Question #18
Reading: Reading 37 Measuring and Managing Market Risk
PDF File: Reading 37 Measuring and Managing Market Risk.pdf
Page: 7
Status: Correct
Correct Answer: A
Question
Which of the following is most likely an example of a stop loss limit?
Answer Choices:
A. Liquidate the portfolio if the portfolio value falls below $100 million
B. Maximum tracking error of 3%
C. Maximum daily VaR of $1.5 million
Explanation
Stop loss limits specify liquidation of a portfolio or a reduction in its size if a loss of a
specific magnitude occurs. Maximum daily VaR and tracking errors are examples of risk
budgets.