- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 5. Introduction to Geopolitics
- Subject 6. Incorporating Geopolitical Risk into the Investment Process
CFA Practice Question
Which of the following geopolitical risk is most likely a known risk that evolves and expands over a period of time?
A. Event risk
B. Exogenous risk
C. Thematic risk
Explanation:
Thematic risk is a type of geopolitical risk that is known, evolves, and expands over a period of time. Examples include climate change and ongoing threats of terrorism.
A is incorrect. Event risk is a type of geopolitical risk that revolves around set dates or date-driven milestones such as elections or political anniversaries.
B is incorrect. Exogenous risk is a type of geopolitical risk. It is a sudden or unanticipated risk that impacts a country's cooperative stance or the ability of non-state actors to globalize. Examples include invasions and sudden uprisings.
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