CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

Shortfall risk is defined as ______.

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
Correct Answer: A

Shortfall risk is the risk of experiencing a shortfall; that is, falling short of a target or expected value.

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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