If a client has many assets other than the portfolio, then the relevant measure of the portfolio risk is
A) total risk.
B) standard deviation.
C) market risk.
D) unique risk.

Question

Quizplus · Accepted Answer

The relevant measure of portfolio risk in this scenario is market risk. Market risk refers to the overall risk that arises due to macroeconomic variables such as changes in interest rates, inflation rates, currency exchange rates, and geopolitical events. It is the risk that cannot be diversified away by adding additional assets to the portfolio. Since the client already has many assets other than the portfolio, unique risk is not a relevant measure of portfolio risk. Total risk and standard deviation are also not specific enough to capture the unique characteristics of market risk.

If a Client Has Many Assets Other Than the Portfolio