CFA Practice Question

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CFA Practice Question

Which statement is true?
A. Gross position risk is an important risk measure for understanding the importance of correlation risk for a hedge fund portfolio.
B. Hedge funds usually use a benchmark-relative measure.
C. Standard deviation and historical beta measures can be very helpful for hedge fund strategies that focus on events.
Explanation: B is false. They rarely use such a measure.

C is false too. These measures can be misleading. Instead, "maximum drawdown" can be used to understand more extreme risks.

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