What Does a Wall Street Risk Analyst Do? (Tasks, Hours, Salary, Career Trajectory, and More!)

Summary

This video offers an in-depth look at the role of a market risk analyst in an investment bank, detailing their responsibilities, which include monitoring market news, analyzing positions, conducting stress tests, and ad hoc analysis. It discusses the work-life balance, compensation, and career progression, emphasizing the importance of a blend of financial, economic, and quantitative skills. The speaker also shares insights on the job's intellectual stimulation and the encouraged pursuit of continuous learning.

Takeaways

• 😀 The role of a risk analyst in finance is often overlooked but is crucial for managing market risks in investment banks.
• 📈 The job involves a variety of tasks, including keeping up with market news, monitoring positions, conducting value-at-risk (VAR) and stress tests, and working with quant teams to maintain risk models.
• 🕵️‍♂️ Risk analysts spend about 15% of their time staying updated with market news and trends, which is essential for understanding market dynamics and geopolitical developments.
• 📊 Another 15% is dedicated to monitoring desk positions and performing VAR and stress tests to ensure the bank's exposure is within acceptable limits.
• 🤖 Approximately 15% of time is spent troubleshooting and working with the quant team to fix issues in the risk system, which is a less exciting but necessary part of the job.
• 📝 The largest portion of time, around 40%, is dedicated to ad hoc analysis, which includes weekly presentations and long-term projects to increase the team's knowledge base and identify hidden risks.
• 🏦 The speaker worked in a bulge bracket investment bank, a term referring to the largest banks on Wall Street, specifically in municipal bond and equity trading desks.
• 💼 Compensation for risk analysts includes a base salary comparable to other trading floor roles and a bonus typically ranging from 25% to 50% of the base salary, though it's lower than in some front-office roles.
• 🔑 Work-life balance is generally better for risk analysts, with an average workweek of 40 to 60 hours and no weekend work, unlike some other roles in finance.
• 🛣️ Career trajectories for risk analysts can include promotion within the risk department, moving to sales or trading roles, or transitioning to other areas of finance.
• 📚 To prepare for a career as a risk analyst, it's beneficial to study finance, economics, or quantitative fields like statistics, math, or computer science, and to have a genuine interest in financial markets.

Q & A

What is the primary role of a market risk analyst?

A market risk analyst works on the trading floor of an investment bank, managing risks related to market fluctuations and the securities at the desk trades in. They monitor and analyze market trends, perform risk assessments, and work with the trading team to mitigate potential losses.

What are the main responsibilities of a risk analyst as described in the script?

The main responsibilities include keeping up with market news, monitoring desk positions and conducting Value at Risk (VAR) and stress tests, working with the Quant team to troubleshoot risk system issues, performing ad hoc analysis for presentations and projects, participating in regulatory processes like the Comprehensive Capital Analysis and Review (CCAR), and dedicating time to learning and exploring market-related curiosities.

How much time does a risk analyst typically spend on keeping up with market news?

According to the script, a risk analyst spends about 15% of their time keeping up with market news, which includes reading articles from Bloomberg and other financial news sources to stay updated on market developments.

What does VAR stand for and what is its purpose?

VAR stands for Value at Risk, which is a measure used to assess the potential loss in an investment. It estimates how much money could be lost given a large but unlikely market move, helping risk analysts to monitor and manage risk levels.

How does the work-life balance for a risk analyst compare to other roles on the trading floor?

The work-life balance for a risk analyst is generally better compared to other roles on the trading floor. The script mentions an average workweek of 40 to 60 hours, with the possibility of staying later during market crises, but without the expectation of working on weekends.

What is the average base pay range for a risk analyst and an associate position in an investment bank?

The base pay for a risk analyst position is estimated to be between $100,000 to $120,000, while for an associate position, it ranges from $150,000 to $200,000. These figures can vary by bank and the level of experience.

What is the difference between the bonus structure for a risk analyst compared to front office roles like investment banking or sales and trading?

While front office roles might have bonuses reaching up to 100% of base salary or more, risk analysts typically receive bonuses in the range of 25% to 50% of their base pay, reflecting a trade-off for a better work-life balance.

What are some common career trajectories for a risk analyst?

Common career trajectories include ascending the ranks within the risk analyst role, moving to a sales or trading role due to the integrated nature of the job with the trading desk, or pivoting to another finance role such as investment banking or asset management, although the latter is less common.

What is the CCAR process and why is it important for risk analysts?

The CCAR, or Comprehensive Capital Analysis and Review, is a quarterly regulatory process that simulates shocks to a bank's trading positions to assess potential losses and the bank's capital adequacy during financial stress. It is important for risk analysts as it requires their expertise to compile data and ensure the bank's compliance with regulatory requirements.

What skills and interests are recommended for someone aspiring to be a risk analyst?

Aspiring risk analysts should have a strong educational background in finance, economics, statistics, math, or computer science, and a genuine interest in financial markets. Additionally, they should be open to learning about coding and automating tasks, as these skills are encouraged and beneficial in the role.

Outlines

00:00

📈 Market Risk Analyst Overview

This paragraph introduces the role of a market risk analyst, a position often overlooked in the finance industry. The speaker, with nearly two years of experience, provides an in-depth look at the daily responsibilities, compensation, work-life balance, and career paths associated with this role. The speaker emphasizes the diverse nature of the work, which includes staying updated with market news, monitoring positions, conducting value-at-risk (VAR) and stress tests, troubleshooting risk models, performing ad hoc analysis, and engaging in regulatory work such as the Comprehensive Capital Analysis and Review (CCAR). The speaker also highlights the importance of continuous learning and exploration, which is encouraged and supported by the company.

05:00

💼 Compensation and Career Trajectory

In this paragraph, the speaker discusses the compensation structure for market risk analysts, comparing it to other roles on the trading floor. The base pay is similar, but the bonuses are generally lower, ranging from 25% to 50% of the base salary. The speaker also describes the work-life balance, noting that the average workweek is 40 to 60 hours, with minimal weekend work. Career trajectory options are outlined, including advancing within the risk analyst role, transitioning to sales or trading, or moving to another finance role like investment banking or asset management. The speaker concludes with advice for aspiring risk analysts, recommending studies in finance, economics, or quantitative fields, and a genuine interest in financial markets.

Keywords

💡Risk Analyst

A risk analyst is a professional who assesses and identifies potential risks in various fields, particularly in finance. In the context of this video, a risk analyst works within an investment bank, focusing on market risk analysis and collaborating with the sales and trading team. The role involves monitoring market news, managing risk metrics, and conducting stress tests to ensure the bank's financial stability.

💡Market Risk Analyst

A market risk analyst is a specialized type of risk analyst who focuses on the risks associated with market fluctuations. This includes monitoring the trading desk's positions and conducting value-at-risk (VAR) calculations to predict potential losses in the event of significant market movements. The script mentions the role of a market risk analyst sitting on the trading floor and working with securities.

💡Bulge Bracket

The term 'bulge bracket' refers to the largest and most prestigious banks on Wall Street. In the script, the speaker mentions having worked at a bulge bracket investment bank, indicating a high level of prestige and the importance of the bank's size and influence in the financial industry.

💡Value at Risk (VAR)

Value at Risk, or VAR, is a statistical technique used to measure and quantify the level of financial risk within a firm. It estimates how much a set of investments might lose, with a given probability, due to normal market fluctuations over a set time horizon. The script describes VAR as a tool to determine potential losses in the event of a large but unlikely market move.

💡Stress Test

A stress test in finance is a simulation of extreme but plausible future events to see how a portfolio or a financial institution would perform under such conditions. The script mentions conducting stress tests on all positions to determine potential losses in various hypothetical scenarios, such as a 5% sell-off in equities.

💡Quant

In the context of the video, 'quant' refers to quantitative analysts or 'quants' who work with complex mathematical models and algorithms to analyze financial markets and products. The speaker mentions working with the quant team to troubleshoot issues with risk models, indicating the importance of this role in risk management.

💡Ad Hoc Analysis

Ad hoc analysis refers to the process of conducting specific, one-time analyses to address particular issues or questions. In the script, the speaker discusses performing ad hoc analysis, which includes creating reports and presentations on market trends, risk, and profit and loss, contributing to the team's knowledge base.

💡Comprehensive Capital Analysis and Review (CCAR)

CCAR is a regulatory process that requires large banks to simulate potential losses under various stress scenarios to ensure they have enough capital to withstand financial stress. The script describes CCAR as a quarterly exercise involving complex simulations and cooperation across the risk department.

💡Work-Life Balance

Work-life balance refers to the equilibrium between an individual's work and personal life. The script mentions the work-life balance of a risk analyst, noting that the role typically involves a more predictable schedule compared to other investment banking roles, with fewer instances of working late or on weekends.

💡Career Trajectory

Career trajectory refers to the path of career development and progression. The script outlines common career trajectories for risk analysts, such as ascending the ranks within the risk department, moving to a sales or trading role due to market knowledge, or pivoting to another finance role like investment banking or asset management.

💡Financial Markets

Financial markets are the platforms where financial assets are exchanged, including stock exchanges, bond markets, and foreign exchange markets. The script emphasizes the importance of having a genuine interest in financial markets for a risk analyst, as the job involves extensive market analysis and staying updated on market news.

Highlights

The often overlooked yet crucial role of a risk analyst in finance.

A comprehensive overview of the risk analyst job, including responsibilities and career insights.

Introduction to market risk analysts and their collaboration with the sales and trading team.

The variety of risk functions within an investment bank, such as credit, market, and operational risk.

The day-to-day tasks of a risk analyst, including monitoring market news and trends.

The importance of staying updated with macro and geopolitical developments for risk analysis.

Conducting VAR and stress tests to evaluate potential market risks.

The role of technology and quant teams in fixing risk model errors.

Ad hoc analysis as a significant part of a risk analyst's job, involving presentations and in-depth research.

The creation of detailed research reports to uncover hidden market risks.

Regulatory work, including the comprehensive Capital analysis and review process.

The work-life balance of a risk analyst, with an average 40-60 hour workweek.

Compensation details for risk analysts, including base pay and bonus structures.

Career trajectory options for risk analysts, such as ascending ranks or moving to sales/trading roles.

The value of continuous learning and skill development in the risk analyst profession.

Recommendations for aspiring risk analysts, including educational backgrounds and market interest.

The encouragement of coding and automation skills in risk analyst roles.

Transcripts

one of the often overlooked jobs careers

in finance and one that really only has

one movie made about them is the job of

the risk analyst now I'm coming up on

two years in this field so in today's

video I thought I would give a

comprehensive overview of the job of a

risk analyst from what it is that we do

the compensation the work-life Balance

common career trajectories and lastly

what it takes to get a job in this field

within an investment Bank there are many

different types of risk functions from

credit risk Market risk operational risk

the list goes on but the type of risk

analysts that I'll be talking about

today is the market risk analyst the

type of risk analyst that sits on the

trading floor of an investment bank and

works with the sales and trading team in

managing risks related to micro

fluctuations and the Securities at the

desk trades in my case for about a year

and a half I worked at a bulge bracket

Investment Bank on their Municipal bond

trading desk and for about a month on

their Equity trading desk by the way

bulge bracket is just a slang term that

essentially means the largest banks on

Wall Street let's first talk about what

exactly a risk manager does the role of

a risk manager actually quite varies and

I never would be doing the same thing

every day now while that was definitely

good thing not everything I did was

exactly fun or stimulated work but we'll

get to that in a second so the way I'll

lay out my responsibilities is in the

percentages of time I spent doing them

the first 15 is simply keeping up with

market news this consisted of reading

Bloomberg articles and news articles

from other websites in order to stay

updated on the recent developments

within my specific Market but also the

rest of the macro and geopolitical

Landscape when I was covering municipal

bonds I would always keep track of how

well the media Market was performing I

would always have a good sense of where

immunity yields were relative to

treasuries and a sort of an extension

that I would always know where Treasures

are trading and how credit markets were

trading beyond that I would also keep

track of Trends in the global economy

like where economic data such as

inflation was trending geopolitical

developments like the war in Ukraine

Central Bank policy and also what was

going on in other markets such as

equities the next 15 percent is

monitoring our desks positions and

conducting VAR and stress tests this

would involve looking at the current

risk numbers and making sure that they

were not too high not too low but right

where we'd expect them you're also

monitor the VAR which stands for value

at risk and it basically tells you how

much money you would lose given a very

large but unlikely Market move lastly

we'd conduct stress tests on all our

positions which tells you what you stand

to lose if certain scenarios were to

occur say Equity selling off five

percent and volatility shooting up 10

something like that if any of the above

numbers don't look like what we'd expect

we'd then do some investigation to see

if it was a calculation error or if

there's an actual large change in the

portfolio and if we do notice a

calculation error we would then talk to

the technology and quantums to fix this

error and that's where another about 15

of my time was spent this is probably

the least exciting part of the job at

least for me it essentially just

involves working with a team that codes

and maintains the risk models to

troubleshoot whatever's going wrong with

the risk system usually the risk team

will be the ones to identify the issue

because we have an idea of what the

actual position is and then we'll relay

that to the Quant team to fix the model

moving on to the next facet of the job

which takes the largest chunk of time

and that is doing ad hoc analysis these

pieces of analysis would vary from

weekly presentations with my team and

managing director to projects that would

take a whole quarter to complete the

weekly present occasions would often be

about very relevant to the present day

Market related topics that we felt that

our managing directors should be aware

of topics range from doing statistical

analysis to identify relationships

between Securities Trends and risk

profit and loss research and market

conditions and much more the quarter

long projects would involve creating

very detailed research reports on parts

of the market that the team may not know

about or uncertain Market phenomena that

occurred and the purpose is to increase

the team's knowledge base and also to

identify potentially hidden risks in

these less transparent parts of the

market for example during my time

covering municipal bonds I put together

a research report on a very Niche

product within the muni space one that

had a pretty complicated structure and

was pretty unfamiliar to the rest of my

team and to the risk Department as a

whole it took me several months to

complete but once it was done it could

serve as a good resource for the rest of

my team as well as future Risk Managers

that are covering this particular market

doing this type of analytical work is

easily one of the best parts of the job

because you learn an incredible amount

it's intellectually stimulating and it

helps with your presentation skills the

next 10 is regulatory work and specific

quickly I'm talking about a quarterly

process called c car which stands for

comprehensive Capital analysis and

review essentially following 2008 the

FED now requires every large Wall Street

Bank to undergo a quarterly exercise in

which we simulate shocks to our trading

positions to see what the resulting

losses could be and if the bank would

have enough Capital to sustain

operations during those times of

financial stress the whole process is

incredibly complex and requires the

cooperation of the entire risk

Department across every asset class in

order to compile this list to then

submit to the FED needless to say it's a

very time consuming and tedious process

and also probably one of the less

exciting but also very necessary and

important parts of the job because Risk

Managers are not always on call I would

say the last 15 of my time was spent

simply learning and exploring my

Curiosities this was heavily encouraged

by my previous company and they

frequently had extra training programs

seminars to develop our presentation

skills learn about different markets

learn how to code and much more and this

is really great because I was literally

paid to develop my skills and expand my

knowledge and whatever Direction I

wanted I've noticed that in this job you

have to understand the market side of

things but it's also very beneficial for

you to understand the tech side of

things which is why coding and learning

how to automate tasks was heavily

encouraged so broadening your Knowledge

and Skills was literally part of the job

description next let's talk a little bit

about compensation now these figures

will be mostly from my own experience as

well as talking to other people but the

base pay is usually the same as other

roles on the trading floor like sales

and trading which by rough estimates

would be about 100 000 to 120 000 for an

analyst position and 150 000 to 200 000

for an associate position as of the

making of this video naturally these

figures will vary by bank and also what

level analyst and what level associate

you are and for reference an analyst is

typically someone zeroed to two years

out of school and an associate is

someone three plus years out of school

or someone that is hired from a graduate

program such as an MBA or Masters while

there isn't much or any difference in

the base pay the bonus is where the

biggest difference lies whereas some of

the front office rules like Investment

Banking sales and trading could have

bonuses reaching up to 100 your base

salary or even more in a risk role

you're looking more around 25 to 50

percent from what I've generally seen

now while the bonuses are smaller there

are trade-offs such as having a better

work-life balance on average you're

probably looking at around 40 to 60

hours per week working at Investment

Bank the hours will really vary

sometimes when the markets are just

going crazy and it's all hands on deck

you might have to stay later to finish

very urgent work but I would say 95 of

the time I would go in at around seven

to eight and leave around five to six in

the afternoon and I never once had a

work on the weekend which is how I'm

able to make these videos in regards to

Career trajectory the most common ones

I've seen include number one obviously

ascending the ranks as a risk analyst

you start off as an analyst then you

work your way up to associate then VP

then MD and then one day who knows maybe

even the chief risk officer at your

organization number two moving to a

sales or trading rule because the role

is so heavily integrated with the

trading desk and the product and market

knowledge Remains the Same I've seen

many people move to become a Trader A

salesperson or even do some kind of

structuring number three and probably

the least common is pivoting to another

Finance rule such as Investment Banking

or Asset Management I haven't seen many

people do this but there are definitely

some so you've come to the end of this

video and you're thinking to yourself

hey being a risk analyst doesn't seem

like a bad choice well here's a few

quick things I would recommend to help

you get a job in this field number one

study Finance or economics or even

something quantitative like statistics

math or computer science during my time

in this job I found that people that

came in with the finance and econ

background ended up learning the

computer science and stats elements and

the people that came in with the stats

and computer science background

eventually end up learning the finance

part and I think the most successful

people in this field have some sort of

blend of these skill sets number two

have a genuine interest in the financial

markets this job will have you looking

at and learning about the markets for

hours on end so you better find the

markets at least somewhat interesting if

you want to learn more about how to get

a job on Wall Street I would recommend

checking out this video or if you're

curious about my day-to-day lifestyle

check out these two videos and as always

take care and I'll see you guys in the

next one