Market Risk Vs Credit Risk Management

NuK85's picture
Rank: Senior Baboon | 226

Which one should be a better gig(to transition into an IB role later after an MBA)? have an opportunity to pursue either..
As far as I know Market risk involves calculating risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors.
Credit risk involves going through the financials of the clients and analyzing them with debt ratios etc to determine credit quality..correct me if I am wrong

Comments (23)

Dec 11, 2009

how tough is it to move from CRM to trading?

Dec 11, 2009

I know a couple of guys moved to trading in long run..more specifically trading structured credit products..more of a quant trader position..hard to get into..

Dec 11, 2009

It really depends. I wouldn't call credit "mid-office". The front-mid-back office designations only really matter on the S&T side of things. There is no mid-back office on the banking side. There are support staff, but not like on the S&T side where you have a front office, mid-office to book trades and a back office to do the rest.

I would think it is easier to move from credit or market risk to other front office roles. If you chose market risk, you're likely more inclined to go into S&T, while if you're in credit risk management you're more likely to go into IBD. Both have more skills related to "front office" positions than PWM.

Dec 12, 2009

Credit Risk is considered front office at JPMorgan. Not only salaries, but also bonuses are actually the same as for the rest of the IBD.

This was discussed in another forum: //www.wallstreetoasis.com/forums/jpmorgan-ib-risk-bo...

Dec 12, 2009

^its really not, stop with that crap, looks like u got owned in that thread and people gave up arguing with you.

Dec 12, 2009
1styearBanker:

^its really not, stop with that crap, looks like u got owned in that thread and people gave up arguing with you.

YES, It is. How do you know? Do you work there? Have you talked to people who work there? Have you contacted alumni or somebody knowledgeable and asked? Have you explicitly inquired about bonuses?

I HAVE.

The problem is that 90% of people here in WSO are desperate wanna-be-bankers who know very, very little about what they're talking about. The website is still cool and very useful, but you have to take everything you read with a grain of salt. And yes, you're obviously more than free to take what I just said with a grain of salt and believe whatever you want.

    • 1
Dec 12, 2009

bro get the fuck outta this thread so someone who has a clue can comment

Dec 12, 2009

pay should be the same at analyst level. credit risk is your corp fin/ib path if you want to move into coverage. market risk is your markets/S&T path.

Dec 12, 2009

Def credit risk. You analyze companies using financial analysis and credit risk is heavy on writing when you write credit memorandums. Also I've seen people move from credit risk to credit/equity research n

Dec 12, 2009

If your ultimate goal is ER choose Credit Risk. Market Risk analysts deal with, as you wrote above, trading desk. If you would like to switch to Trading, you might consider Market Risk as an option. I believe FRM is more relevant in Market Risk. Not sure about the CFA part though.

Snootchie Bootchies

    • 1
Dec 12, 2009

Agree with the above. The only exception I would add is that if you are guaranteed Equity Market Risk, in which case directly dealing with the product plus easier access to traders/research (assuming you are on the same floor, which several banks are) would probably be better than Credit Risk.

Dec 12, 2009

Thanks everyone for your input.

Is there anyone here that's made that switch? How transferable are the skillsets and what key technical skills did you have to pick up when you got to equity research?

Do the tasks in the typical CRM role fulfil the 'relevant experiences' required for the CFA designation?

Dec 12, 2009

I feel that the soft skills you gain from credit risk (i.e. writing credit memorandums, supporting your analysis and pitching why deal is good/bad) would be useful for equity research, but I don't really seeing the technical skills translating over that much. Credit research is mostly based on coverage ratios and liquidity/cash flow metrics that are pretty much set. There's less room for interpretation or assumptions as you would need in equity research. The rest of credit analysis is based on market trends and understanding the company and industry - this part is obviously relevant to equity research.

Dec 12, 2009

Bump*

Also, what skills are needed/learned in Market Risk? Thanks in advance.

Dec 12, 2009

From my understanding, the skills learned/needed in Market Risk includes VAR and Greeks calculations.

Dec 12, 2009

Check out pirho's interview for a better understanding of credit risk, salaries, etc.

Dec 12, 2009

Mbas are usually more qualitative. For market risk you need to have a good quant background so its generally MFE or other quant oriented people who get in the field

Dec 12, 2009
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Mar 8, 2018