Monday, August 17, 2009

My own interview questions on credit (or mkt) risk system

Q: how is your system related to Credit Valuation Adjustment?

Q: what trading desks do you support?
A: many desks. Could be a firm-wide system.

Q: who are the most important users of the reports generated? Traders? Management of the trading desk? Sales teams? Product control?
R: I know Trader, Desk manager are using that.

Q: what asset classes are rated by the system -- corporate bonds? other bonds? swaptions? CDS? Mortgage-backed-securities?
R: Bonds, Swaps, Special purpose vehicles.

Q: how many positions in each product?

Q: What kind of traders hold those positions? Holding for how many days?

Q: what's a typical position size?

Q: What are the major risks to those positions?

Q: What sensitivities are monitored?

Q: I was told CDS is the main credit product on the market. Many banks use CDS to cover and hedge their credit risk. Is CDS covered by your system?

Q: Since you said it's a reporting system, give me a good idea of the most important pieces of information in your report? To be specific,name at least 3 pieces. Exclude product attributes such as bond name, issuer name, coupon rate, last payment coupon date etc.

Q: give me a good idea of the most important input data to the credit rating system, besides issuer, coupon rate, call dates.

Q: how does the credit risk output from your system affect the trading operation or other businesses? What businesses? Security lending business?

Q: Specifically, what business decisions do these users make after reading your data?
R: user will base on the report to request borrowers to increase collateral.

Q: who are the downstream systems?

Q: does your output data enter the trade "flow" before ORDERS are sent out (ie pre-trade) or after trades are confirmed and become a POSITION (ie post-trade)?
R: Has nothing to do with orders.

Q: if it only affects collateral, then is it part of the buy/sell life cycle? Is it part of security lending life cycle? or some other business life cycle? What businesses? Loan business? Repo business? OTC derivative business that needs collateral?

Q: what are the underlying credit risk methodologies used? Is there a name for that methodology?

Q: how many issuers are covered?
R: Less than 7 hundreds.

Q: do you cover corporate issuers only? If not then who else? Governments? Agencies? Municipalities?

Q: what are the database table sizes in terms of rows and GB? How do you cope with the size?

Q: How large is the largest table you have to query? What kind of data does it hold?
R: my table are small, 80 columns, 100k records. Use ISIN instead of cusip.

Q: is this the largest? What kind of data does it hold? Product data keyed by ISIN?

Q: how long is the batch job? What are the techniques to shorten it?
R: from minutes to several hours. Techniques? none

Q: do you know if the system use a rule engine for the credit risk calculations?

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http://www.linkedin.com/in/tanbin