Market Risk Associate Interview Questions and Answers

Counterparty risk is specific to the risk of default by the other party in a financial transaction, while credit risk is the risk of default by a borrower.

• Counterparty risk is the risk that the other party in a financial transaction will not fulfill their obligations.

• Credit risk is the risk that a borrower will not repay a loan or debt.

• Counterparty risk is more specific to financial transactions between two parties, while credit risk can apply to a wider range of lending scen...read more

VaR stands for Value at Risk, a measure used to quantify the level of financial risk within a portfolio.

• VaR is a statistical measure used to estimate the potential loss on an investment over a specified time period.

• There are different types of VaR including historical VaR, parametric VaR, and Monte Carlo VaR.

• Historical VaR uses past data to estimate potential losses, parametric VaR uses statistical models, and Monte Carlo VaR simulates various possible outcomes.

• For example, a...read more

PFE stands for Potential Future Exposure, which is a measure of the maximum expected loss on a portfolio due to market movements.

• PFE is used in risk management to assess the potential impact of adverse market movements on a portfolio.

• It helps in determining the amount of capital that needs to be set aside to cover potential losses.

• PFE is calculated using statistical models and simulations to estimate the maximum loss that could occur within a certain confidence level.

• It is an...read more