A Career In Market Risk

Hello all,

I am a less of a contributor on this site but think it makes sense to post my experience in the field of Market Risk and everything around it from a career point of view if it ends up helping few members. Happy to take questions, ask away...

I spent about eight years in this function working at a top risk solutions vendor company (Bloomberg/MSCI/BlackRock league). My role involved acting as a risk specialist for Hedge funds risk managers in UK, helping them with market risk measures, models, movements and best practices. This allowed me to learn their side of roles and other stuff.

The typical role involves model validation, risk modelling, risk reporting or stress testing (internal/regulatory), and risk monitoring.

Active funds keep churning their portfolios with new instruments and fresh techniques of mitigating risk like stress testing or what-if analysis which does not allow the monotonous factor to creep in.

A front like finance degree/certification like MBA finance, CFA or FRM would suffice once but now there is a growing quant element to this roles giving edge to candidates knowing sql, R, Python, etc.

Typical qualification is a post graduate finance degree like a FRM/CFA or a MBA in finance. Salaries range between $7oK for entry level and around $180-$300K for a VP position with a ~20% bonus. BB fund risk managers get as high as $300K average but again remuneration is the function of how sophisticated the firm is and type of role. Quant risk roles are paid in top bracket while reporting ones at lowest.

Work load is very reasonable about 10hrs at most levels and most roles (add little for juniors) but the only time it gets crazy is when the numbers are out of wack causing trading limit exception or a regulatory breach.
questions welcome!

Can you be more specific when you say "risk solutions vendor company"? So you acted sort of like a risk management consultant?

Were you solely located in the UK? do you know if Risk roles are similar in the US?

Thanks for sharing! Patrick

ps - feel free to connect with me on LinkedIn and WallStreetOasis.com>[email protected] if you want to become a Certified User on WSO.

My company has a risk solutions software which Clients subscribe to for measurement of risk. So that way we were vendors for them. I act as a specialist to help them make sense of the numbers and draw best practices in terms of what they should look out for depending on the asset mix of their portfolios. I was allocated to UK client base but got to know about US funds from my fellow colleagues as we often back-up for each other.

Both US and UK have similar roles but I know for a fact that it gets much more sophisticated in US which is a factor of how sophisticated investors are. So for example when you will find UK managers undergoing conventional VaR models, a US fund may be interested to explore GARCH model, or a t distribution etc. Instruments also get more complex in US with structured products (TBAs, MBAs, PTs) and exotics comprising a material portion of their portfolios.

Thanks a lot anky. This is exactly why I logged into the site today and clicked on forums. Anyone else believes in power of wishful thinking? ;)

May be you you can guide me a bit further. I recently left my job as a software engineer and started a program in risk management (I live in Paris) in one of the top schools here. I'll be graduating this summer and I'm attempting FRM level I in May and hopefully FRM level II this december or next May.

I've been quite confused as to pursue career in consulting or target IBs. Ideally I'd like to have some technicality or analytical stuff in my work so I was thinking of going for risk analyst/modeling in either market risk or credit risk or KYC.

I've worked for 5 years previously and so ideally I wouldn't want to start a low level analyst job (which means I forgoe all my experience and start my career all over again). This is what's pushing me into consulting. But I'm not sure if it's the best thing to do right out the school. Do you suggest me to get some experience with banks/funds/AM companies first (for 2-3 years may be)?

Also, in your opinion, what would your advice be to me for a career path?

Merci beaucoup! Much appreciated. kal-el

Thanks kal-el! I am not sure what's exactly covered in your syllabus, but I would strongly suggest learning one of the statistical languages like R or Python. I am guessing you may already know sql but that is again heavily used for reporting aspects.

There are 2 parts to choose from i)risk solutions company or ii) prop risk functions at a fund. I dont have a strong opinion on what should come first but working in a fund gives you practitioners eye view which may not exist in a vendor company straight away before you have some exp handling clients. On the other hand working at a risk vendor allows you to see all facets of process and helps you decide what suits you the best. There is a high degree of internal movement in such companies wherein people move from model validation to consulting to sales to product development (order is irrelevant).

Consulting roles need practitioners view which may not fit your exp to being with but something you build over next few years. Quant driven roles should best suit your kind of academics I believe and you may try to move to relationship side of roles (consulting/sales) if interested at a subsequent stage.

Career path can only come from within. Unfortunately no one can tell you how to lead your life. If I had 1 piece of advice, attempt to think through your own situations.


I believe you are referring to conventional banks and not IBs. Banks are more process oriented and daunting regulations don't allow them to get too creative. Most of it is treasury management and FX is a big book there. Baring this due to their nature of their operations there aren't much innovation in terms of what measures they look for and analytics. I am not 100% sure but doubt if banks have model validation teams unless they are using proprietary models. So would believe they are low on quant and high on regulatory bits.

I'll help you out...................................bump.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."

Maybe you should repost your question on Monday.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."

What kind of things do they do? Mostly they generate risk reports. At a higher level you would be reviewing these reports, approving new types of trades/products, etc.

Skills required?Basic understanding of the greeks and the products traded by the desk you cover.

Background of typical employee?Some background in economics or finance, and may have spent some time in Finance/Product Control. If hired straight out of school they tend to have a master's in math or economics or an MFE.

Market risk is highly quant. I have a friend that works in market RM, he spends most of his time in data tables and sensitivity tables (spreadsheets).

I also thought that this description might be useful:

"Candidates will gain a broad understanding of how a portfolio of risk is managed in a global financial institution using various measurement techniques including VaR, stress-testing and scenario analysis. Candidates will also learn about the risks and rewards from individual financial instruments." (Citi)

Hey anky, thanks for doing this.

I am not entirely sure if you can go deeper and tell us about the risk metrics and models that you have used in managing HF risk but I would really appreciate it if you could.

There has been lots of discussions around decomposing HF returns/risk and factor risk. Do you think this is something that genuinely adds value from both risk management point of view and then maybe investment management? Majority risk solution vendors do claim that it is perfectly doable, but when you get to practicalities they start bringing up excuses like "oh, we all know that these FI arb strategies cannot really be breaken down into factors, let's look at Equity L/S funds instead".

Even if you could decompose HF returns and risk into understandable factors, how would you go about managing your HF risks? Do you come up with some sort of hedge overlay?

Not sure if you have participated in Investment Committee meetings, but as a risk manager how do you add value here? Do you think doing some sort of asset allocation for only Hedge Funds makes any sense or not?

Andrew Ang has done a great research in factor investing and apparently this topic is developing further. What is your take here?

Snootchie Bootchies
Best Response

@ Bondholm, I am a Chartered Accountant and a CFA. Most risk systems do allow decomposition on both standard and custom parameters. Standard is stuff like gic sector, asset class, currency, etc. Custom ones are based on what tags user puts in. So all FI arb positions will be tagged in a specific manner and this dimension is used for decomposition in reports. No fuss in that..and perfectly doable.

Once the breakdown is there RMs use them in variety of forms. Most obvious is picking casualties. E.g., emerging market bond denominated in foreign ccy are not doing great, so lets shave them off. In terms of hedging you may run a correlation metrics on these dimensions and good to go from there. Stress test is another useful add on on specific strategies.

A good add on I used to suggest my Clients is developing a simulator (as most solutions do not provide this and even if they do its not too customizable) wherein they iterate their portfolios using various combination of hedging instruments and playing around with weights to find which one is ideally suited based on last 6 mts performance for example. once you have a PL strip or a correlation metrics, doing this is not hard at all as you just keep re-scaling variables based on changing size. This can be done at portfolio level or any granular level below it. One can use a simple VBA code or a R or Python or any other computing programme to achieve this. Surely this is what-if exercise of a kind, but the idea is to use a sliced and diced output from a front like risk system adding a layer on top of it to achieve this. So that way risk systems can be leveraged.

There are solutions which focus on factor (multi-factor) modelling concept to compute risk and that goes down to stuff like market cap, style factor, and such other elements. So that's a modelling choice, but I guess what you are after is how smart/custom the output can get and take it further from there.

Taking specifically abt hedge funds their uniqueness is a highlight and that's where its difficult to standardize. So while they surely look for dimension based output, the end goal is discretionary to each RM/PM.

hope it helps..

I have been thinking about this for a while and I'm not sure if I agree with you regarding the effectiveness of those risk systems in decomposing HF risk/returns.

If I didn't have any third party risk system, what do you suggest to do?

Snootchie Bootchies

Not sure how is it different with energy sector. Probably market risk for investments in energy sector? In any case if you are dealing with investment risk concepts like VaR, stress test, etc you can consider to move with a risk solutions provider company like bloomberg, BlackRock, msci, etc. They have lot of roles and encourage internal movement. So even if you don't find your heart to begin with chances are you will in some time.

Getting to a front office risk team is also a great option although that role has a little high pressure environment as you deal with traders all the time.

Barring this you may look to similar stuff as you currently do but in a more sophisticated environment like a hedge fund or a asset manager.

Hi Anky,

Thanks for doing this

How easy is it to transition to market risk from operational/credit risk? How easy would it be to transition between different types of market risk? commodities to equities for e.g

Hi Darkn, operational risk is a completely different animal and it wont be a natural move either in and out of it to credit or market unless its a very junior role and one beefs up quant skills while doing operational risk.

Credit to market and wise versa is possible at junior or middle mgt level. But this is more true for reporting dominated roles and not niche roles like research or consulting (exceptions exist of course). Having said that market to credit is more easier than other way round. Market risk needs more of quant skills while credit risk is high on reporting, compliance and regulation.

Risk at most places is still treated as a generic role serving most asset classes and specialization is few and far. As most risk teams are centralized rather than desk specific. Having said that modelling and research roles need specialization and its the FI segment that has most of the appetite. So while employers may look for skills like stochastic modelling, MC simulation modelling, path dependent pricing, etc but it wont go into specifics of instrument types. Hope it helps..

Im in UG currently trying to enter credit/market risk

Would it be better to do credit at a small firm then attempt to transition or work at operational at a large firm (e.g big 4)?

what are the potential exit ops for operational risk?

The mkt doesnt seem good right now and there seems to be a shortage of credit/market openings at the entry level

Hi anky,

Thanks for sharing your experience. I'm a third year undergraduate student in Applied Math. Do you think there will be any opportunities in market risk for undergrad? Another question is, how do you like the job? I heard my friends saying that risk is kind of low paced and work remains the same? Can you talk a bit more about that?

Thank you so much!

A internship at a BB should be a good option. I know UBS, DB are some of the firms who have this structure. If you perform good, most likely you will be absorbed. It is also a great way to build some domain skills by getting a risk certification like FRM/PRM.

Reporting roles can be mundane but the best part of risk is there is lot of scope for lateral move within diff risk functions which is why it is always better to work at a BB rather than a boutique especially at the inception of the career. My initial comment on this forum summarizes types of roles.

I'm looking for a career change, and this sounds very interesting. I've been out of college for a 2.5 years and have been doing actuarial work in NYC. If I want to transition into finance, would my actuarial background help in a market risk role? I'm aware the jobs are quite different, but I'm hoping a ton of quantitative experience as well as Excel and some R programming might make me a good candidate. Would anyone have advice for my situation?

Hi Anky,

If I am not wrong are you from India?? Thanks a ton for the post . Just want to know how much FRM as a qualification helps in getting into risk roles of doesn't have a finance background in India ? I am an ERP financial consultant in IT . Please guide .

Hi Anky

I'm really good with VBA/SQL and have some quality internship experience in Operations (Involved in automating existing processes, Major projects, MI etc). Ideally I'm looking for a risk reporting role and then after I plan to pick up CFA/FRM + Matlab/C++ some time in the near future

My question to you is this, I have an Interview coming up with a BB for a risk reporting role, what are the three key things you think I should be selling about myself. And as an additional question, what are the three key things I MUST know going into said interview.

JohnVarRisk your name intimidates man :-)

getting a market or credit reporting roles just based on sql may be difficult. You may find luck with one of the IT risk roles but that's very low on domain if at all. If you could get a Ops risk role at a BB it might not be hard to move to market/credit within while you pursue FRM/PRM. CFA is more generic Invt mgt certification. If risk is where your heart lies FRM/PRM are the one.

@ Anky, how would you view someone who has passed the first few actuarial exams and the FRM exam, who hasn't been an actuarial analyst, but worked in a MO position at a BB in risk management ( 3+ years) .

Given the amount of AI and automation in the news, where do you see risk management as a career heading ? What would be the required skill set 5 + years from now ?

Seems like a great start to me It always often starts with reporting and excels from there.

Risk is unlike trading wherein surge of automation will dry down jobs considerably. It will affect reporting to an extent but automation is still picking up and there is always a need to evolve and maintain the automated systems. SO net net i don't see that affecting jobs if that's where u are getting at.

Again risk is more stable invt mgt jobs and has less beta to one of the front office jobs like trading or research. On the contrary focus on risk generally expands in tuffer economies. Future according to me is quant risk and regulatory risk.

I recently saw a posting for liquidity risk management. How would it compare with credit and market risk in terms of quant and exit ops?

Possible to lateral from liquidity to market or credit easily?

Liquidity is a sub-set of market risk. when liquidity gets impacted it eventually impacts market price thereby causing market risk. So liquidity answers one of the causes of market risk. Very few funds have a clear focus on liquidity so team size would be hardly anything.

Bulk of liquidity is also regulatory related.

Liquidity to market should not be difficult for quant guys.

Starts with analyzing daily exceptions on VaR, stress test etc and back your findings as to why it occurred (data/markets/holdings/, etc). Monthends and quarter ends are same just that some more reporting parameters would get added.

Got to cater to regulatory fillings which is more cyclical.

Contribute to input feeds to risk system like building portfolio files monitor batch process etc if you are still junior into the role.

Finally there would be projects and adhoc tasks like automation, dashboards, answering investor queries, etc.

Your comp numbers do not translate well to real market risk roles in industry. I work in risk at a hedge fund and I have worked in risk on the real money side. The % of comp that comes in bonus is much higher, especially at the level that you are talking about.

20% coming in from bonus, especially at a higher level, sounds like risk reporting roles. I guess maybe risk vendors fall under that category since the level of sophistication from external solutions is generally lower and more suited for smaller funds?

Off topic - rule of thumb for people seeking career in risk, if you see a job description about limits/breaches/regulatory parameters etc, in general that's a lower tier risk job, because the most capable risk guys don't take roles that are "cops on the beat", but like to be on the collaborative side with investment groups.


How would u rank programming languages?

I have limited time so im looking to focus on picking up one or 2..


Completely different things. SQL is for data access, not really a programming language. But everything starts with data, and almost all firms store at least some data in relational database, so it's useful.

R is a statistical package. It's useful. But I'd pick up python between the two. From what headhunters have told me, risk analysis guys with python skills are the hottest in the market right now.

SAS is useless.

I have a simple question for someone who know the London market, I received an offer for a quant market risk position at associate level (MS) (I have PhD in math from a french top university) but no prior exp banking (some year of post doc). The base is 70kp+bonus. My question is it a fair offer or is it below the market rate.

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Curious about everything.