- CFA Exams
- Dec. 2020 Level 2
- Study Session 16. Portfolio Management I
- Reading 45. Measuring and Managing Market Risk

### Reading 45. Measuring and Managing Market Risk

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### Learning Outcome Statements

Reading 45. Measuring and Managing Market Risk | |
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1. Value at Riska. explain the use of value at risk (VaR) in measuring portfolio risk;b. compare the parametric (variance-covariance), historical simulation, and Monte Carlo simulation methods for estimating VaR; c. estimate and interpret VaR under the parametric, historical simulation, and Monte Carlo simulation methods; d. describe advantages and limitations of VaR; e. describe extensions of VaR; | |

2. Other Key Risk Measuresf. describe sensitivity risk measures and scenario risk measures and compare these measures to VaR;g. demonstrate how equity, fixed-income, and options exposure measures may be used in measuring and managing market risk and volatility risk; h. describe the use of sensitivity risk measures and scenario risk measures; i. describe advantages and limitations of sensitivity risk measures and scenario risk measures; | |

3. Applications of Risk Measuresj. describe risk measures used by banks, asset managers, pension funds, and insurers; | |

4. Using Constraints in Market Risk Managementk. explain constraints used in managing market risks, including risk budgeting, position limits, scenario limits, and stop-loss limits;l. explain how risk measures may be used in capital allocation decisions. |