- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 42. Measuring and Managing Market Risk
- Subject 4. Applications of Risk Measures
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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