[2008]Topic 75: VAR and Risk Budgeting in Investment Management 相关习题 forward, backward, budgeting, Investment

wanganjie

 

AIM 1: Define risk budgeting.

1、Risk budgeting is a:

A) top-down process and is forward looking. 

B) bottom-up process and is forward looking. 

C) top-down process and is backward looking. 

D) bottom-up process and is backward looking.

wanganjie

 

The correct answer is A

Risk budgeting is a top-down process that involves choosing and managing exposures to risk. It builds upon the VAR measure, is forward-looking, and can apply to asset managers, classes of assets, and individual securities.

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2、The process of defining risk and allocating that risk across a portfolio is known as:

A) risk budgeting.

B) tactical allocation.

C) asset allocation.

D) market timing.

wanganjie

 

The correct answer is A

The process of defining risk and allocating that risk across a portfolio is known as risk budgeting. The risk budgeting process allows a manager to set target risk levels across her portfolio.

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AIM 6: Explain why risk measurement problems exist in hedge funds.

Which of the following are properties that hedge funds generally share with “sell-side” institutions in the investment industry?

A) Hedge funds use low leverage and have a low turnover. 

B) Hedge funds have a long horizon and low leverage. 

C) There are no properties that hedge funds share with sell-side institutions. 

D) Hedge funds use high leverage and have a high turnover.

wanganjie

 

The correct answer is D

These are properties that hedge funds share with the sell side.

 

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AIM 7: Explain absolute versus relative risk and distinguish between policy mix and active risk for investment managers.

In contrast to absolute risk, relative risk is measured by:

A) total variance, and VAR techniques cannot apply under any circumstances. 

B) total variance, and VAR techniques can apply to tracking error if it is normally distributed.

C) tracking error, and VAR techniques can apply to tracking error if it is normally distributed. 

D) tracking error, and VAR techniques cannot apply under any circumstances. 

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The correct answer is C

Absolute risk refers to the total possible losses over a horizon. Relative risk is measured by tracking error, which is the dollar loss relative to a benchmark return. VAR techniques can apply to tracking error if it is normally distributed.

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AIM 8: Explain how VAR can be applied to measuring funding risk, and compute the negative surplus associated with a VAR level of loss.

1、VAR can apply to funding risk:

A) in no way, funding risk is not a type of risk to which VAR can apply.

B) by showing how to construct the surplus so that it goes up when the VAR loss occurs. 

C) by calculating the level of VAR associated with a zero surplus. 

D) by calculating the fall in surplus when the portfolio’s VAR loss occurs. 

wanganjie

 

The correct answer is D

This is the usual application of VAR to funding risk.