- CFA Exams
- CFA Level I Exam
- Study Session 19. Portfolio Management (2)
- Reading 55. An Introduction to Risk Management
- Subject 4. Measuring and Modifying Risks
CFA Practice Question
Which statement is TRUE?
B. Risk modification is strictly risk reduction or prevention.
C. Risk mitigation methods are mutually exclusive.
A. A hedge is to reduce risk.
B. Risk modification is strictly risk reduction or prevention.
C. Risk mitigation methods are mutually exclusive.
Correct Answer: A
B is false. Sometimes risk management requires increasing risk.
Risk mitigation methods are not mutually exclusive. Many organizations use all methods to some extent.
User Contributed Comments 2
| User | Comment |
|---|---|
| 10425406 | Does risk modification include increasing risk? |
| rojaslav | Yes, a company could be interested in increasing its risk for the sake of potential higher returns/better outcomes if they are willing to accept the additional risk |