Market Risk & VaR Screen
Parametric and historical VaR, square-root-of-time scaling, Expected Shortfall, coherence and diversification the objective core of a market-risk screen.
The scenario
You've joined the market-risk team. Every evening the desk's Value-at-Risk is computed, scaled and checked against limits, and the regulator watches the backtest. Work the numbers precisely: size the VaR two ways, scale it, average the tail, and reason about what the number does and does not promise.
Where this shows up
VaR calculation and scaling, Expected Shortfall, coherence and the regulatory backtest are the staple objective content of market-risk and model-validation assessments, where candidates are tested on accuracy and interpretation rather than opinion.
Firms such as Barclays, JPMorgan, Man Group.
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The drill
Answer each item. Numeric answers are graded to a small tolerance and VaR is expressed as a positive loss. Every convention you need (z-scores, the tail definition, the scaling factor, correlations) is stated in the prompt, so work strictly to what each question specifies.
Sample question
A portfolio has a daily return standard deviation of 200,000 and approximately normal, zero-mean returns. Using the parametric method with z = 1.645, what is the 95% one-day VaR, in pounds (as a positive loss)?
Included with the Risk pack
The full graded drill is part of the Risk (Market, Credit & Model Risk) pack a one-time purchase unlocks every concept, coding guide, interview playbook and take-home in this track.
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