So going back to the OP… oh yeah that was me. Here is the scenario. I’m casually (very casually) thinking about an eventual move from a client facing role (mildly stressful, too much biz travel as opposed to fun/leisure travel) to a behind the scenes role (cushy number). I need that role to pay north of $200k pa & I want 9-6 hours and the option to go into PM role in HF if I feel I want the stress again/money opps. I think RM ‘might’ fit the bill. Hence the light interest in the FRM. I took a look at the curriculum. It looks ok (and i’ve done most of it in the CFA, so a refresher if you like). I note that they list alumni from JPM/MS and a bunch of others among their legion. Perhaps the FRM will complement my CFA/VBA skills/winning personality/other experience. Perhaps not. I don’t think all risk managers have a doctorate in thermonuclear physics from Oxford. In fact I know they don’t. Most need to have an understanding of VaR and other catchy metrics. Having said that, our CRO is a Dr, CFA, FRM (yes he even has it on his bio & I think even on his email sig). Perhaps I need the doctorate after all. And some programming skills. I sure hope not. FWIW, I have met 50-100 HF managers. Not the risk management guys but the guys with their names on the door. A significant number in the last 3 years top earner’s list. Shaken hands, had them present to me. Yes, I am an allocator. Boring, huh? HF managers come in all varieties. Some will give you the action talk. I like the action talk. These guys have been in the biz for 10-15 years and have no need to work. But they enjoy shooting the breeze and they know their sh.t. These are my sort of people. They talk about the markets as if you were reading a Tom Clancy novel. They like it when you laugh at their jokes. They are the sort of people who would ask you to a BBQ on my boat next week if circumstances were different i.e. you didnt have to hop on a plane/roll on to the next manager meeting 3 blocks down. Here, risk management subject only comes up as an afterthought in the Q&A. Normally, the most boring person/robot in our group asks something about VaR. The HF manager narrows their eyes and gives some standard factoids that neither he nor I cares for. Diametrically opposed to this variety is the nerdy, quant type manager. This manager will start out with a strategy/factor approach and pepper their conversation with risk management metrics. These people look and sound like they don’t get laid too often. These people are often called quants elsewhere. As long as they have found a method to extract money from the markets using their nerdy tool, we don’t mind. We give them several million each to play their game. They tend not to be the most attractive folk around. But, hey everyone gotta make a livin’. I’m pretty sure I could get a RM position in my outfit if we weren’t downsizing. But I don’t want to and don’t see the next move anyway. At least being in a HF, you get the opportunity to network on the inside (that really is my forte) and share the outsized bonus in the good times. That’s what i’m thinking of. I’m thinking institutional level HF most likely. The 20-30 bn dollar guys. Maybe it is too much of a leap and they need to see an MSc as a minimum, I would hope not. Tell me the truth & I will cry myself to sleep…
If you want to do Risk Management, you need to get an MS in Financial Math/Financial Engineering. Most job applications require an advanced quantitative degree for this. MS in Math or Statistics should be suitable also, however, strong programming experience is usually required for these positions.
Dude (OP), I’m appalled at virtually everything you just wrote.
The tears are rolling down my cheeks as I type…
This thread shattered my faith in humanity and the internet. Congratulations - I thought you might like to know that.
Black Swan Wrote: ------------------------------------------------------- > Dude (OP), I’m appalled at virtually everything > you just wrote. Say it ain’t so. Everything? Each individual word? What makes you appalled?
You need to be clear as to what you mean by RISK MANAGEMENT. Do you mean credit risk or counterparty risk mgmt? Do you mean market risk? As someone who has worked in counterparty credit I can tell you the job simply fills a compliance/regulatory/administrative role and there is LITTLE opportunity to leverage that role internally to move to IB. Market risk tends to be much more quantitative in nature and has many banks seeking folks with PHds and/or programming experience. Thus a CFA is not even close, in and of itself, for a job in market risk. I believe market risk roles offer an increased oppty to land a gig in IB or with a HF versus credit risk. Both credit risk and market risk tend to be quite boring btw
Were these the offending lines? “Yes, I am an allocator.” “HF managers come in all varieties. Some will give you the action talk. I like the action talk.” “They tend not to be the most attractive folk around. But, hey everyone gotta make a livin’.”
Hahahahah the post on analyzing HF guys killed me. Good stuff mudahahahdhdhahahduduududhaaha.
I like what Paul Wilmott wrote about risk management in his blog. "I’d now like to explain how I think risk management should work. It’s a simple combination of standard practices that I have used very successfully in the past. It’s not exactly earth shattering, but it shows how to focus your attention on what matters. I will also finish with a small proposal for how to approach scenario analysis. Roughly speaking, I tend to think in terms of three different levels or classes of risk management. These are Level 1: Probabilities and VaR Level 2: Worst-case scenarios Level 3: Invasion by aliens, “It’s the end of the world as we know it, and I feel fine” (REM this time!) Level 1: Typical day-to-day markets for which it is acceptable to work with probabilities and even possibly normal distributions. Correlations, while never exactly trustworthy, will not be a deciding factor in survival or collapse. Use probabilities and talk about Value at Risk by all means. This is really just classical mid 1990’s risk management, with not too much worrying about fat tails. To some extent trust in a decent amount of diversification. The rationale behind this is simply that you never know what your parameters or distributions really are and so you are better off with simple calculations, more instruments and plenty of diversification. You may not make a profit but at least you won’t be killed during a quiet day in the market. Level 2: Situations which will cause your bank or hedge fund to collapse. Test your portfolio against a wide range of scenarios and see the results. But since these are situations resulting in the collapse of your institution you must never, ever talk about probabilities, except in terms of how many centuries before such events may happen. I would much prefer you work with worst-case scenarios (as in the very simple concept of CrashMetrics). I sometimes use the example of crossing the road. Imagine it’s late, it’s dark, and it’s raining. If you cross the road there is a 5% chance of being hit by a bus and killed. That does not mean that tomorrow 95% of you goes to work! No, you assume the worst, because it is so bad, and cross the road elsewhere. Certainly there is little role for Extreme Value Theory (EVT) in its fiddly, detailed sense. Consider these two statements about the same portfolio: “According to Gaussian distributions the expected time to bank collapse is 10^25 years” and “According to EVT the expected time to bank collapse is 50 years.” The difference between these statements should only be of academic interest. Such a portfolio must be protected asap. Of course, many people would be happy with such a portfolio because 50 years is still longer than a trading career. Such people should not be in positions of responsibility. As I said above, “risk management must be consistent with protecting the wider interests of the institution rather than being easy to manipulate towards the narrow interests of some employees.” To recap, if it’s bad enough to cause bank/fund collapse you don’t look at probabilities. Handle extreme events with worst-case scenario analysis. Level 3: Scenarios which are so dire as to affect the world directly. I always use the example of invasion by aliens as an example, since there are whole bodies of literature and movies that have explored the effects of such an event, but we have little idea of the probability! If your hedge fund will collapse in the event of invasion by aliens, or drying up of oil supplies, or decimation of the world’s population by bird flu, then I wouldn’t necessarily change your portfolio! You’ll have other things to worry about! Finally, a small proposal. I would like to see risk management forced to engage in the following task, the reverse engineering of a bank collapse. Start with your current portfolio and imagine being called into the big boss’s office to be told that the bank has lost $50billion. Having put yourself in the frame of mind of having already lost this amount, now ask yourself what could have caused this to happen. As Einstein said “Imagination is more important than knowledge.” This should be the mantra for those in risk management. There is always going to be something that will come as a surprise at the time but with hindsight you realise could have been expected (if not necessarily predicted). Once you have figured out what could have caused this loss then you ask about the likelihood of this happening. The result of that analysis then determines what you should do with the portfolio. If, for example, the answer is simply that a fall in property prices caused the loss then you must get out this very instant, before it actually happens. You see the idea, work backwards from the result, the loss, rather than pick (possibly convenient) scenarios and look at the effects. Then estimate the likelihood of the chain of events happening, and act accordingly. Going the other way is more open to abuse. Scenario testing is a beautiful concept, if one gets to choose the scenarios to test. And those of weak character will not, of course, test any scenario that might jeopardize a juicy trade. "
The probability of making 250K a year managing risk is about the same as the probability of managing institutional money at a HF. ( slim to none) I still remember a section in the FRM material, title: "How can Risk Management Add Value ? " That tells you all you need to do about risk management, another layer of cubicle workers punching in numbers 
mo34 Wrote: ------------------------------------------------------- > The probability of making 250K a year managing > risk is about the same as the probability of > managing institutional money at a HF. ( slim to > none) > > I still remember a section in the FRM material, > title: "How can Risk Management Add Value ? " > > That tells you all you need to do about risk > management, another layer of cubicle workers > punching in numbers you couldnt be more wrong, and i speak from personal experience as a market risk manager.
As I stated, I’m in market risk too, and mo34 obviously doesn’t know what he’s talking about here.
mo34 Wrote: ------------------------------------------------------- > The probability of making 250K a year managing > risk is about the same as the probability of > managing institutional money at a HF. ( slim to > none) > > I still remember a section in the FRM material, > title: "How can Risk Management Add Value ? " > > That tells you all you need to do about risk > management, another layer of cubicle workers > punching in numbers Didn’t JDV make that much being a risk manager?
If you know what you’re doing, you can add a lot of value as a Risk Manager. The trick is finding a risk manager that knows anything about risk.
former trader Wrote: ------------------------------------------------------- > mo34 Wrote: > -------------------------------------------------- > ----- > > The probability of making 250K a year managing > > risk is about the same as the probability of > > managing institutional money at a HF. ( slim to > > none) > > > > I still remember a section in the FRM material, > > title: "How can Risk Management Add Value ? " > > > > That tells you all you need to do about risk > > management, another layer of cubicle workers > > punching in numbers > > > Didn’t JDV make that much being a risk manager? Exactly my point. Now compare the OP credentials to JDV (PhD Statistics from North Carolina and about a zillion years of experience at top BB) and you get my probability estimate ( slim to none, and actually closer to none).
justin88 Wrote: ------------------------------------------------------- > If you know what you’re doing, you can add a lot > of value as a Risk Manager. The trick is finding > a risk manager that knows anything about risk. Hear, hear. Also: Muddahudda, as a VBA programmer you might also want to compare FRM with PRM before you decide.
Great discussion. If you were given the budget what course would you recommend? Only caveat is that I cannot do a full time course and it should preferably be less than 1 year. What about a distance MSc at a reputable uni? Is it even possible? I *think* I can get the budget to do pretty much any course I like.