Bank risk
Risk Analyst Screen - Free Timed Practice
Modelled on sell-side and clearing risk screens. You compute VaR and Expected Shortfall on a book, then answer on correlation breakdown, fat tails and the Greeks under stress.
Format
- 1 section · 18 items · about 25 minutes
- No negative marking - answer everything.
- No going back. Answer or skip, and the next item loads.
- Every sitting is generated fresh - a retake is a new paper.
Sections
- Tail risk & portfolio stress - 18 items, 25 minutes, no negative marking. 18 items, 25 minutes.
What this sitting is
Modelled on sell-side and clearing risk screens. You compute VaR and Expected Shortfall on a book, then answer on correlation breakdown, fat tails and the Greeks under stress.
1 section, 18 items, about 25 minutes end to end, on a clock that does not stop between sections. Every question is generated fresh, so sitting it twice gives you two different papers and there is nothing to memorise between attempts.
How it is marked
No section marks negatively. A wrong answer costs nothing beyond the mark you would have earned, so there is never a reason to leave an item blank.
There is no going back anywhere in the paper. You answer or skip, and the next item loads, so every decision to leave something is final at the moment you make it.
Section by section, with a worked example
Every example below is generated by Outcry, drawn from the same generator that section runs during the timed sitting. None of it is any firm's own material.
A. Tail risk & portfolio stress
18 items, 25 minutes.
18 items in 25 minutes, which is about 83 seconds an item. No penalty for a wrong answer here, so answer everything.
Example 1
The rates desk's 99% one-day VaR was exceeded 6 times in the last 250 trading days. Under the Basel traffic light, what follows?
- Red zone - the model is presumed wrong and the multiplier goes to its maximum
- Green zone - that count is what a correct 99% model produces over 250 days
- Amber zone - the capital multiplier is stepped up and the exceptions have to be explained
- 250 days is too short a sample to conclude anything, so no action follows
Answer Amber zone - the capital multiplier is stepped up and the exceptions have to be explained
A correct 99% model fails 1% of the time, so 0.01 × 250 = 2.5 exceptions are expected. An observed count of 6 puts the desk in the amber zone: green is 0 to 4, amber 5 to 9, red 10 or more. The bands are set so that a correct model rarely reaches amber, which is why crossing into it shifts the burden onto the desk rather than onto the supervisor.
Example 2
Trade MTM ($M) Cap 3y -6 IRS 10y -9 IRS 5y 59 CDS 5y 48
Every trade with this counterparty sits under one netting agreement. One-year PD is 0.4% and LGD is 45%. What is the expected loss, in $ thousands?
Answer 165.6
Netting makes exposure at default the net mark, not the gross: EAD = −6 − 9 + 59 + 48 = 92. Without the agreement it would be the sum of the positive marks alone, 107, since the out-of-the-money trades stay owed in a default. EL = PD × LGD × EAD = 0.4% × 45% × 92 = 165.6k. The netting agreement is worth 27k of expected loss a year on this book.
Example 3
$5M face of a bond trades at 93.8 per 100 with modified duration 6.0. What is the DV01, in dollars?
Answer 2814
Market value = 5M × 93.8/100 = $4,690,000. DV01 = MV × D × 0.0001 = 4,690,000 × 6.0 × 0.0001 = $2,814. Duration acts on market value, not on face. Running the same sum off the $5M face would give $3,000, wrong by 6.2% for a bond priced at 93.8.
Common questions
- How long is Risk Analyst Screen?
- About 25 minutes across 1 section, 18 items in total, with the clock running continuously between them.
- Is there negative marking?
- No section marks negatively. A wrong answer costs nothing beyond the mark you would have earned, so there is never a reason to leave an item blank.
- Can I go back to an earlier question?
- There is no going back anywhere in the paper. You answer or skip, and the next item loads, so every decision to leave something is final at the moment you make it.
- Are the questions the same every time?
- No. Every item is generated from the archetype bank the format draws on, so the shape of the paper is fixed and the numbers are not. Two attempts are two different papers.
- Which firms run this assessment?
- No named firm runs this as an online test. The firms hiring for this role screen by interview instead, so this sitting models the work rather than anyone's test.
No firm runs this as an online assessment. The firms hiring for this role screen by interview instead, so this sitting models the work rather than anyone's test. Outcry is not affiliated with any firm and every question is generated by Outcry.