A
Acadi
Fi
Courses
Knowledge Hub
Community
Practice
Pricing
About
Search
⌘K
Question Bank
/
FRM
/
Part II
/
Risk Management and Investment
Risk Management and Investment
Medium
A hedge fund reports an annualized Sharpe ratio of 2.1, an annual volatility of 6%, and a maximum drawdown of only 8% over its 7-year track record. These statistics most likely reflect:
A
Smoothed returns from illiquid holdings that understate true volatility and overstate risk-adjusted performance
B
Genuinely superior risk management and investment skill across market cycles
C
A low-risk strategy focused exclusively on government bond arbitrage
D
Extensive use of stop-loss orders that truncate downside returns
Select an answer to continue
Tags
#hedge-fund-risk
#smoothed-returns
#sharpe-ratio
#illiquidity-bias
More Risk Management and Investment questions
Start full Part II quiz