CFA Practice Question

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CFA Practice Question

Which statement is true about scenario analysis?

A. Scenario measures generally require normal distributions.
B. Scenario analysis can be used to analyze both negative and positive outcomes.
C. Delta, gamma, and vega can be used directly in scenario analysis if the portfolio has options.
Correct Answer: B

A is false. Scenario measures don't require any assumptions of probability distributions.

B is true. Scenario analysis's most common application is assessing negative outcomes.

C is false. They are not suited for handling the kinds of extreme movements used in scenario analysis.

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