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Basic Question 3 of 3

A portfolio may remain under its VaR limit each day but cumulatively lose more than expected. This is known as "trending." Which constraint is the best candidate for managing trending?

A. A position limit
B. A scenario limit
C. A stop-loss limit

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Craig Baugh

Learning Outcome Statements

explain constraints used in managing market risks, including risk budgeting, position limits, scenario limits, and stop-loss limits;

explain how risk measures may be used in capital allocation decisions.

CFA® 2025 Level II Curriculum, Volume 5, Module 41.