Asked by Zakia Pollard on Jul 23, 2024
Verified
Market neutral bets can result in ______ volatility because hedge funds use ______.
A) very low; hedging techniques to eliminate risk
B) low; risk management techniques to reduce risk
C) considerable; risk management techniques to reduce risk
D) considerable; considerable leverage
Market Neutral Bets
Investment strategies aiming to profit from both increasing and decreasing prices in one or more markets, whilst minimizing exposure to market risk.
Considerable Leverage
The use of borrowed capital to increase the potential return of an investment.
- Assess the risk profiles associated with hedge funds and the obstacles faced in their performance evaluation.
- Gain insight into the strategies hedge funds employ for risk reduction and leverage in investments.
Verified Answer
KP
Kavina PatelJul 29, 2024
Final Answer :
D
Explanation :
Market neutral bets can result in considerable volatility because hedge funds often use considerable leverage to amplify returns, which can also amplify losses and thus increase volatility.
Learning Objectives
- Assess the risk profiles associated with hedge funds and the obstacles faced in their performance evaluation.
- Gain insight into the strategies hedge funds employ for risk reduction and leverage in investments.
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