risk budget

CFA Level III Derivatives
#1

official CFA mock PM Q46

why choice A is wrong?

both trading desk has the same risk budget since they have same daily VaR

and from CFA Book 6.1.1. Risk Budgeting:

"we note that the allocated daily VaR for the two business are the same, so each has the same risk budget "

any thoughts?

#2

I have the same doubt. Someone in a different tread mentioned that we should look at a return-adjusted basis.

#3

well, if the official books say same VaR decide same risk budget, i rather believe it…

the point is what is the definition of risk budget

#4

I don’t think they have the same risk budget because they don’t have the same amount of capital allocated. The VARs being the same number is just a coincidence. Have to look at how much var as a percentage of assets I beleive.

#5

thx for replying,

but from CFA Book 6.1.1. Risk Budgeting:

“we note that the allocated daily VaR for the two business are the same, so each has the same risk budget ”

it`s basically the same question as the example from the book… get lost

#6

Yeah, don’t know then.