- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 5. Portfolio Mathematics
- Subject 3. Shortfall Risk and Roy's Safety-First Criterion
CFA Practice Question
Shortfall risk is defined as ______.
B. the probability that the mean return on a portfolio will fall below some minimum acceptable level over some time period
C. the probability that a portfolio value will always be below some minimum acceptable level over some time period
A. the probability that a portfolio value will fall below some minimum acceptable level over some time period
B. the probability that the mean return on a portfolio will fall below some minimum acceptable level over some time period
C. the probability that a portfolio value will always be below some minimum acceptable level over some time period
Correct Answer: A
Shortfall risk is the risk of experiencing a shortfall; that is, falling short of a target or expected value.
User Contributed Comments 2
| User | Comment |
|---|---|
| fahad | It is the opposite of Z formula in the numerator and also replace mean with minum acceptable level of return denoted as RL. |
| bobert | It isn't the opposite of the z-formula. z-value = (X-mean) / std dev. SFRatio = (Rp-RL) / std dev. Both formulas look to get an answer that is relative to standard deviation units. Therefore on a normal distribution, you use the SFRatio as a z-value to determine the F(X) |