土豆妮

The Real Value Fund is designed to have zero exposure to inflation. However its current inflation factor sensitivity is 0.30. To correct for this, the portfolio manager should take a:

A) 30% short position in the inflation factor portfolio.

B) 30% short position in the inflation tracking portfolio.

C) 30% long position in the inflation factor portfolio.

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To hedge inflation, the fund should take a 30% short position in the inflation factor portfolio. This short position will fully offset the fund’s positive exposure to inflation. Tracking portfolios are typically used for active asset selection and have multiple factor exposures which would prevent them from adequately hedging the inflation exposure of the fund.

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土豆妮

An analyst is constructing a portfolio for a new client. A portfolio which uses multifactor models to create a portfolio with an exposure to only one type of risk is:

A) a factor portfolio.

B) an efficient portfolio.

C) a tracking portfolio.

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A factor portfolio is established to create exposure to a specific risk (i.e. inflation).

土豆妮

An analyst is constructing a portfolio for a new client. A portfolio which has factor exposures matched to those of a benchmark is:

A) an arbitrage portfolio.

B) a tracking portfolio.

C) an efficient portfolio.

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A tracking portfolio has factor exposures matched to those of a benchmark.