- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 40. Using Multifactor Models
- Subject 3. Multifactor Models: Selected Applications
CFA Practice Question
Assume a portfolio manager wants to hedge against time horizon risk. She should ______ the time horizon risk factor portfolio because such a factor portfolio ______ the time horizon risk.
B. sell, is exposed to
C. buy, is hedged to
A. buy, is exposed to
B. sell, is exposed to
C. buy, is hedged to
Correct Answer: B
The factor portfolio is assumed to be hedged against all but time horizon risk. That is, it has zero sensitivities to all but time horizon risk.
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