Portfolio Management Q189
0. Which of the following statements is/are most likely correct?
Statement 1: Standard deviation measures how different an actual investment outcome could be from what the investor expects.
Statement 2: Duration measures the sensitivity of a security or portfolio to a change in market interest rates.
Statement 3: Vega measures the sensitivity of a security (either a derivative or a security with derivative-like characteristics) to a change in the price volatility of the underlying asset.
- Option : C
- Explanation : All the statements are correct. Standard deviation measures how different an actual investment outcome could be from what the investor expects. While, duration measures the sensitivity of a security or portfolio to a change in market interest rates and vega measures the sensitivity of a security (either a derivative or a security with derivative-like characteristics) to a change in the price volatility of the underlying asset.
