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. 057What is Basel IV, and what changed for market risk?Regulatory capitalHardsuperdayRegulatory reportingBank market risk

   Say this

   Basel IV, formally the finalisation of Basel III, is about comparability rather than more capital. The headline is the 72.5 percent output floor on internally modelled RWA. For market risk it's FRTB, which replaced VaR with expected shortfall and drew a much harder line between trading and banking book.

   Then walk it

   1. The output floor: total RWA can't fall below 72.5 percent of the standardised calculation, phased in over several years. It caps the benefit of internal models and restores comparability between banks, which was the central complaint after 2008.
   2. Credit risk: advanced IRB removed for large corporates and financial institutions, IRB removed for equities, input floors on PD and LGD, and a more granular standardised approach with real loan-to-value sensitivity on mortgages.
   3. Operational risk: internal models abolished entirely, replaced by the standardised measurement approach driven by business indicators and your own loss history.
   4. FRTB for market risk, and the four things that changed. Expected shortfall at 97.5 percent replaces 99 percent VaR, so tail depth is captured. Liquidity horizons vary by risk factor from 10 to 120 days, so illiquid risk costs more capital.
   5. Third, non-modellable risk factors. If a factor lacks enough real price observations, you can't model it and it attracts a stress-based add-on. That was a large and unwelcome surprise for exotic and emerging market desks.
   6. Fourth, the trading and banking book boundary became prescriptive with restrictions on reclassification, ending the pre-crisis practice of moving positions to whichever book carried less capital. And the internal models approval is now at desk level with P&L attribution tests, so one desk can fail and lose modelled treatment while others keep it.
   7. Implementation dates have slipped repeatedly and differ by jurisdiction, with the US, UK and EU all on different timelines and different versions, especially for FRTB internal models. That fragmentation is itself a live commercial issue for global banks.
   8. The fair criticism: the aggregate capital impact is modest but very unevenly distributed, falling hardest on European banks with big IRB books and on trading desks in illiquid products. And the complexity it adds runs against the original goal of simplicity.

   Where candidates lose it

   Treating Basel IV as just higher capital requirements. The theme is comparability and constraining internal models, not level. And for market risk you need FRTB's specifics: expected shortfall, liquidity horizons, non-modellable risk factors and the desk-level P&L attribution test. Naming only the first shows shallow reading.

   Expect next

   • Why did FRTB move to expected shortfall?
   • What is a non-modellable risk factor and what does it cost?
   • What happens when a desk fails P&L attribution?

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.