PART A · QUESTION 1
A trading book's one-day value at risk is US$2.4m. Assume daily moves are independent and alike.
// EXAM HALL21 QUESTIONS · 30 MINUTES
Bank Market Risk Analyst Practice Test
Markets and liquidity in numbers, one quarter's pack, one daily report against its limits, and the calls when a desk would rather you waited.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A bank market risk analyst practice test asks whether you can read a trading book and a liquidity position, and stand behind a limit. This paper has four parts: DV01, value at risk and liquidity coverage; the market side of one quarter's risk pack; one daily report against its limits and stresses, set on an exhibit, with back-testing and haircuts; and calls on breaches, new products and a sudden outflow. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock, or take it as practice.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// HOW TO SIT IT
Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.
PART A
The measures
The numbers a trading book and a balance sheet are read in.
PART A · QUESTION 2
In a stress, a bank expects deposits to leave at US$40m a day for the first ten days and US$20m a day after that. It holds US$600m of liquid assets.
How many days does the buffer last?
PART A · QUESTION 3
A bank holds US$3bn of assets it could sell within days at little loss. In a severe stress, it estimates US$2.4bn of its funding would leave within 30 days.
What is its liquidity coverage?
PART A · QUESTION 4
A desk holds US$100m of bonds with a duration of about 4.5 years.
About what is its DV01?
PART A · QUESTION 5
A desk has sold a lot of options, and its value at risk looks low and steady. It says: 'Look how little risk we carry.'
What do you ask?
PART B
The risk pack
One quarter's market and liquidity lines.
EXHIBIT H · THE RISK PACK
One quarter's risk report for a mid-sized bank, three tables from the pack. Figures in US$m. The Lost and Grew columns cover the last 12 months. PD is the chance of default in a year; LGD is the share lost if it happens.
| US$m | PD | LGD | Lost | Grew | |
|---|---|---|---|---|---|
| Home loans | 6,000 | 0.4% | 15% | 2 | 4% |
| SME loans | 2,000 | 2.5% | 45% | 24 | 3% |
| Commercial property | 1,500 | 2.0% | 35% | 3 | 28% |
| Credit cards | 500 | 4.0% | 80% | 19 | 5% |
| Book | 10,000 | 48 |
| Details | Figure |
|---|---|
| Commercial property, against a limit of 15% of the book | 15.0% |
| Trading: one-day 99% value at risk, against a limit of 3.0 | 2.4 |
| Back-test: days in the last 250 with a loss above value at risk | 9 |
| Liquid assets 1,800; stressed 30-day outflow 1,500 | 120% |
| Share of deposits held by the ten largest depositors | 22% |
| Application scorecard, Gini: all customers | 0.71 |
| Application scorecard, Gini: new-to-bank, 18% of new loans | 0.38 |
| Item | What the log says |
|---|---|
| 1 | A payment batch of US$1.2m was sent twice. All recovered. The second such event in six months. |
| 2 | A leaver's system access stayed active for three months. No loss recorded. Access logs not yet checked. |
| 3 | The arrears report the board reads is built by hand, in a spreadsheet, by one person. |
| 4 | 400 letters went out with the wrong date. Corrected in a day. |
PART B · QUESTION 6
Exhibit H reports one-day 99% value at risk of US$2.4m. An executive says: 'So the most we can lose in a day is US$2.4m.'
What do you correct?
PART B · QUESTION 7
Exhibit H's back-test shows nine days in the last 250 with losses above one-day 99% value at risk. The desk points out that it stayed inside its limit on every one.
Signal or noise?
PART B · QUESTION 8
Exhibit H shows a liquidity coverage of 120%. It also shows that ten depositors hold 22% of deposits.
What do you ask about the 120%?
PART C
The market risk report
One report, eight questions. Read each desk against its own limit before you read the total.
EXHIBIT W · THE MARKET RISK REPORT
A bank's risk report for Tuesday, with a note added later that week. Money in US$m.
| Tuesday | Limit | Back-test | |
|---|---|---|---|
| Rates | 2.4 | 3.0 | 0 |
| FX | 0.9 | 1.5 | 3 |
| Credit | 1.1 | 1.0 | 7 |
| Bank-wide | 3.1 | 4.0 |
| US$m | |
|---|---|
| Rates up 2 points: loss, against a limit of 40 | 38 |
| Credit spreads double: credit desk's loss, against a limit of 40 | 55 |
| Liquid assets: government bonds | 1,200 |
| Liquid assets: bank paper | 400 |
| Liquid assets: shares | 200 |
| Stressed 30-day outflow | 1,500 |
| Liquidity coverage (liquid assets over outflow) | 120% |
| Wholesale funding maturing in 30 days | 700 |
Back-test is days in the last 250 with a loss above value at risk. The credit desk's limit was raised to 1.2 on Wednesday, the day after it went over, at the desk head's request.
PART C · QUESTION 9
From Exhibit W: the desks' value at risk adds up to US$4.4m, and the bank-wide figure is US$3.1m.
What is the gap, and what does it rely on?
PART C · QUESTION 10
In Exhibit W, the credit desk's value at risk is US$1.1m against a limit of US$1.0m. The bank-wide figure is well inside its own limit.
Signal or noise?
PART C · QUESTION 11
In Exhibit W, the credit desk's loss if spreads double is US$55m. Its value at risk is US$1.1m.
Why are they so far apart?
PART C · QUESTION 12
In Exhibit W, the credit spread stress shows a US$55m loss against a limit of US$40m. The desk head says: 'It is only a scenario. Spreads have not doubled in years.'
What do you do?
PART C · QUESTION 13
In Exhibit W, suppose the US$400m of bank paper is worth 60% in a stress, and the US$200m of shares 50%. Government bonds keep their value.
What is liquidity coverage on that basis?
PART C · QUESTION 14
Exhibit W shows US$700m of wholesale funding maturing in the next 30 days, and a stressed outflow of US$1,500m.
What do you ask?
PART C · QUESTION 15
In Exhibit W, the credit desk's limit was raised to US$1.2m the day after the breach, at the desk head's request.
What do you ask?
PART C · QUESTION 16
Exhibit W's back-test shows, in the last 250 days, losses above one-day 99% value at risk: rates 0, FX 3, credit 7.
How many were expected, and which line stands out?
PART D
The calls
Breaches, new products, and a Friday evening nobody planned for.
PART D · QUESTION 17
It is 4:40pm. A market risk limit has been breached on the rates desk. The desk head says it will be back inside by tomorrow's open, and asks you to wait before reporting.
What do you do?
PART D · QUESTION 18
A bank holds government bonds at amortised cost, on the basis that it will hold them to maturity. Rates have risen, and it now needs cash.
What happens if it sells the bonds?
PART D · QUESTION 19
At 6pm on a Friday, social media posts claim that your bank is in trouble. Online transfers out are running at several times the normal rate.
What comes first?
PART D · QUESTION 20
A desk wants to trade a new product that the risk system cannot capture properly yet. It proposes booking it as the closest existing product for now.
What do you do?
PART D · QUESTION 21
You find that one input to the value at risk calculation has been stale for three weeks. Fixing it will probably show the desk over its limit for several of those days.
What do you do?
0 OF 21 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE
// THE REST OF THE ROUND
Every question here is original; none is any bank's real test. Written for: Market and liquidity risk analyst.
- Market and liquidity risk analyst: the interview questions, against a two-minute clock.
- Situational judgement, for any seat.
- The assessment centre: a whole case in forty-five minutes.
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