Risk Management interview preparation

Market, credit and operational risk, plus model validation, regulatory capital, liquidity and ALM, the statistical foundations and the Indian regulatory syllabus. Every question is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it — and answers lead with the point, then the mechanism, then the limitation.

Jump to the question bank
Question bank

100 questions, mapped to the firms that asked them

Questions
100
Traced to a firm
37
Firms
12
Updated
September 2026
Asked at
All firmsUBS14MSCI7BlackRock5Franklin Templeton3Oaktree Capital Management2Scotiabank2Jane Street1Moody's1Neuberger Berman1PIMCO1State Street1Truist 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
Showing 1–1 of 1 · filtered from 100Clear filters
  1. 024What is basis risk? Give me an example.Greeks and sensitivitiesIntermediatetechnicalBank market riskTreasury and ALM

    Say this

    Basis risk is the risk that your hedge and your exposure don't move together, so you're left with residual P&L even though you think you're flat. It's what's left after you've hedged the first-order factor.

    Then walk it

    1. The classic example: you hold a corporate bond and hedge the rate risk with a government bond future. Now you're exposed to the spread between corporate and government yields, which is exactly the thing that moves in a credit event.
    2. Product basis: hedging a jet fuel exposure with crude futures because jet fuel futures are illiquid. The crack spread becomes your risk, and airlines have lost real money on that.
    3. Tenor and calendar basis: hedging a three-month exposure with a one-month contract and rolling. Each roll re-prices the basis, and in a stressed market that roll cost blows out.
    4. Location and currency basis: cross-currency basis on a dollar funding swap. In March 2020 that basis widened by more than 100 basis points, which made hedged dollar funding dramatically more expensive for non-US banks holding dollar assets.
    5. In a bank's banking book it shows up as repricing basis: your loans reprice off the repo-linked benchmark and your deposits reprice off something else entirely, so a rate move that looks neutral on a gap report still hits net interest margin.
    6. The way you manage it is to measure it explicitly, set a separate basis limit, and stress it. The failure mode is that VaR often shows a hedged book as low risk because the basis has been quiet, right up until it isn't.

    Where candidates lose it

    Defining it abstractly without a concrete pair. Interviewers want an instrument and its hedge named. And the risk-manager point to add is that basis risk is systematically understated by VaR, because the basis is stable for long stretches and then jumps.

    Expect next

    • How would you measure and limit basis risk?
    • Why does VaR tend to understate it?
    • What happened to cross-currency basis in March 2020?

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.