- CFA Exams
- CFA Exam: Level II 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Excerpt from Probabilistic Approaches: Scenario Analysis, Decision Trees, and Simulations
- Subject 3. An overall assessment of probabilistic risk assessment approaches
CFA Practice Question
If the various risks are correlated, the LEAST LIKELY probabilistic approach to assess investment risk is ______.
B. decision trees
C. simulations
A. scenario analysis
B. decision trees
C. simulations
Correct Answer: B
Correlated risks are difficult to model in decision trees.
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