What is the relationship between risk driver, risk position, and risk exposure?
The risk management is the process of identifying the level of risk an organization wants, measuring the level of risk the organization currently has, taking actions that bring the actual level of risk to the desired level of risk, monitoring the new actual level of risk so that it continues to be aligned with the
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What is the main difference between cognitive errors and emotional biases?
In general, behavioral biases come in two forms: cognitive errors and emotional biases. Both forms of bias, regardless of their source, may cause decisions to deviate from what is assumed by traditional finance theory. What is the main difference between both types of biases? a) Cognitive errors are behavioral biases resulting from faulty reasoning, and
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What are the main elements of an Investment Policy Statement (IPS)?
Portfolio planning can be defined as a program developed in advance of constructing a portfolio that is expected to define the client’s investment objectives. The written document governing this process is the investment policy statement (IPS). The main elements of an IPS can be classified into objectives and constraints. Mark the correct sentence in relation
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How can we reduce risk through diversification in a portfolio basis?
Which of the following performance measures represents the ratio of the standard deviation of an equally weighted portfolio to the standard deviation of a randomly selected security of this portfolio? a) Volatility ratio. b) Diversification ratio. c) Naïve ratio. https://vimeo.com/manage/videos/944899947
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What can we say about the performance of traditional asset classes in the long run?
If we consider data from the US market through a long period of time (1926 – 2017), which one of the following sentence is correct? a) Small company stocks show the highest return and risk, while treasury bills show the lowest return and risk. b) Large company stocks show the highest return and risk, while
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