative skills are needed for success as a market risk analyst. If you want to go into something technical like financial modeling you'll need some knowledge about things like software. In fact, many financial modeling interns are currently studying masters in computational finance or financial engineering. For a more qualitative roll like market risk analysis for equity trading you will need to be able to perform functions like analyzing VaR and stress and working on account integrity.

The Downsides of Being in Market Risk

While this post includes many of the positives of being in market risk, it would be dishonest to tell you that there aren't any downsides. The first is that, if you don't like NYC or don't want to live there, you're outta luck. It's cold, unfriendly, expensive, and definitely not for everyone. On the flip side, many people consider it the best city on earth. It is also one of the lower paying jobs in this field of work. That, coupled with the expensive location, means that you will not quite live the extravagant life of your peers. The last downside is that you do not learn as much about the traditional trading side of things so your future career options are a little more limited.

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Comments (46)

Best Response
7y
Communist, what's your opinion? Comment below:

I would think that as an Associate your base would be similar to one in FO. For comparison, 2016 full time IBD Analyst started at 85k while in Market Risk the offer was 80k. The bonus would be lower but I'm not entirely sure how much lower because I didn't interact much with the summer associates.

corporate finance is entirely different from market risk. The questions I was asked during my interviews were more conceptual related to VaR, stress testing, portfolio risk, alpha/beta, and questions about the market. It seemed to me that they take mainly quant heavy students. Most of the interns I met were from schools like Michigan/Carnegie Mellon/Vanderbilt/NYU studying Math and/or Finance.

7y
chinochino, what's your opinion? Comment below:

Great post!

What are the backgrounds of the FO strats?

If my long term goal is to do Structured Fin strat, is it worth doing strcutured fin IBD first, then switch to the quant role?

Thanks!

7y
Communist, what's your opinion? Comment below:

Background of Strategists - usually Ivy League / Stanford / other targets studying Comp Sci, Math, or something quantitative. No I don't think that is a good idea. If you want to be a Strat then you should apply to be one. If not, I would say it is easier to lateral from other roles within Securities like Equity Sales, Global Macro Trading, etc. rather than lateral from IBD. IBD is on the other side of the Chinese firewall.

7y
AndyLouis, what's your opinion? Comment below:

hey thanks for offering to answer questions! will add to frontpage tonight so you'll be seeing more questions coming in

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  • 1
7y
Esuric, what's your opinion? Comment below:

Those compensation figures don't seem right. 105k to 115k (all in) as an analyst for a MO role?

“Elections are a futures market for stolen property”
7y
Communist, what's your opinion? Comment below:

Yup. These are first hand offers that all the analysts I have worked with got. Annual bonus is definitely dependent on performance but base is definitely 80k

7y
Communist, what's your opinion? Comment below:

Yes, I do know that there were some scripts being written to automate some mundane SOX processes relating to checking traders accounts and ensuring they met certain regulations. Unfortunately I didn't work with any fixed income products

7y
Bondholm, what's your opinion? Comment below:

Hey, thanks for your time.

Would you accept FT Market Risk role? Is/was risk reporting involved? What are the exit opps? A whie ago I have screened requirements for Market Risk roles and most firms listed VBA/SQL (R and Matlab some of them) as a must. How crucial are these?

Snootchie Bootchies
7y
Communist, what's your opinion? Comment below:

Yes, risk reporting takes up around 20-30% of my time. There are "package days" when certain packages are due to different regulators as well as internal committees. Exit opps can be varied. A VP I worked with lateraled into Structured Finance IBD as a VP and some other associates I met lateraled into Securities. B-school is also a popular option. Yes, those technical software knowledge are preferred but not required. It depends which role you are applying to - Market Risk Analysis, Market Risk Modeling, etc. The modeling interns were very technical, many of them studying masters in computational finance/financial engineering. This role is essentially developing and maintaining the VaR models we use to calculate risk which in turn send to regulators.

7y
Bondholm, what's your opinion? Comment below:

Thanks for the reply.

20-30% seems a significant amount to me. What other tasks consume most of your time? Can you talk a little bit about your background? How common is it to have FRM/CFA designations?

Snootchie Bootchies
7y
OverTheHedge, what's your opinion? Comment below:

Thanks for doing this.

Do you have any advice for someone who is in a Credit Risk role at a CC issuer and wants to get more involved in Market Risk? I would need to change companies and I graduated from a non-target, but I do have extensive modelling and SQL/VBA experience. I am in charge of a large amount of impact analysis of changing our scoring models and programs to mitigate bad debt etc at the portfolio level.

7y
Communist, what's your opinion? Comment below:

It depends on what type of credit risk role you are in. Are you analyzing internal credit, mortgage credit, counterparty credit? I'm guessing mortgage credit. It might be relevant if you are very familiar with the different types of CMBS/RMBS and other mortgage products and how they are securitized and traded. Let me tell you that at any BB the mortgage desk is one of the most volatile and tons of exposure in PnL. What type of modeling do you know? Most of the Market Risk models are built in a java-like database with code. No excel modeling.

7y
Count, what's your opinion? Comment below:

Thanks for the post:

Which areas of mathematics do you feel are most applicable to this role? What are the names of any textbooks you read which were most helpful for this role? Preferably, are there any ones you referenced to while on the job (i.e. looked something up in a textbook)?

Cheers,

7y
Communist, what's your opinion? Comment below:

Honestly, I feel like you will learn most concepts on the job. Not many classes really pertain to the work itself. Its helpful to take probability and statistics but the work isn't as quantitative as you think. I did not look up anything in a textbook.

7y
Communist, what's your opinion? Comment below:

Yes, most of the summer analysts I worked with were coming into their senior year in undergrad. There were very few grad students, and most of them were placed in the Market Risk Modeling team.

That question is very broad because RIsk itself is very broad. Modeling will definitely require more technical skills while Market Risk Analysis, the group I worked in, doesn't. From what I've seen credit risk is even less quant based than market risk. Most people who study masters work in Strats instead which have completely different responsibilities than market risk.

7y
Luxo, what's your opinion? Comment below:

Thanks for posting! I think it is great that you are talking about Risk, which not a lot of people do.

My two cents here. I am a risk associate in the securitization finance space (CMBS, ABS, ABCP). So technically I am credit risk, although my specific area is more "quant" than other credit risk teams. That being said, Risk Mgmt is not considered Quant Finance.

To answer @soules9219" 's question, on the math side I do a lot of simulations. That requires me to know Probability and Statistics, and a lot of numerical analysis. Usually, the MonteCarlo methods we use have Credit Rating Transition Matrixes embedded, so that's Markov Chains (discrete-time stochastic processes). That, plus log-regression to estimate probabilities of default make Linear Algebra very useful too. If you want to model interest rates, you need some more "advanced" Stochastics like the CIR Model.

One of the books that I have found to be useful is "Credit Risk Modeling using Excel and VBA" by Gunter Loffler. I like it because it is extremely applied but won't get you into the math behind the concepts. It's a very good "introductory" book. If you want to learn the math, then you need both "Stochastic Calculus for Finance" books by Steven Shreve (Discrete-time and Continuous-time books). However, most of the time I find myself researching papers online.

Keep in mind that the modeling side is only that, one side of the job. There is a lot of qualitative aspects to ABS risk, including the structure in which cash flows from party to party (and the "waterfall"), and the legal framework that makes everything possible. So no, you don't need a master's to be here, but if you want to get involved in the modeling you need a solid technical background that most likely would come from a MSc Math or (most) MFE degrees.

7y
Communist, what's your opinion? Comment below:

I agree, Market Risk is definitely not a quant role. Strats is. However, within my BB, there were some quant aspects to the modeling team.. these guys were maintaining the code of the VaR models. Also, risk models are never built with Excel.

7y
Hungry-Hippo, what's your opinion? Comment below:

Thanks for the insight.

Could you (or anyone) provide me with some advice? I'm currently interning at a BB in research, and want to move into market risk. I've been thinking of getting some relevant experience before I begin my masters next year, e.g. a market risk role at a exchange/clearing house such as Interncontinental Exchange.

If the opportunity did come up, do you think it would be a wise move to pick experience over brand name or should I wait around for other 'better' opportunities? Say at another bank.

Thanks

6y
Sarendipity, what's your opinion? Comment below:

Hey there, thanks for doing this AMA!

  1. I was just wondering--What made you switch from Market Risk to Consulting?

(I was working for a firm that dissolved recently, basically doing day trading. I'm trying to decide which area in finance I'd most like to go into (market risk, credit risk, equity research, consulting)...I worked at my previous firm for a year, but aside from that, I haven't had any other financial experience. )

  1. Which of those areas listed above might you suggest for decent hours and good pay, that I could start with just an undergrad degree in Finance and Economics (from a non-target)? I don't need the best pay, because I'd also like to have not absolutely-crazy-insane hours.

  2. Also, I'm guessing that--statistically speaking--you probably aren't female, but since I'm assuming you've interacted with them throughout your career, do you know if any divisions tend to be more accommodating to women? (I've heard that IB/ FO/ direct sales generally tend to be less so).

6y
Blazespeed, what's your opinion? Comment below:

Thanks a lot, this is so useful. I've started to take an interest in Market Risk. I know you haven't been in the role too long, but would you say it is relatively easy for someone in Product Control BB to transfer to Market Risk at some point. AND, if you know, how might you compare the two roles? (Career path/ earning potential wise)

Thanks again.

5y
BlastBorn, what's your opinion? Comment below:

Hi Communist, can you suggest some materials/topics to prepare for, for interviews for a Market Risk Summer position at GS. Would be of great help!

Thanks in advance!

5y
dilraj_kallar, what's your opinion? Comment below:

Hi, I am an undergraduate at university and had a few questions to ask for my assessment.: What takes up most of your time? What is a typical day like? What kind of people succeed in this job? What kind of people struggle in this job? What gets you out of bed in the morning? Why do you do this job? What do you like and dislike about the job? How did you get to where you are? Where do you see your career going? Are there any career paths that you feel are now closed to them? If you had your time over again, what would you do differently? What advice would you give to any students?

3y
mhyr123, what's your opinion? Comment below:

Not the OP but I'm in the same line of work but at a mid market bank.. (I know this reply is like a year late):

What takes up most of your time?

What is a typical day like? -reading news about what's happening in the markets -talking to traders -talking to finance/quants -resolving limit excesses -driving projects

What kind of people succeed in this job? -people with good EQ (emotional intelligence) -people that know how to speak the "right language" to the right people since you're going to be talking to multiple groups

What kind of people struggle in this job? - people with little communication skills and emotional intelligence

What gets you out of bed in the morning? -at the moment, I am looking to move out of this role so networking around gets me out of bed

Why do you do this job? - sort of wandered into it. I liked my manager, so I decided to grab coffee and there was an opening so I got it

What do you like and dislike about the job? Like: interaction with FO, and being close to markets Dislike: lack of respect from traders with big egos. This isn't a front office job so it comes with a bit of baggage (systems, regulatory, audit, etc)

Where do you see your career going? - business school most likely then move into consulting

Are there any career paths that you feel are now closed to them? - PE, probably IB

If you had your time over again, what would you do differently? - i wish I had networked more during the first few years of undergrad -gone to a prestigious school with a brand name

What advice would you give to any students? - network, network, netowork. Start early, and don't feel intimidated to reach out to senior people (as long as you come prepared with questions and don't waste their time).

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2y

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