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**Basic Question 1 of 5**

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

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**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) |

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#### Edward Liu

**Learning Outcome Statements**

define shortfall risk, calculate the safety-first ratio, and identify an optimal portfolio using Roy's safety-first criterion

*CFA® 2024 Level I Curriculum, Volume 1, Module 5.*