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.

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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
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  1. 014Desk A has $10 million of VaR and Desk B has $10 million of VaR. What is the firm's VaR, and which desk is using more of the limit?Market risk and VaRHardtechnicalBank market riskBuy-side risk

    Say this

    Anywhere from zero to $20m, depending on correlation. If they're perfectly correlated it's $20m, if perfectly offsetting it's zero, and if independent it's about $14.1m. And neither desk is necessarily using half the limit, which is the real point of the question.

    Then walk it

    1. Under normality, combined VaR is the square root of the sum of squares plus twice the covariance term. Two $10m desks at zero correlation gives $10m times root two, so $14.1m. At 0.5 correlation it's about $17.3m.
    2. That gap between $20m and $14.1m is the diversification benefit, and allocating it is the political heart of a risk manager's job.
    3. Component VaR is how you split it. You compute each desk's contribution so the components sum exactly to firm VaR. It's marginal VaR times position size, and it's the number you use for limits and for risk-adjusted performance.
    4. Marginal VaR is the derivative: how much firm VaR changes for a small increase in that desk. Incremental VaR is the discrete version, firm VaR with the desk minus firm VaR without it.
    5. Here's the counterintuitive part that makes it a good interview question. A desk hedging the rest of the firm can have positive standalone VaR and negative component VaR. It genuinely reduces firm risk, and a naive standalone limit framework would penalise it.
    6. So the answer to 'which desk uses more limit' is: whichever has the higher component VaR, and you cannot tell from the standalone numbers. You need the covariance with everything else.

    Where candidates lose it

    Answering $20m, or answering $14.1m as though independence were given. The interviewer wants the range and the word correlation, then the distinction between standalone and component VaR. The hedging-desk case, where component VaR is negative, is the answer that gets remembered.

    Expect next

    • Can a desk have negative component VaR?
    • How would you allocate the diversification benefit between the two desks?
    • Does this decomposition still work for expected shortfall?

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.