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Basic Question 9 of 10
Risk budgeting or risk allocation includes ______
II. setting risk limits (risk budgets) to each asset class (or even single asset), factor, and/or investment manager (ex ante).
III. allocating assets in compliance with risk budgets.
IV. monitoring the use or abuse of risk budgets on an ongoing basis.
I. decomposing the aggregate risk of a portfolio (or even of the entire investment process) into its constituents (risk factors or drivers) on a quantitative basis.
II. setting risk limits (risk budgets) to each asset class (or even single asset), factor, and/or investment manager (ex ante).
III. allocating assets in compliance with risk budgets.
IV. monitoring the use or abuse of risk budgets on an ongoing basis.
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Learning Outcome Statements
explain the specification of asset classes in relation to asset allocation
describe the principles of portfolio construction and the role of asset allocation in relation to the IPS
CFA® 2025 Level I Curriculum, Volume 6, Module 4.