Risk Management interview preparation

Questions

100

Traced to a firm

37

Firms

12

Updated

September 2026

Asked at

All firmsUBS14MSCI7BLBlackRock5FTFranklin Templeton3Oaktree Capital Management2Scotiabank2Jane Street1Moody's1Neuberger Berman1PIMCO1SSState Street1TSTruist Securities1

Topic

All topicsMarket risk and VaR14Tail risk and stress testing5Greeks and sensitivities5Credit risk11Counterparty risk and CVA6Operational risk5Model risk and validation6Regulatory capital7Liquidity risk and ALM6Statistics and quant foundations7Indian regulation7Risk governance and appetite4Markets and macro9Fit and career8

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseBrainteaserMarket viewFit

1. 013Take me through the basic concepts in market risk. What are the main types?Market risk and VaRCorephone / first roundScotiabankRisk · Toronto · 2025

   Say this

   Market risk is the risk of loss from moves in market prices, and it splits by the factor driving it: interest rate, equity, foreign exchange, credit spread and commodity. Then volatility risk sits across all of them once you hold options.

   Then walk it

   1. Interest rate risk is usually the biggest for a bank, and it has shape as well as level: parallel shifts, steepening and flattening, and basis between curves.
   2. Credit spread risk is separate from interest rate risk even though both show up in a bond price. One is the risk-free curve moving, the other is the spread over it, and they often move in opposite directions in a flight to quality.
   3. Equity, FX and commodity risk are more straightforward directionally, but FX carries a funding dimension too, because a cross-currency basis move hits you even with no net FX position.
   4. Volatility risk comes free with any option book: vega for the level of implied vol, and then the shape, skew and term structure.
   5. Then the two that candidates forget. Basis risk, where your hedge and your exposure are driven by different but correlated factors. And market liquidity risk, where the price you can actually transact at is worse than the mark.
   6. The way a desk measures all of it is sensitivities plus VaR plus stress. Sensitivities for daily trading decisions, VaR for aggregation and limits, stress for the scenarios VaR can't see.

   Where candidates lose it

   Giving four factor names and stopping. Two things lift the answer: separating credit spread risk from interest rate risk, and naming basis risk and market liquidity risk as market risks in their own right. Those are the ones that actually generate P&L surprises.

   Expect next

   • Which of those is largest for a commercial bank, and why?
   • Is credit spread risk market risk or credit risk?
   • Now tell me about counterparty credit risk.

   Reported by candidates at Scotiabank (Risk, Toronto, 2025). Source: Wall Street Oasis.

2. 036What is counterparty credit risk?Counterparty risk and CVACorephone / first roundScotiabankRisk · Toronto · 2025

   Say this

   It's the risk that the other side of a derivative or a securities financing trade defaults while the trade is in your favour. What makes it different from loan credit risk is that the exposure isn't a fixed amount: it's market-driven, two-sided, and it changes every day.

   Then walk it

   1. With a loan you know the exposure, it's the balance outstanding. With a swap, the exposure is the replacement cost, which can be zero today, in your favour tomorrow, and against you next week.
   2. That's why exposure has to be modelled rather than read off a ledger: current exposure is today's mark-to-market if positive, and potential future exposure is a high quantile of what it could become over the life of the trade.
   3. It's a hybrid of credit and market risk, which is why it sits awkwardly in bank org charts. You need a credit view on the counterparty and a market view on the exposure profile, and the interaction of the two is where the hard part lives.
   4. Mitigants in order of power: netting agreements under an ISMA or ISDA master, collateral and margin under a CSA, then central clearing, then break clauses and downgrade triggers.
   5. The specific flavour that catches people out is wrong-way risk, where the exposure grows precisely as the counterparty's credit deteriorates. That's not a diversifiable add-on, it's a fundamental change in the shape of the loss distribution.
   6. And the capital and pricing angle: CVA is the market price of this risk and it sits in the P&L. After 2008, Basel added a CVA capital charge because two-thirds of crisis counterparty losses were mark-to-market CVA losses rather than actual defaults.

   Where candidates lose it

   Describing it as 'credit risk on a derivative' and stopping. The distinguishing feature is that the exposure is stochastic and two-sided, and if you can't say that you can't explain why the discipline needs its own modelling. Name netting, collateral and wrong-way risk without being prompted.

   Expect next

   • How do you measure the exposure if it changes daily?
   • What is wrong-way risk?
   • Why does central clearing help, and what does it cost?

   Reported by candidates at Scotiabank (Risk, Toronto, 2025). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.