Risk Analyst vs Risk Model Validation Analyst: Which one is a good career move?

[Aber]

Hey guys. I have two job offers, both in a major Swedish bank in Stockholm:

1. Market Risk Analyst. The job is not that quantitative and the tasks are to monitor/verify/report/analyze VaR calculations. (VBA Excel, SQL are used)
2. Credit Risk Model Validation Analyst: Use statistical methods to analyze and validate the PD, LGD etc models used in the bank (Python, SQL are used)

My ultimate career goal is to become a Quant/model developer and work with market risk and derivative pricing models and eventually move to London.

MY QUESTION: Is taking the first job a bad career move for me? The reason for my doubt is that I think market risk is more interesting than credit risk but I fear that the first job is not technical enough. Please discuss the pros/cons. I am very much interested to know if it is possible for me to go from job 1 to a model development position.

Background: I have recently graduated from Royal Institut of Technology in Stockholm (top 50 engineering school according to QS ranking) with a MSc in Applied Mathematics (focus on quant/math finance).

 

[IntoDarkness]

pay in stockholm is bad? london is such an expensive place filled with many morons why would you even wana go there

 

[MRoss]

The model risk teams work really closely with the risk analysts at large banks. I think a move in either direction is quite natural as long as you have the skills necessary.

 

[ZFL]

I incline to think taking the market risk analyst is better. Working as a market risk analyst you speak market risk "language", which is more important work experience to build. Though you may not be using quant skills as much, you can demonstrate your quant skills in other means. As a credit risk model validation analyst, even though you may work with more quant stuff, you're in the credit risk regime.

It's just that I see jumps within market risk regime more often than across credit/market regimes. IMO credit risk is less ideal as a stepping stone. My 2 cents.

 

[Aber]

The model risk teams work really closely with the risk analysts at large banks. I think a move in either direction is quite natural as long as you have the skills necessary.

Do you think a move to model development will also be "natural" from a Market Risk Analyst position?

 

[Aber]

I incline to think taking the market risk analyst is better. Working as a market risk analyst you speak market risk "language", which is more important work experience to build. Though you may not be using quant skills as much, you can demonstrate your quant skills in other means. As a credit risk model validation analyst, even thought you may work with more quant stuff, you're in the credit risk regime.

It's just that I see jumps within market risk regime more often than across credit/market regimes. IMO credit risk is less ideal as a stepping stone. My 2 cents.

Your 2 cents are much appreciated

I get your point.. Nice to hear, actually! I have difficulty of choosing because the financial aspect of job 1 is more appealing but the tools used in job 2 are more appealing (stats/simulation/more code etc). The reason I am so stressed at this point is, that I have no idea what the consequences of my choice today will have on my career the next 5-10 years.

 

[ZFL]

Your 2 cents are much appreciated

I get your point.. Nice to hear, actually! I have difficulty of choosing because the financial aspect of job 1 is more appealing but the tools used in job 2 are more appealing (stats/simulation/more code etc). The reason I am so stressed at this point is, that I have no idea what the consequences of my choice today will have on my career the next 5-10 years.

My pleasure. The point to have a second thought on is a market risk analyst looks into traded products (think 5 major sales&trading asset classes: equity, commodity, FX, interest rate and traded credit/FI), which relate to market risk&derivatives pricing you mentioned; while credit risk models would most likely be about retail/commercial/corporate banking products.

 

[Ken Abbott]

My ultimate career goal is to become a Quant/model developer and work with market risk and derivative pricing models and eventually move to London.

MY QUESTION: Is taking the first job a bad career move for me?

If this is the case, the model job may be best. Desk people do quant stuff, but the role is very different.

 

[KillingField]

Market risk is not a quant job, model validation is. Off the top of my head, I can't think of anyone specific who moved from market risk to a quant role of any kind, whereas moving from model validation to model development is not rare at all. And all the more power to you if you are actually independently implementing the models (or at least doing some coding, as at some banks you can get entirely bogged down in the maths and pencil pushing).

 

[Aber]

If this is the case, the model job may be best. Desk people do quant stuff, but the role is very different.

How would you react if you needed to hire someone for Risk model development and the person had 1-2 years market risk analyst experience and highly quantitative masters degree?

 

[KillingField]

How would you react if you needed to hire someone for Risk model development and the person had 1-2 years market risk analyst experience and highly quantitative masters degree?

I realize that you didn't ask me, but just to add to my previous answer and then also answering your new question, market risk typically start at an analyst level, whereas quants (be it model validation or development) start as associates or are fast tracked through the analyst period (depending on the bank). Not sure how it works in Stockholm, but you might want to find out, as it will also have salary implications. Also, in more recent times quants of all types, but validation in particular, have increasingly been moved to the low cost centers of Eastern Europe and Asia, which may make your move to London more difficult, and probably more so later in the career.

As for your new question, you should first of all know that people are very quick to label others. Having a non-quant job on your CV, for example, and particularly one where your technical skills don't go beyond VBA, is not a good look. Plenty of people with quantitative masters get stuck in non-quantitative roles, sometimes even working alongside people with no university degree at all, just because they needed a job upon graduation and then waited a bit too long before starting to look seriously elsewhere. Even if you were to get a quant job after your gig in market risk, your previous experience would likely be highly discounted and not count towards your years of experience (in terms of promotion eligibility).

Now finally, then, though there is no lack of supply of people with quantitative degrees trying to break into quantitative finance, if you pass the CV screen, then it is just a matter passing the technical interviews to land the job. If you previously already applied to jobs in London and didn't make it to interviews, I don't think a job in market risk on your CV is going to help you get further. If you didn't apply to jobs in London, I guess the question is why not if that is your intention anyway two years down the line?

 

[Aber]

I realize that you didn't ask me, but just to add to my previous answer and then also answering your new question, market risk typically start at an analyst level, whereas quants (be it model validation or development) start as associates or are fast tracked through the analyst period (depending on the bank). Not sure how it works in Stockholm, but you might want to find out, as it will also have salary implications. Also, in more recent times quants of all types, but validation in particular, have increasingly been moved to the low cost centers of Eastern Europe and Asia, which may make your move to London more difficult, and probably more so later in the career.

Now finally, then, though there is no lack of supply of people with quantitative degrees trying to break into quantitative finance, if you pass the CV screen, then it is just a matter passing the technical interviews to land the job. If you previously already applied to jobs in London and didn't make it to interviews, I don't think a job in market risk on your CV is going to help you get further. If you didn't apply to jobs in London, I guess the question is why not if that is your intention anyway two years down the line?

Mayby I should tell my university to compensate you for acting as a career counselor for their graduates

More or less everyone in finance starts as analyst in Stockholm and move on to senior analyst after some years (some phd's start out as senior analyst).

For your last part, let me be totally honest: I haven't applied because in London I have been a wuss! tbh. Haven't had the guts to through with it. I thought I it will be easier If I have some experience first so it becomes easier to get interviews. But yeah, I have been a wuss.

 

[Aber]

Little Update peeps. The validation team subtracted their offer so I got the first job. I have been here 3 months and last week I got the opportunity to move to the Credit risk development team within the bank. (mostly about building and improving PD and LGD models. Lots of coding and lots of stats). I said yes right away and I’ll start in April. It is much better for me to spend a couple of years here in a quantitative job than my current! finally I got that “quantitative” position. thank you all for your inputs

 

[Ken Abbott]

Best of luck. Make sure you review the Canabarro and Duffie paper and the basic Basel II Internal Model stuff to get the landscape.