Ending months of speculation about his future, former Federal Reserve chairman Paul A. Volcker yesterday said he is embarking on a dual career as a Wall Street investment banker and an Ivy League university professor.

Volcker, who left the Fed when his second four-year term as chairman expired last August, will become partner and chairman of the Wall Street firm of James D. Wolfensohn Inc., which advises international and domestic corporate clients on business strategy and merger deals. He also will join the faculty of Princeton University on a part-time basis.

A small operation with about 20 professionals and a blue-chip client roster, the Wolfensohn firm was begun about six years ago by Jim Wolfensohn, a well-connected Australian financier who was previously a top investment banker at Salomon Inc.

"I think it is a very high-class firm," Volcker said in an interview. "It emphasizes continuing relationships, not just in-and-out things such as a merger."

Volcker's compensation was not disclosed, but Wall Street officials said they assumed he would earn well over $1 million annually, even while working less than full-time. During his long career in government, Volcker earned a modest salary relative to his influence and reputation.

"There aren't too many former chairmen of the Federal Reserve out there," said Wolfensohn. "He'll no doubt broaden the range of advice we can give to our existing clients. ... I believe, and so does Paul, that as he builds up knowledge of our relationships, he'll be able to contribute powerfully."

"I am not a babe in the woods, to say the least," Volcker said. Among other duties, Volcker said he would "expect to help maintain the client relationships" at the Wolfensohn firm.

At Princeton, Volcker has been named a professor of international and public affairs at the university's Woodrow Wilson School of Public and International Affairs. He will teach both graduate and undergraduate students. Volcker said his teaching and other activities at Princeton will be limited to a "half-time, academic year kind of basis."

Volcker and Wolfensohn met about a decade ago when Volcker was chairman of the government's Chrysler loan guarantee board and Wolfensohn was the auto maker's chief outside financial adviser at Salomon. Since then, they have maintained both a personal and business relationship.

The pair began discussing the possibility of Volcker's becoming a partner in Wolfensohn's firm about two months ago. "It just arose generally out of our relationship," Wolfensohn said. "Neither one of us can remember how it came up."

A formal partnership agreement was signed Tuesday night.

Volcker's work with Wolfensohn will involve him in a business and social world far removed from the relatively austere environs that surrounded him during his public service career in Washington.

An amateur cellist, Wolfensohn is chairman of Carnegie Hall in Manhattan, where he has raised millions of dollars in recent years by recruiting board members such as Australian media executive Rupert Murdoch and Gulf & Western Chairman Martin Davis. Wolfensohn also is a director of CBS Inc., where he played an important role in the ouster of former chairman Thomas Wyman, according to Wall Street sources familiar with the matter. Earlier, Wyman had invited Wolfensohn to join the CBS board.

The firm Volcker will chair has been primarily built up through Wolfensohn's extensive personal relationships with key executives here and abroad, Wall Street officials said.

"He is absolutely a consummate intermediary," said David Schulte, an investment banker who worked with Wolfensohn at Salomon. "He's exceptionally good at helping people communicate with one another."

Volcker said his joining the Wolfensohn firm probably will lead to its "broadening its work into general economic consulting" while continuing its previous investment banking activities. Volcker said he did not intend to limit his work to advising clients on general economic matters, but expected to become closely involved in specific deals.

Since leaving the Fed last summer, Volcker has been approached by universities and Wall Street firms about possible positions. Until yesterday, however, he had agreed only to serve as a consultant to the World Bank and as chairman of the National Commission on the Public Service, a nonprofit group that encourages individuals to undertake public service.

In addition, Volcker had made a number of speeches, commanding fees of up to $35,000. He said yesterday that he will continue to make speeches, but added, "My career is not going to be speaking out."